Despite walking away from contracts and uncertain container volumes, Wincanton’s half year results recorded a 52% jump in pre-tax profit. Motortransport.co.uk talks to CEO Adrian Colman.
The figures for the six months ended 30 September this year showed pre-tax profit of £19.6m, compared to £12.9m for the same period in 2015.
Adrian Colman said the increase was the result of an improved, profitable performance from Pullman, its fleet services arm, and capital from the sale of its Records Management business.
He tells Motortransport.co.uk: “Overall I was really pleased with the performance of the group. Records management was a good profitable business within the group, and we got a great price for it last year – we had a £60m valuation on that business.
“But we’ve been able to demonstrate that even disposing of that business, we’ve been able to get the profitability of the group to keep moving in the right direction, so it shows the performance of the remaining business has been very creditable.”
The group did see a 3.6% dip in turnover for the six-month period, which Colman attributed to the loss of turnover from Records Management and its decision to walk away from two unprofitable businesses with Pullman.
Pullman has since undergone a management restructure which, as reflected in the pre-tax profit, has set the division back onto a profitable course.
“It’s been very encouraging, the new management team has done a great job,” says Colman. “They’ve improved the performance, service offering and customer satisfaction in all areas of that business, so it’s a great job by them.”
Building on construction work foundations
Colman says that another area of growth for Wincanton could be its work in the construction sector, after it recently signed an eight-year deal to deliver ready-mixed concrete for Hanson.
The group bought 75 mixers for the deal, which Colman says are almost all in use, but that he can see Wincanton extending its work with other players in the construction sector.
He says this is partly because it has the capital to invest in the “kit” needed to do the job, but also that retiring drivers were leaving gaps in the construction sector, which is increasingly looking to 3PLs to fill it.
“Hanson is interested in expanding our work with them in 2017, and we’ve had a good level of enquiries from a number of other customers. So the market dynamics are right for us, and I feel positive around the overall construction market in the UK and its long-term dynamics,” he says.
He adds: “The model is very fragmented at the moment, and the driver profile in the UK has changed quite a bit over the last few years.
"There are quite a lot of drivers who are choosing to retire, so if you’re Hanson, do you really want the aggravation of having to recruit lots of drivers, and train them, and manage the logistics of that? So I could see that model changing quite substantially over the coming years.”
Colman adds that the number of large-scale construction projects underway in the UK at present – citing the Hinckley nuclear plant and HS2 in particular - means that it’s a good time to be operating in the construction sector.
Container market volumes
One market where things are less certain, he says, is in container haulage and storage. Here, the volumes are plateauing, and Colman thinks Brexit could magnify the issue.
He tells Motortransport.co.uk: “The great unknown for us in the UK is post-Brexit, the valuation of sterling as a currency means that importation of products will have upward pressure on prices.
“Many of the general merchandisers who import from the Far East are paying in dollars, and if we as consumers don’t like those price increases we may turn down our levels of consumption. I think we won't really know if that’s impacting on volumes until next year, when we might see an impact of weaker sterling at the till.”
This will mostly affect luxury items, Colman believes, meaning there’s still a solid market for “everyday” consumables. “People might buy fewer luxury goods like televisions and cars, but they’ve still got to eat their cereal in the morning and drive their cars to work. Those dynamics haven’t changed post-referendum,” he says.
However according to Colman, the collapse of South Korean Hanjin Shipping has not had an adverse effect on Wincanton’s container operation.
“Interestingly,” he says, “it’s actually created opportunity for us. We have a lift and store facility in Bourne, Cambridgeshire, where we have off-quay storage. There’s been some indigestion with Hanjin containers left by the administrators which has left lots of boxes stranded. And we can provide off-quay storage for that.”
Wincanton is also looking to expand its e-commerce operations, following the successful implementation of a custom-built service for Majestic Wines.
Wincanton set up a new national fulfilment centre for the wine merchant, and Colman says that by freeing up the burden of dealing with online orders, Majestic staff were more able to focus and improve front of house operation.
“It’s been a great e-commerce solution, and we’re really pleased with it. I think we’ll do more in that space, either with more drinks customers because we’ve got that speciality, but it’s just as transferable to other forms of merchandise,” he says.
Generally, Colman concludes, the UK economic backdrop has “dealt [Wincanton] a good hand”, and he says he’s confident about the group's performance in the coming months.
He says: “We’ve got great stability in our business. We’re linked to a GDP human consumption model, and those dynamics are very stable. They’re dealing us a good hand, so it’s up to us to get out there and do a good job."