Wincanton has momentum

Wincanton has been on the mend for a couple of years. Following the £60m sale of its record management business at the end of 2015 and the cessation of several onerous contracts, the company is looking in much better shape. In particular, its higher-margin industrial and transport division, which accounted for 55 per cent of first-half profit, is thriving. The division saw a 38 per cent improvement in underlying operating profit in the half-year to September 2016, despite a 9.2 per cent fall in segmental revenue. With a more sedate 2.6 per cent profit increase at the group's other division focused on retail and consumers, overall underlying profit was up 19 per cent to £26.1m in the first half on a 2 per cent drop in turnover. Margins rose from 4 per cent to 4.6 per cent.

Improving cash generation from the business has resulted in a virtuous cycle of debt reduction, lower interest payments and a return of the dividend last year.

Before signing the Ikea deal, the company had already said full-year results were likely to be "marginally ahead" of previous expectations. And although contracts will be subject to both price pressure and the odd cancellation - as Tesco decided to do this week - chief executive Adrian Colman is confident his company will benefit from any uncertainty and complexity for retailers' supply chains associated with the UK's exit from the EU.

While business prospects look healthy and debt is falling, the balance sheet still has issues. As of September, swelling liabilities meant the company's pension deficit had grown to £169m from £106m six months earlier, resulting in negative shareholders' funds. However, it is likely that the rise of corporate bond yields in the two months since the US presidential election will result in a better picture by the time Wincanton begins its triennial pension valuation in March. Meanwhile, pension contributions are expected to remain at about £15m this year and next.