TIDMWIN
RNS Number : 3133E
Wincanton PLC
05 November 2020
For immediate release 5 November 2020
WINCANTON plc
Half Year Results for the six months to 30 September 2020
(unaudited)
Strong growth in Digital & eFulfilment contributes to
resilient first half performance
Profitability impacted by COVID-19 disruption
Wincanton plc ("Wincanton" or "the Group"), the largest British
third-party logistics company, today announces its half year
results for the six months ended 30 September 2020.
Key financial measures
H1 2020 H1 2019 Change
---------------------------------------- --------- -------- -------
Revenue (GBPm) 578.7 592.9 -2.4%
Underlying EBITDA (GBPm) (1,2) 43.2 50.9 -15.1%
Underlying profit before tax (GBPm)(2) 19.1 26.2 -27.1%
Underlying basic EPS (p)(2) 12.9 17.8 -27.5%
Dividend per share - interim (p) 2.85 3.90 -26.9%
Free cash flow (GBPm) (3) 76.4 22.4
Net cash/(debt) (GBPm)(4) 63.3 (14.8)
Statutory results
---------------------------------------- --------- -------- -------
Profit before tax (GBPm) 19.1 28.5 -33.0%
Basic EPS (p) 12.9 19.7 -34.5%
Financial highlights
-- First half performance underpinned by Digital &
eFulfilment growth (+15.7%) from increased demand for online
retail
-- Underlying profit before tax of GBP19.1m (2019: GBP26.2m)
delivered in face of unprecedented disruption caused by
COVID-19
-- Strong improvement in cash to deliver net cash of GBP63.3m
(2019: net debt of GBP(14.8m), driven by good working capital
management and deferral of VAT, corporation tax and pension
payments
-- Agreement on 2020 pension triennial reached with trustees,
significantly reducing pension risk and negating need for planned
GBP6m increase in contributions
-- Good momentum into H2 - results for FY20/21 expected to be
materially ahead of current market expectations assuming no further
severe impacts from COVID-19
-- Dividend payments resumed following COVID-19-related
suspension earlier in the year, with an interim dividend of 2.85p
(2019: 3.90p) to be paid in January 2021
Positive progress against strategy
-- Strategy announced in Spring 2020: "great people delivering sustainable supply chain value"
-- Opened dedicated eFulfilment centre in Nuneaton with Loaf as
foundation customer and capacity to sell in the market
-- Growing eCommerce through notable wins with Waitrose, Wickes and The White Company in H1
-- High potential to expand public sector activity through
Inland Border Facility support and framework agreement with Crown
Commercial Services
-- Renewals and extensions with existing key customers including Asda, Morrisons and Screwfix
-- Simplified organisation under a single COO
-- Disposal of Pullman fleet services business expected,
following recent sale of containers operations, underlining focus
on higher growth markets
James Wroath, Wincanton Chief Executive Officer commented:
"Wincanton has demonstrated agility, innovation and commitment
to meet the critical supply chain needs of customers and consumers
throughout the country. I am proud of how our team has responded to
the challenge that COVID-19 has brought to our markets. The current
environment strengthens our conviction that we are following the
right strategy. The steps we have taken to refocus the Group on
growth markets, including disposing of our Pullman fleet services
and our containers business, will underpin our ongoing
performance.
"I am greatly encouraged by the new contracts we have secured so
far this year to become a key partner for some of Britain's biggest
brands and public bodies, and we continue to see a healthy pipeline
of new opportunities coming to market. Performance has been
resilient in the first half, we expect the good momentum with which
we end the period to continue and consequently expect results for
current year to be materially ahead of market expectations. "
For further enquiries please contact:
Wincanton plc
Tim Lawlor, Chief Financial Officer Tel: 01249 710000
Headland
Susanna Voyle Tel: 079 8089 4557
Henry Wallers Tel: 078 7656 2436
Jane Glover Tel: 078 8474 2400
A virtual meeting/conference call for analysts will be held
today, Thursday 5 November 2020, commencing at 10.30am. Wincanton's
Half Year Results 2020 are available at www.wincanton.co.uk
An audio webcast of the analysts' meeting will be available from
12 noon today:
https://webcasting.brrmedia.co.uk/broadcast/5f8ed8b5c4d0076f2b942cc1
Notes
(1) Underlying EBITDA refers to underlying operating profit
before depreciation and amortisation and is reconciled in the
section on Alternative Performance Measures (APMs) below.
(2) The section on APMs below provides further information on
these measures, including definitions and a reconciliation of APMs
to statutory measures.
(3) Free cash flow is defined as net cash inflow/(outflow)
before the movement in debt, pension payments, dividends and the
acquisition of own shares.
(4) Net cash/(debt) is the sum of cash and bank balances, bank
loans and overdrafts and other financial liabilities excluding
lease liabilities. Note 12 to the consolidated half year financial
statements provides a breakdown of net cash/(debt) for the current
and prior periods.
Half Year Review
for the six months to 30 September 2020
Summary
The Group has performed strongly in the first six months,
delivering an encouraging performance despite the disruption and
uncertainty caused by COVID-19 during the period. Recovery in those
core markets most affected by the pandemic has been supported by
performance within Digital & eFulfilment, which grew revenues
strongly (+15.7% versus prior year), taking advantage of increased
demands for online retail. This momentum is expected to continue to
benefit the Group as it moves through the second half of the
year.
Revenue was GBP578.7m (2019: GBP592.9m), slightly down on the
prior year as a result of the impact of COVID-19 lockdown measures,
primarily in the early months of the year. The construction, energy
and container markets were particularly affected, as was our home
delivery network due to a requirement to shut down completely for a
short period. These adverse effects have been largely offset by the
strength of online performance within Digital & eFulfilment, by
buoyant grocer sales through the lockdown and improving General
Merchandise activity throughout H1. We are well positioned to take
advantage of growth opportunities, as demonstrated by our success
converting pipeline opportunities in the period such as the
customer fulfilment centre (CFC) in west London for Waitrose and a
dedicated eFulfilment centre in Nuneaton. The extension of our
relationship with HMRC through Inland Border Facility support and
the signing of framework agreements with Crown Commercial Services
(CCS) provide evidence of our increasing role within the public
sector. We will continue to drive expansion in our identified
strategic growth markets.
