Two poorly priced vehicle maintenance and repair contracts were the main culprits behind a 6 per cent slide in underlying operating profits at Wincanton (WIN). Combined with management's determination to continue making the business "more resilient" before paying a dividend, that triggered a slight drop in the logistic group's share price on results day.
Chief executive Adrian Colman told us the group is getting closer to reintroducing the dividend, but still has a couple of targets left to achieve beforehand. The group slashed net debt by 7 per cent in the six months to end-September, and the recent disposal of its records management arm could spur a further reduction.
Wincanton's chain logistics and services unit grew underlying operating profit by 17 per cent to £24m, thanks to a strong performance in construction and general merchandise. Rampant demand was reflected in a number of big contract wins, including ones with B&Q, Halfords and BAE Systems. But management may have more work to do in the specialist logistics operation. Aside from the extra £2m in losses incurred on two contracts - one of which has already expired - divisional profits came under pressure from higher driver and subcontract haulier costs.
Broker Numis expects adjusted pre-tax profit of £33.4m in the year to March 2016, giving adjusted EPS of 20.2p.
| WINCANTON (WIN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 195p | MARKET VALUE: | £242m | |
| TOUCH: | 195-203p | 12-MONTH HIGH: | 213p | LOW: 142p |
| DIVIDEND YIELD: | nil | PE RATIO: | 11 | |
| NET ASSET VALUE: | * | NET DEBT: | £62.2m | |
| Half-yearto 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 551 | 12.7 | 8.3 | nil |
| 2015 | 583 | 12.9 | 8.8 | nil |
| % change | +6 | +2 | +6 | - |
Ex-div: na Payment: na *Negative shareholders' funds | ||||
