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Wincanton profits dip on Covid-19 writedown

Pandemic disruption has seen the logistics group take a £9m impairment on its ‘industrial and transport’ business
June 17, 2020

Logistics group Wincanton (WIN) reaped the benefit of new business wins in the year to 31 March, with a five-year contract with Morrisons (MRW) helping to propel grocery revenue up more than a quarter to £228m. Combined with new customer pick-ups in general merchandise and increased scale and efficiency boosting margins, the larger ‘retail and consumer’ division saw like-for-like underlying operating profit jump 17 per cent to £36m.

IC TIP: Hold at 185p

That contrasted with a 13 per cent decline in ‘industrial and transport’ to £21m due to the exit from underperforming haulage contracts, Brexit and election uncertainty suppressing volumes, and a Covid-19 induced slowdown in international container traffic.  

The pandemic did see volumes and demand from grocery and consumer products customers spike towards the end of the period. But there was a limited drop through to profit as ‘open book’ contracts are designed to protect the group from volume fluctuations in more normal times.  

In the current financial year, revenue is down 10 per cent so far, with Covid-19 disruption hitting profitability in ‘industrial and transport’. The use of ‘closed book’ contracts here leaves Wincanton more exposed to falls in volumes. In the construction segment, volumes in May were 50 per cent lower than a year earlier. In response to the crisis, the group has taken a £9m impairment on its ‘industrial and transport’ non-current assets and inventory, pulling down statutory earnings.   

House broker Numis forecasts adjusted pre-tax profit of £15.5m and EPS of 10.4p in 2021, down from £52.8m and 36.1p in 2020.

WINCANTON (WIN)   
ORD PRICE:185pMARKET VALUE:£229m
TOUCH:185-186p12-MONTH HIGH:319pLOW: 140p
DIVIDEND YIELD:2.1%PE RATIO:6
NET ASSET VALUE:12p*NET DEBT:£145m**
Year to 31 MarTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20161.1565.850.75.5
20171.1245.434.29.1
20181.1737.925.29.9
20191.1448.634.510.89
20201.2043.831.13.9^
% change+5-10-10-64
Ex-div:na   
Payment:na   
*Includes intangible asset of £86m, or 69p a share, **Includes lease liabilities of £134m, ^No final dividend for 2020