Underlying profit before tax decreased by 27.1% to GBP19.1m
(2019: GBP26.2m) and the Group's underlying profit before tax
margin is 3.3% (2019: 4.4%). The driver of the profit decrease was
the impact of COVID-19 on our closed book operations, with the
reduction in margin due to the mix of revenue movements in the
period:
-- The unprecedented scale of the COVID-19 lockdown and the
speed with which it was imposed created a temporary but significant
drop in demand on our construction, energy and container businesses
and our home delivery network ;
-- Construction activity across the UK stopped almost completely
for 6 weeks and the subsequent recovery has been gradual;
-- Within energy, the reduction in vehicle numbers on the road
severely impacted retail fuel sales;
-- Container volumes were materially impacted by reduced consumer demand;
-- Two-man home deliveries were suspended, although some one-man
delivery activity continued; and
-- The relative profit impact of the lost revenue in Public
& Industrial and Specialist Services exceeded the profit earned
on the revenue growth in other sectors resulting in a lower margin
for the Group.
Recovery in construction and energy has been sustained but
gradual and we have chosen to exit the containers market. Following
the shutdown of our home delivery network for a few weeks in April
and May, volumes quickly returned and remain buoyant. The profit
impact of COVID-19 has therefore been partly mitigated and a solid
foundation created on which positive sales and profit momentum from
June onwards has been built.
Underlying EPS decreased by 27.5% to 12.9p per share (2019:
17.8p per share) reflecting the reduction in profits.
Net cash at the end of H1 was GBP63.3m (30 September 2019: net
debt of GBP14.8m, 31 March 2020: net debt of GBP10.1m). The net
cash inflow since 31 March 2020 of GBP73.4m was the result of cash
protection measures taken by management during H1, including the
deferral of VAT, corporation tax and pension recovery payments in
Q1 and the suspension of the FY19/20 final dividend. The remaining
positive movement in cash reflects the removal of non-essential
capital expenditure and strong disciplines around cash collection.
Customers have continued to pay promptly throughout the period, a
recognition of the important role Wincanton plays in its customers'
supply chains.
In September, the Group reached an agreement with the Trustee of
the Wincanton plc Pension Scheme (the Scheme) on the 2020 triennial
valuation and recovery plan. The annual deficit funding
contributions have been agreed at GBP18.9m per annum from April
2021, with annual cash contributions for the period through to
March 2027 being c.GBP6m per annum lower than those agreed in the
2017 valuation due to positive investment returns and longevity
experience since the 2017 valuation was agreed.
Dividend
The Board is declaring an interim dividend of 2.85p per Ordinary
Share (2019: 3.90p per share) following the temporary suspension of
dividend payments earlier in the year. This reflects the Board's
confidence in the Group's performance and the importance of
dividends to its shareholders. T he Group is therefore returning to
its established dividend policy with dividend payouts broadly
following movements in underlying earnings .
Board
On 31 July 2020 it was announced that Paul Dean, Non-executive
Director and Chair of the Wincanton plc Audit Committee would step
down from the end of February 2021. It was also announced that
Anthony Bickerstaff would be appointed as a Non-executive Director
with effect from 1 September 2020. As well as being appointed to
the company's Audit and Nomination Committees, Anthony will take
over as Chair of the Audit Committee on Paul Dean's departure.
Anthony is Chief Financial Officer of Costain Group plc, the FTSE
All-Share smart infrastructure solutions company, a position he
holds until 30 November 2020. Before joining Costain, he held
senior management and financial positions in Taylor Woodrow.
Key priorities and outlook
The importance of the strategy we announced at the start of this
year has been underlined by the ongoing pandemic. The dedication of
our people and the strength of the Wincanton business model have
led to an improving performance trend and we expect this to
continue into the second half of the year. New business wins and
the gradual recovery of the construction and energy businesses that
were hardest hit in the earliest stages of COVID-19, provide
further reasons for confidence.
We have opened a dedicated eFulfilment centre in Nuneaton and
notable contract wins with Waitrose, Wickes and The White Company
are already evidence of our expanding role in the eCommerce
marketplace. In the public sector, the Group has secured framework
agreements with Crown Commercial Services (CCS) to ensure that we
can bid for future Government work directly. In addition, we are in
final stage discussions with HMRC over a major extension to our
existing contract that would lead to us managing Inland Border
Facilities at the end of the Brexit transition period. Our
relationship with EDF Energy on the Hinkley Point C nuclear power
plant project has also continued to grow and is enabling us to
build potential relationships across a number of UK infrastructure
projects.
Meanwhile, we continue to offer key services and support to long
term customers in our primary markets in Grocery & Consumer and
General Merchandise. Recent contract renewals and additional
business with key customers including Screwfix, Asda, and Morrisons
is evidence that the Group's existing business relationships are in
good health. We also have a good pipeline of further opportunities
across these sectors from our strengthened business development
team. We have good momentum going into H2, and the results for
FY20/21 are expected to be materially ahead of current market
expectations assuming no further severe impacts from COVID-19.
As a result of the Group's strategy of focusing on its core
markets which offer the greatest potential for growth, the Group
completed the disposal of its containers operations in October and
expects to complete the disposal of Pullman fleet maintenance
services in November. The containers operations were sold for
consideration of approximately GBP1.5m, with net liabilities of
approximately GBP1.0m, primarily in respect of leased fleet,
transferring to the buyer. The Group expects to receive a nominal
consideration for the sale of Pullman and net liabilities,
primarily in respect of leased fleet and property, will transfer to
the buyer. After fees and provision for costs of transition and
separation, the Group expects to report a small non-underlying gain
on the disposals. The disposals will reduce the Group's annual
revenue by approximately GBP90m but lead to a small benefit to
underlying profit before tax.
We are mindful that COVID-19 continues to impact the wider
economy and we have put in place operational measures to allow the
effective continuity of business in the current environment. We
believe the measures we have in place will also allow us to
continue to operate through the second national lockdown. In the
face of the uncertainty created by the pandemic, we actively
monitor how it is affecting our businesses, our markets and our
people so we can respond to challenges as they arise in as
effective and timely a manner as possible. T he Group does not
expect to utilise the recently announced extension to the
Coronavirus Job Retention Scheme.
Overall, the Group will maintain focus on the delivery of our
strategy, which is particularly relevant as the UK economy
continues to respond to the impacts of COVID-19 and ensure that we
play our full part through "Great people delivering sustainable
supply chain value".
Trading
Following the review of the Group's strategy announced earlier
this year, Wincanton reorganised its operations into four
customer-facing business units and one specialist services business
under a single Chief Operations Officer. This unified operating
model will drive further collaboration across the entire structure
providing an agile platform to underpin continued growth in our
focus markets.
The four customer-facing business units and the specialist
services business cover the following areas:
-- Digital & eFulfilment: Technology focused sector to support the growing eCommerce market
-- Grocery & Consumer: Food focused sector creating logical
connections in one of the UK's most critical supply chains
-- General Merchandise: Retail focused sector to meet the
evolving needs of major multi-channel customers
-- Public & Industrial: Sector focused on customers in
Construction, Infrastructure, Defence, Energy and the Public
Sector
-- Specialist Services: Specialist sector for container
transportation and fleet maintenance services, which we expect to
exit in H2.
H1 2020(1) H1 2019
GBPm GBPm Change
---------------------------------------- ---------- ------- ------
Digital & eFulfilment revenue 65.0 56.2 15.7%
Grocery & Consumer revenue 215.4 206.5 4.3%
General Merchandise revenue 149.6 145.9 2.5%
Public & Industrial revenue 106.6 137.2 -22.3%
Specialist Services revenue 42.1 47.1 -10.6%
----------------------------------------- ---------- ------- ------
Total Revenue (GBPm) 578.7 592.9 -2.4%
Underlying EBITDA (GBPm) 43.2 50.9 -15.1%
Underlying EBITDA margin (%) 7.5% 8.6% -12.9%
Underlying profit before tax (GBPm) 19.1 26.2 -27.1%
Underlying profit before tax margin (%) 3.3% 4.4% -25.3%
----------------------------------------- ---------- ------- ------
(1) For HY1 2020 underlying profit before tax is equal to the
statutory measure.
Digital & eFulfilment delivered strong growth despite the
shutdown of our home delivery network for a few weeks in April and
May. We also saw steady growth in both Grocery & Consumer and
General Merchandise. These positive impacts were offset in overall
revenue terms by the negative impact of COVID-19 on the Public
& Industrial business, primarily in construction and energy
operations, and in Specialist Services. This change in revenue mix
had a disproportionate profit impact on the Group, due to the
closed book commercial mechanisms operated in the affected markets.
We acted swiftly to right-size capacity where required and continue
to drive operational efficiency alongside the underlying market
recovery. The Group has seen good profit growth in Digital &
eFulfilment from both new contract growth and increases in
underlying volumes throughout H1.
The Group continues to take advantage of the shift in consumer
purchasing habits to online, with Digital & eFulfilment
revenues growing 15.7% against prior year. In addition to start-up
activity for the new Waitrose CFC, high activity levels through the
home delivery network for Ikea and M&S as well as growth in the
Wickes and Homebase contracts were the key drivers of the year on
year uplift.
Buoyant end-customer sales and new business operations combined
to deliver another strong half for our Grocery & Consumer and
General Merchandise businesses. We successfully commenced
operations with Morrisons across several new locations, growing our
business with a key customer in our primary markets. Our teams also
rose to the challenge of high-demand levels throughout lockdown in
the Spring, maintaining service levels to keep shelves stocked for
the UK grocers. General Merchandise sales in H1 were driven by
strong online activity across the division, supported by the
opening of a new site for Screwfix.
The downturn in Public & Industrial (P&I) revenue was
the result of the impact of the COVID-19 lockdown. Our energy
business saw a dramatic drop off in activity with the reduction in
vehicle numbers on the road severely impacting retail fuel sales,
sometimes by as much as 80%. Similarly, our construction networks
were heavily impacted by the industry-wide closure of many building
sites and builders' merchants at the start of the year. Both
businesses continue to track behind prior year and while we have
seen a gradual recovery in demand in the second quarter we have
recognised an impairment of certain vehicles servicing the energy
market in the first half of the year. The return in demand has
coincided with an increase in subcontractor costs as a result of
capacity coming out of the market. This increase is impacting the
pace of the return to pre-COVID margin levels in these parts of the
business.
The downsides in P&I were partially offset by continued
strong performance in the infrastructure part of our business,
primarily through our growing relationship with EDF at the Hinkley
Point C nuclear site. Furthermore, P&I is set to benefit from
opportunities emerging from HMRC and the CCS framework agreement
that will generate a good pipeline of prospects in the public
sector.
The impact from the pandemic also significantly affected
Specialist Services, with new business gains in both containers and
fleet maintenance services more than offset by a subdued containers
market throughout much of the first quarter.
Net financing costs
2020 2019 GBPm
GBPm
-------------------------------------------------- ----- ----------
Interest income 0.1 0.1
Interest on the net defined benefit pension asset 1.1 -
Bank interest payable on loans (1.4) (2.0)
Unwinding of discount on provisions (0.3) (0.3)
Interest on lease liabilities (1.8) (1.9)
--------------------------------------------------- ----- ----------
Net financing costs (2.3) (4.1)
--------------------------------------------------- ----- ----------
Net financing costs were GBP2.3m (2019: GBP4.1m), GBP1.8m lower
compared to the prior period.
Bank interest payable on loans of GBP1.4m (2019: GBP2.0m) was
lower than the prior year due to the Group being in a net cash
position for much of the period which reduced the need to utilise
the Group's revolving credit facility.
Of the non-cash financing items, interest of GBP1.1m (2019:
GBPnil) on the defined benefit pension asset in the period arose
due to the significant pension net surplus position reported at 31
March 2020 (see 'Pensions' section below).
Financing charges of GBP1.8m in respect of the interest on lease
liabilities were in line with the prior period (2019: GBP1.9m).
Non-underlying items
2020 2019
GBPm GBPm
----------------------------------------- ----- -----
Net profit on freehold property disposal - 2.3
------------------------------------------ ----- -----
There were no non-underlying items in the 6 months to 30
September 2020. In the prior year we completed the disposal of two
freehold properties, receiving gross sales proceeds of GBP5.5m and
recognising costs of disposal and transitioning operations to
another site of GBP0.8m. The carrying value of the properties was
GBP2.4m generating a net profit on the disposal and transition of
GBP2.3m.
Taxation
2020 2019
GBPm GBPm
---------------------------------------- ----- -----
Underlying profit before tax 19.1 26.2
----------------------------------------- ----- -----
Underlying tax 3.1 4.2
Tax on non-underlying items - -
---------------------------------------- ----- -----
Tax as reported 3.1 4.2
----------------------------------------- ----- -----
Effective tax rate on underlying profit
before tax (%) 16.1% 16.2%
----------------------------------------- ----- -----
Underlying tax of GBP3.1m (2019: GBP4.2m) represents an
underlying effective tax rate (ETR) of 16.1% (2019: 16.2%) on
underlying profit before tax. The underlying ETR applied at the
half year is an estimate of the expected full year rate. With
effect from FY21/22, the ETR is expected to move towards the
statutory tax rate of 19.0%.
Corporation tax paid in respect of the period was GBPnil (2019:
GBP4.9m). The decrease is due to the uncertainty over the taxable
profits for the year and therefore the payments on account being
deferred to the second half of the year.
The total net deferred tax asset reduced to GBP1.2m (2019:
GBP3.1m) primarily as a result of the reduction in the pension
asset and the deferred tax liability thereon.
Profit after tax and EPS
Profit after tax for the period was GBP16.0m (2019: GBP24.3m)
which translates to a basic EPS of 12.9p (2019: 19.7p). The
decrease compared to the prior period is due to the impact of the
COVID-19 pandemic on specific areas of the business.
Underlying EPS, which excludes from earnings non-underlying
items where relevant, decreased to 12.9p (2019: 17.8p), again due
to the impact of COVID-19.
The calculation of these EPS measures is set out in Note 8.
Dividends
The Group's policy is for dividend growth to broadly match the
growth in underlying earnings.
In setting the dividend the Board considers a range of factors,
including the Group's strategy (including downside sensitivities),
the current and projected level of distributable reserves and
projected cash flows, including cash payments to the pension scheme
and deferred payment arrangements.
The Board has declared an interim dividend of 2.85p (2019:
3.90p) per share relating to the six-month period ended 30
September 2020, payable on 22 January 2021. This reflects the
Board's confidence in the Group's performance and the importance of
dividends to its shareholders. T he Group is therefore returning to
its established dividend policy with dividend payouts broadly
following movements in underlying earnings .
The Group did not pay a final dividend in the six-month period
relating to the year ended 31 March 2020 (2019: 7.29p) due to the
temporary suspension in response to the COVID-19 uncertainty.
Financial position
The summary financial position of the Group is set out
below:
30 September 2020 30 September 2019 31 March 2020
GBPm GBPm GBPm
--------------------------------------------------------- ----------------- ----------------- -------------
Non-current assets (excl. employee benefits) 204.7 225.5 226.6
Net current liabilities (excl. net debt) (213.9) (159.3) (162.3)
Non-current liabilities (excl. net debt/pension deficit) (106.8) (116.9) (133.9)
Net cash/(debt) (excl. lease liabilities) 63.3 (14.8) (10.1)
Pension net asset (excl. deferred tax) 24.3 8.1 94.4
---------------------------------------------------------- ----------------- ----------------- -------------
Net (liabilities)/assets (28.4) (57.4) 14.7
---------------------------------------------------------- ----------------- ----------------- -------------
The increase in net liabilities since the year ended 31 March
2020 of GBP43.1m is primarily due to the profit after tax of
GBP16.0m being offset by a reduction in the pension net asset and
corresponding deferred tax movement of GBP(59.7)m.
The movement in the pension net asset is primarily due to
employer contributions paid into the Scheme less net actuarial
movements on pension assets and liabilities.
Included within the net current liabilities above are assets and
liabilities classified as held for sale of GBP5.8m and GBP(3.1)m
respectively.
Net debt and cash flows
Net cash at 30 September 2020 was GBP63.3m (2019: net debt of
GBP(14.8)m, 31 March 2020: net debt of GBP(10.1)m), reflecting a
net cash inflow of GBP78.1m over the intervening 12 months and
GBP73.4m since 31 March 2020.
The Group's cash flows for the six months to 30 September 2020
are summarised in the following table:
30 September 2020 30 September 2019 31 March
GBPm GBPm 2020
GBPm
------------------------------------------ ----------------- ----------------- --------
Underlying EBITDA 43.2 50.9 104.1
Working capital 54.1 (2.5) (4.0)
Tax - (4.9) (7.0)
Net interest (3.1) (4.1) (7.8)
Other items 0.8 (1.5) (5.0)
------------------------------------------- ----------------- ----------------- --------
Free cash flow before capital expenditure 95.0 37.9 80.3
Repayment of obligations under leases (16.2) (15.8) (35.7)
Capital expenditure (2.8) (4.7) (9.3)
Net proceeds from asset disposals 0.4 5.0 5.5
Free cash flow 76.4 22.4 40.8
Pension payments (3.0) (8.9) (17.8)
Dividends - (9.0) (13.8)
------------------------------------------- ----------------- ----------------- --------
Net cash flow 73.4 4.5 9.2
------------------------------------------- ----------------- ----------------- --------
The Group generated a GBP73.4m net cash inflow in the period
(2019: GBP4.5m) with a free cash inflow of GBP76.4m (2019:
GBP22.4m). Included in the net cash inflow is the effect of
approximately GBP55m of payment deferrals including GBP43.9m of VAT
payments, GBP6.1m of pension contributions and GBP3.1m of
corporation tax - these timing differences are expected to reverse
in H2 FY20/21 and in FY21/22.
There has been a working capital inflow in the period of
GBP54.1m (2019: outflow of GBP2.5m) mainly due to the deferral of
GBP43.9m of VAT payments in the first quarter, but also due to
continued strong disciplines around billing and cash collection
throughout the period. The Group paid GBPnil corporation tax in the
period (2019: GBP4.9m), with payments on account of GBP3.1m being
deferred until the second half of the year. We expect to pay
deferred VAT amounts in full in the second half subject to any
material unplanned adverse cash movements in the period.
The amount of cash interest paid, excluding fees, of GBP3.1m
(2019: GBP4.1m) has decreased in the period due to the improved
cash position leading to a reduced requirement to draw down on the
Group's revolving credit facility.
Other items of GBP0.8m (2019: GBP(1.5)m) comprise both cash and
non-cash items and relate primarily to net movements on provisions
and share-based payment charges in the period.
Capital expenditure of GBP2.8m (2019: GBP4.7m) principally
consists of investments in IT systems, including the enhancement of
our transport management system. The reduction versus prior year is
due to the controls put in place restricting non-essential capital
expenditure. We expect capital expenditure to increase in the
second half due to continued investments in systems, including the
upgrade of our finance and HR systems, and new contract
start-ups.
Net proceeds from asset disposals of GBP0.4m relate to the
disposal of sundry vehicles. In the prior period, the net proceeds
of GBP5.0m related primarily to the disposal of two under-utilised
freehold properties and the transition of the related operations to
other sites (gross proceeds of GBP5.5m less costs of disposal and
transitioning operations to another site of GBP0.8m).
Cash contributions to fund the pension deficit in the current
year to 31 March 2021 will be GBP18.9m, less administration costs
of GBP0.7m to be paid directly by the Group (31 March 2020:
GBP18.4m) of which GBP3.0m was paid in H1 following an agreement
with the pension trustees to defer GBP6.1m of contributions as a
cash protection measure against COVID-19 impacts. These deferred
contributions will be paid in December 2020. Under the newly agreed
pension arrangements following the 31 March 2020 triennial
valuation, payments in the next financial year are expected to
remain at GBP18.9m.
The final FY19/20 dividend, which ordinarily would have been
paid in H1 (2019: GBP9.0m) was suspended earlier in the year as a
consequence of the uncertainty caused by COVID-19. The interim cash
dividend payment in the second half is expected to be GBP3.5m.
Financing and covenants
The Group's committed facilities at the period end were
GBP181.2m (2019: GBP141.2m), including a GBP40m extension to the
facility which expires in May 2021. The headroom in these committed
facilities compared to net cash of GBP63.3m at 30 September 2020
was GBP244.5m (2019: GBP126.4m). The Group also has a Receivables
Purchase Facility with Santander UK plc and operating overdrafts
which provide day to day flexibility and amount to a further GBP50m
and GBP7.5m respectively in uncommitted facilities. At 30 September
2020, utilisation of the Group's non-recourse Receivables Purchase
Facility was GBP5.2m (2019: GBP10.1m).
Wincanton operates comfortably within its banking covenants, as
summarised in the table below:
Covenant Ratio At 30 September 2020
-------------------- --------- ----------------------
Leverage ratio <2.75:1 Net Cash position
Interest cover >3.5:1 24.2
Fixed charge cover >1.4:1 2.9
-------------------- --------- ----------------------
Pensions
The Group has a number of pension arrangements in the UK and
Ireland including defined benefit arrangements which are described
below.
The Group has reported an IAS 19 net asset of GBP24.3m (GBP19.7m
net of deferred tax) at 30 September 2020 (2019: net asset of
GBP8.1m, 31 March 2020: net asset of GBP94.4m) as set out in the
following table:
30 Sept 30 Sept 31 March
GBPm 2020 2019 2020
------------------ --------- --------- ---------
Assets 1,284.5 1,272.5 1,157.5
Liabilities (1,260.2) (1,264.4) (1,063.1)
------------------ --------- --------- ---------
Pension net asset 24.3 8.1 94.4
------------------ --------- --------- ---------
Discount rate (%) 1.55 1.80 2.30
------------------ --------- --------- ---------
The movement in the net asset since 31 March 2020 is due to the
unwinding throughout H1 of market uncertainty caused in the spring
by the COVID-19 pandemic. The valuation of Scheme liabilities is
calculated using a discount rate based on high quality corporate
bond yields while Scheme assets are hedged against movements in
gilt yields. Credit spreads on corporate bonds increased due to
market uncertainty resulting in a reduction in the liabilities
which was not matched with a corresponding fall in assets as at 31
March 2020. This difference reversed post year end as expected,
significantly reducing the size of the net asset.
In September 2020 the Group reached an agreement with the
Trustee of the Scheme on the 2020 triennial valuation and recovery
plan. The key elements are set out below:
-- The annual deficit funding net contributions have been agreed
at GBP18.9m per annum from 1 April 2021 increasing by RPI over the
three years to March 2024, followed by GBP22.0m per annum from
April 2024, increasing by RPI to March 2027. The Group will
continue to pay certain administration costs directly and, in line
with the Schedule of contributions, these will be deducted from the
deficit funding contributions.
-- Annual cash contributions for the period from April 2021 to
March 2027 are c.GBP6m per annum lower than those agreed in the
2017 valuation due to positive investment returns and longevity
experience since the 2017 valuation was agreed.
-- Additional protection has been provided to the Scheme in the
form of a letter of credit of GBP3.0m per annum in the event of
severe adverse Scheme experience and Group default.
The actuarial deficit at 31 March 2020 was GBP154m, compared to
the March 2017 valuation of GBP221m. The 2020 valuation was
impacted by the market volatility in relation to COVID-19. The
estimated actuarial deficit at 30 June 2020 had reduced to GBP105m.
Following this improvement and as part of the overall triennial
agreement, the Trustee and the Group agreed to a substantial
acceleration of the planned de-risking of the Scheme's investment
strategy to lock in the lower deficit position. This was largely
implemented in September with the sale of equities and an increase
in the level of the hedging against actuarial liabilities. As at 30
September 2020 the Scheme's investment was split between 17% in
return-seeking assets and 83% in defensive assets.
Contingent liability
The Group has been notified by HMRC of potential claims for
Excise duty and related VAT in connection with the historic
transfers of a group of former customers' excise goods. These
movements occurred from one of Wincanton's bonded warehouses to a
common third party UK export agent. HMRC suspects irregularities to
have occurred during the export process and the export agent has
subsequently entered administration. Due to the nature of the
excise regime Wincanton operates in, HMRC considers Wincanton to be
jointly and severally liable for Excise duty and VAT arising as a
result of these irregularities.
Wincanton is vigorously disputing the potential claims and is
confident in its legal position having received clear, expert
advice. As a result of the strength of the legal advice, no
liability has been recognised in respect of these claims, noting
that the total value of the potential claims could be up to
approximately GBP50m before interest and legal costs. We expect
that any claims made by HMRC will be received in the second half of
the year.
Unless earlier resolution is achieved, the Group expects to
proceed to have the claims heard before a Tax Tribunal and the full
legal process could take in excess of two years. Under current
regulations, some or all of the claims could be required to be paid
shortly after issuance and in advance of the outcome of a Tribunal.
The Group is in discussion with HMRC regarding the process and
potential options to minimise the risk of cash outflows in advance
of a Tribunal. In parallel with the legal process, the Group is
reviewing options regarding its insurance cover.
Risks
The key risks and uncertainties facing Wincanton in the second
half of the current financial year have not changed materially from
those outlined on pages 32 to 35 of the Annual Report for the year
ended 31 March 2020, and include the risks to our operations of
further COVID-19 outbreaks and lock downs as well as other global
pandemics and events. Other than COVID-19, the principal commercial
and operational risks are the Group's ability to source new
contracts, at an appropriate financial return for an acceptable
level of risk, and subsequent performance of new and existing
contracts. Wincanton has a diversified customer base which spans
large sectors of the UK economy. The majority of our contracts are
open book and we are not directly exposed to foreign currency
movements in our business.
Brexit
Wincanton's planning for Brexit, and its likely impact, is at an
advanced stage of maturity. The key risks across our business have
been identified and are supported by mitigation plans. Due to the
high number of potential eventualities reported, which could occur
under the various Brexit scenarios, Wincanton elected to build its
mitigation plans to address a 'no deal' scenario. Our risks
associated with Brexit are relatively limited and largely confined
to labour availability, particularly drivers, and interruptions in
the transport consumables supply chain. These risks have
mitigations in place or in development. Positively, we believe a
hard Brexit presents opportunities to the Group and this is
reflected in our preparations.
Going Concern
The interim financial statements have been prepared on a going
concern basis. Having considered the ability of the Company and the
Group to operate within its existing facilities and meets its debt
covenants, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in
operational existence for the foreseeable future.
In determining whether the interim financial statements can be
prepared on a going concern basis, the Directors considered the
Group's business activities, together with the factors likely to
affect its future development, performance and position. The review
also included the financial position of the Group, its cash flows,
and borrowing facilities.
The Board considered in detail the future impact on the Group of
the ongoing COVID-19 outbreak. The Board has considered a base case
and a severe but plausible downside case. In both scenarios, the
Group has adequate headroom in existing bank facilities to fund
itself and it complies with the financial covenants under its
committed borrowing facilities throughout the forecast period.
Further details are provided in the Basis of Preparation note in
Note 1 Accounting Policies in the interim financial statements.
Other key factors considered by the Directors were:
-- The implications of the current economic environment and
future uncertainties around the Group's revenues and profits by
undertaking forecasts and projections on a regular basis;
-- The impact of the competitive environment within which the Group's businesses operate;
-- The potential actions that could be taken in the event that
revenues are worse than expected, to ensure that operating profit
and cash flows are protected.
Alternative Performance Measures
Alternative Performance Measures (APMs) are used by the Board in
assessing the Group's performance and are applied consistently from
one period to the next. They therefore provide additional useful
information for shareholders on the underlying performance and
position of the Group. Additionally, underlying EPS is used as a
key performance indicator for the share incentive scheme, being the
Long Term Incentive Plan (LTIP), up to FY19/20 (from FY20/21
onwards the LTIP has moved to being measured entirely on Total
Shareholder Return). These measures are not defined by IFRS and are
not intended to be a substitute for IFRS measures.
The Group presents underlying EBITDA, operating profit and EPS
which are calculated as the statutory measures stated before
non-underlying items, including related tax where applicable.
Non-underlying items are those items of income and expenditure
which, due to their nature or size, the Directors consider should
be disclosed separately on the face of the income statement, such
as amortisation of acquired intangibles, exceptional items and
related tax.
The table below reconciles the APMs to the statutory reported
measures.
2020 2019
Non-underlying Non-underlying
GBPm Statutory items(1) Underlying Statutory items(1) Underlying
Revenue 578.7 - 578.7 592.9 - 592.9
---------------------- --------- ---------------------- ---------- --------- ---------------------- ----------
EBITDA(2) 43.2 - 43.2 53.2 (2.3) 50.9
---------------------- --------- ---------------------- ---------- --------- ---------------------- ----------
EBITDA margin (%) 7.5% - 7.5% 8.6% - 8.6%
Depreciation,
amortisation and
impairments (21.8) - (21.8) (20.6) - (20.6)
---------------------- --------- ---------------------- ---------- --------- ---------------------- ----------
Operating profit 21.4 - 21.4 32.6 (2.3) 30.3
Net financing costs (2.3) - (2.3) (4.1) - (4.1)
---------------------- --------- ---------------------- ---------- --------- ---------------------- ----------
Profit before tax 19.1 - 19.1 28.5 (2.3) 26.2
Income tax (3.1) - (3.1) (4.2) - (4.2)
---------------------- --------- ---------------------- ---------- --------- ---------------------- ----------
Profit after tax 16.0 - 16.0 24.3 (2.3) 22.0
---------------------- --------- ---------------------- ---------- --------- ---------------------- ----------
Earnings per share
(p)(3) 12.9 - 12.9 19.7 17.8
Dividend per share (p) 3.90 3.90
Net cash / (debt)
excluding lease
liabilities (4) 63.3 - 63.3 (14.8) (14.8)
---------------------- --------- ---------------------- ---------- --------- ---------------------- ----------
1 Note 4 provides further detail of non-underlying items.
2 EBITDA refers to operating profit before depreciation,
amortisation and impairments.
3 Note 8 provides further detail of underlying earnings per
share.
4 Net debt is the sum of cash and bank balances, bank loans and
overdrafts and other financial liabilities excluding lease
liabilities. Note 12 to the consolidated half year financial
statements provides a breakdown of net debt for the current and
prior periods.
Statement of Directors' responsibilities
The Board confirms to the best of its knowledge:
-- that the consolidated half year financial statements for the
six months to 30 September 2020 have been prepared in accordance
with IAS 34 Interim Financial Reporting amended in accordance with
changes in IAS 1 Presentation of Financial Statements, as adopted
by the EU; and
-- that the Half Year Report includes a fair review of the
information required by sections 4.2.7R and 4.2.8R of the
Disclosure Guidance and Transparency Rules, being an indication of
important events that have occurred during the period and their
impact on the consolidated half year financial statements; a
description of the principal risks and uncertainties for the
remainder of the current financial year; and the disclosure
requirements in respect of material related party transactions.
The composition of the Board of Directors has changed since the
publication of the Annual Report in June 2020, as noted in the Half
Year Review above. A list of current Directors is maintained on the
Wincanton plc website at www.wincanton.co.uk.
The above Statement of Directors' responsibilities was approved
by the Board on 4 November 2020.
T Lawlor
Director
Consolidated income statement
for the six months to 30 September 2020 (unaudited)
Six months to Six months to Year ended
30 Sept 30 Sept 31 March
2020 2019 2020
Note GBPm GBPm GBPm
Revenue 3 578.7 592.9 1,201.2
---------------------------------------------------- ------- ---------------- ---------------- -------------
Underlying operating profit 21.4 30.3 61.0
---------------------------------------------------- ------- ---------------- ---------------- -------------
Non-underlying items 4 - 2.3 (9.0)
---------------------------------------------------- ------- ---------------- ---------------- -------------
Operating profit 21.4 32.6 52.0
Financing income 5 1.2 0.1 -
Financing costs 5 (3.5) (4.2) (8.2)
---------------------------------------------------- ------- ---------------- ---------------- -------------
Net financing costs (2.3) (4.1) (8.2)
---------------------------------------------------- ------- ---------------- ---------------- -------------
Profit before tax 19.1 28.5 43.8
Income tax expense 7 (3.1) (4.2) (5.3)
---------------------------------------------------- ------- ---------------- ---------------- -------------
Profit attributable to equity shareholders of
Wincanton plc 16.0 24.3 38.5
---------------------------------------------------- ------- ---------------- ---------------- -------------
Earnings per share
- basic 8 12.9p 19.7p 31.1p
- diluted 8 12.8p 19.5p 30.8p
---------------------------------------------------- ------- ---------------- ---------------- -------------
Consolidated statement of comprehensive income
for the six months to 30 September 2020 (unaudited)
Six months to Six months to Year ended
30 Sept 30 Sept 31 March
2020 2019 2020
GBPm GBPm GBPm
Profit for the period 16.0 24.3 38.5
------------------------------------------------------------------------- -------------- -------------- -----------
Other comprehensive income/(expense)
Items which will not subsequently be reclassified to the income
statement
Remeasurements of defined benefit asset (73.6) 6.1 84.0
Deferred tax on remeasurements of defined benefit asset 13.9 (1.0) (15.8)
------------------------------------------------------------------------- -------------- -------------- -----------
(59.7) 5.1 68.2
Items which are or may subsequently be reclassified to the income
statement
Net foreign exchange gain on investment in foreign subsidiaries of net
hedged items - 0.1 0.1
- 0.1 0.1
------------------------------------------------------------------------- -------------- -------------- -----------
Other comprehensive income for the period, net of income tax (59.7) 5.2 68.3
------------------------------------------------------------------------- -------------- -------------- -----------
Total comprehensive (loss)/income attributable to equity shareholders of
Wincanton plc (43.7) 29.5 106.8
------------------------------------------------------------------------- -------------- -------------- -----------
Consolidated balance sheet
at 30 September 2020 (unaudited)
30 Sept 30 Sept 31 March
2020 2019 2020
Note GBPm GBPm GBPm
---------------------------------------------------- -------- -------- ---------
Non-current assets
Goodwill and intangible assets 10 86.2 84.8 85.6
Property, plant and equipment 11 18.5 32.4 26.6
Right-of-use assets 14 98.5 105.0 114.2
Investments, including those equity accounted 0.3 0.2 0.2
Deferred tax assets 1.2 3.1 -
Employee benefits 17 26.9 8.1 96.5
----------------------------------------------- --- -------- -------- ---------
231.6 233.6 323.1
----------------------------------------------- --- -------- -------- ---------
Current assets
Inventories 1.4 4.9 2.0
Trade and other receivables 159.4 149.2 135.0
Cash and cash equivalents 12 63.3 39.2 60.9
----------------------------------------------- --- -------- -------- ---------
224.1 193.3 197.9
Assets classified as held for sale 13 5.8 - -
----------------------------------------------- --- -------- -------- ---------
229.9 193.3 197.9
Current liabilities
Income tax payable (4.0) (3.3) (2.4)
Lease liabilities 14 (34.7) (33.9) (36.6)
Trade and other payables (326.2) (266.1) (248.1)
Provisions 15 (12.5) (10.1) (12.2)
----------------------------------------------- --- -------- -------- ---------
(377.4) (313.4) (299.3)
Liabilities classified as held for sale 13 (3.1) - -
----------------------------------------------- --- -------- -------- ---------
(380.5) (313.4) (299.3)
----------------------------------------------- --- -------- -------- ---------
Net current liabilities (150.6) (120.1) (101.4)
----------------------------------------------- --- -------- -------- ---------
Total assets less current liabilities 81.0 113.5 221.7
----------------------------------------------- --- -------- -------- ---------
Non-current liabilities
Borrowings and other financial liabilities 12 - (54.0) (71.0)
Lease liabilities 14 (82.2) (89.8) (97.8)
Employee benefits 17 (2.6) - (2.1)
Provisions 15 (24.6) (27.1) (24.8)
Deferred tax liabilities - - (11.3)
(109.4) (170.9) (207.0)
----------------------------------------------- --- -------- -------- ---------
Net (liabilities)/assets (28.4) (57.4) 14.7
----------------------------------------------- --- -------- -------- ---------
Equity
Issued share capital 12.5 12.5 12.5
Share premium 12.9 12.9 12.9
Merger reserve 3.5 3.5 3.5
Translation reserve (0.2) (0.2) (0.2)
Retained earnings (57.1) (86.1) (14.0)
----------------------------------------------- --- -------- -------- ---------
Total (deficit)/equity (28.4) (57.4) 14.7
----------------------------------------------- --- -------- -------- ---------
Consolidated statement of changes in equity
at 30 September 2020 (unaudited)
Retained earnings
-----------------------------
Issued Total
share Share Merger Translation equity/
capital premium reserve reserve Own shares Profit and loss (deficit)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- --------- --------- --------- ------------ ----------- ---------------- -----------
Balance at 1 April
2020 12.5 12.9 3.5 (0.2) (1.5) (12.5) 14.7
Profit for the
period - - - - - 16.0 16.0
Other comprehensive
income - - - - - (59.7) (59.7)
--------------------- --------- --------- --------- ------------ ----------- ---------------- -----------
Total comprehensive
income - - - - - (43.7) (43.7)
--------------------- --------- --------- --------- ------------ ----------- ---------------- -----------
Share based payment
transactions - - - - 0.2 0.3 0.5
Current tax on share - - - - - - -
based payments
Deferred tax on
share based
payments - - - - - 0.1 0.1
Balance at 30
September 2020 12.5 12.9 3.5 (0.2) (1.3) (55.8) (28.4)
===================== ========= ========= ========= ============ =========== ================ ===========
Balance at 1 April
2019 12.5 12.9 3.5 (0.3) (2.2) (93.5) (67.1)
IFRS 16
Restatement(1) - - - - - (11.2) (11.2)
--------------------- --------- --------- --------- ------------ ----------- ---------------- -----------
Revised balance as
at 1 April 2019 12.5 12.9 3.5 (0.3) (2.2) (104.7) (78.3)
Profit for the
period - - - - - 24.3 24.3
Other comprehensive
expense - - - 0.1 - 5.1 5.2
--------------------- --------- --------- --------- ------------ ----------- ---------------- -----------
Total comprehensive
income - - - 0.1 - 29.4 29.5
--------------------- --------- --------- --------- ------------ ----------- ---------------- -----------
Share based payment
transactions - - - - - 0.4 0.4
Dividends paid to
shareholders - - - - - (9.0) (9.0)
--------------------- --------- --------- --------- ------------ ----------- ---------------- -----------
Balance at 30
September 2019 12.5 12.9 3.5 (0.2) (2.2) (83.9) (57.4)
--------------------- --------- --------- --------- ------------ ----------- ---------------- -----------
Balance at 1 April
2019 12.5 12.9 3.5 (0.3) (2.2) (93.5) (67.1)
IFRS16
Restatement(1) - - - - - (11.2) (11.2)
--------- --------- --------- ------------ ----------- ---------------- -----------
Revised balance as
at 1 April 2019 12.5 12.9 3.5 (0.3) (2.2) (104.7) (78.3)
Profit for the year - - - - - 38.5 38.5
Other comprehensive
income - - - 0.1 - 68.2 68.3
--------------------- --------- --------- --------- ------------ ----------- ---------------- -----------
Total comprehensive
income - - - 0.1 - 106.7 106.8
--------------------- --------- --------- --------- ------------ ----------- ---------------- -----------
Share based payment
transactions - - - - 0.7 (1.0) (0.3)
Current tax on share
based payment
transactions - - - - - 0.3 0.3
Dividends paid to
shareholders - - - - - (13.8) (13.8)
--------------------- --------- --------- --------- ------------ ----------- ---------------- -----------
Balance at 31 March
2020 12.5 12.9 3.5 (0.2) (1.5) (12.5) 14.7
===================== ========= ========= ========= ============ =========== ================ ===========
Consolidated statement of cash flows
for the six months to 30 September 2020 (unaudited)
Six
Six months Year
months to 30 ended
to 30 Sept Sept 31 March
2020 2019 2020
GBPm GBPm GBPm
-------------------------------------------------------------------------- ------------ ------------- -----------
Operating activities
Profit before tax 19.1 28.5 43.8
Adjustments for:
- depreciation and amortisation 20.4 20.6 43.1
- interest expense on leases 1.8 1.9 3.8
- other net finance costs 0.5 2.2 4.4
- impairments 1.4 - 9.3
- profit on disposal of property, plant and equipment - (2.4) (2.3)
- share based payment transactions 0.5 0.4 (0.3)
-------------------------------------------------------------------------- ------------ ------------- -----------
43.7 51.2 101.8
(Increase)/decrease in trade and other receivables (24.4) (8.4) 5.8
Decrease/(increase) in inventories 0.4 (1.2) 0.4
Increase/(decrease) in trade and other payables 78.1 7.1 (11.2)
Decrease in provisions (0.2) (1.6) (2.0)
Increase/(decrease) in employee benefits before pension deficit payment 0.6 (0.2) 0.3
Income taxes paid - (4.9) (7.0)
-------------------------------------------------------------------------- ------------ ------------- -----------
Cash generated before pension deficit payments 98.2 42.0 88.1
Pension deficit payments (3.0) (8.9) (17.8)
-------------------------------------------------------------------------- ------------ ------------- -----------
Cash flows from operating activities 95.2 33.1 70.3
-------------------------------------------------------------------------- ------------ ------------- -----------
Investing activities
Proceeds from sale of property, plant and equipment 0.4 5.0 5.5
Interest received 0.1 - -
Addition of trade investment (0.1) - -
Additions of property, plant and equipment (1.2) (3.1) (5.9)
Additions of computer software (1.6) (1.6) (3.4)
-------------------------------------------------------------------------- ------------ ------------- -----------
Cash flows from investing activities (2.4) 0.3 (3.8)
-------------------------------------------------------------------------- ------------ ------------- -----------
Financing activities
(Decrease)/increase in borrowings (71.0) 22.0 39.0
Payment of lease liabilities (16.2) (15.8) (35.7)
Equity dividends paid - (9.0) (13.8)
Interest paid on borrowings (1.4) (2.2) (4.0)
Interest paid on lease liabilities (1.8) (1.9) (3.8)
-------------------------------------------------------------------------- ------------ ------------- -----------
Cash flows from financing activities (90.4) (6.9) (18.3)
-------------------------------------------------------------------------- ------------ ------------- -----------
Net increase in cash and cash equivalents 2.4 26.5 48.2
Cash and cash equivalents at beginning of the period 60.9 12.7 12.7
Cash and cash equivalents at end of the period 63.3 39.2 60.9
-------------------------------------------------------------------------- ------------ ------------- -----------
Represented by:
- cash at bank and in hand 59.8 34.3 56.0
- restricted cash, being deposits held by the Group's insurance
subsidiary 3.5 4.9 4.9
-------------------------------------------------------------------------- ------------ ------------- -----------
63.3 39.2 60.9
------------------------------------------------------------------------- ------------ ------------- -----------
Notes to the consolidated half year financial statements
for the six months to 30 September 2020 (unaudited)
1 Accounting policies
General information
Wincanton plc (the 'Company') is a company incorporated in the
United Kingdom and domiciled and registered in England and Wales.
The consolidated half year financial statements of the Company for
the six months to 30 September 2020 comprise the Company and its
subsidiaries (together referred to as the 'Group') and, where
relevant, the Group's interests in joint ventures.
These consolidated half year financial statements do not include
all of the information required for full annual financial
statements and should be read in conjunction with the consolidated
financial statements for the year ended 31 March 2020. The
comparative figures for the year ended 31 March 2020 have been
extracted from those accounts but do not comprise the full
statutory accounts for that financial year. Except for the 31 March
2020 comparatives, the financial information set out herein is
unaudited but has been reviewed by the auditors and their report to
the Company is set out below.
The consolidated financial statements for the year ended 31
March 2020 have been reported on by the Group's auditor, delivered
to the Registrar of Companies, and are available upon request from
the Company's registered office at Methuen Park, Chippenham,
Wiltshire, SN14 0WT or at www.wincanton.co.uk. The report of the
auditor (KPMG LLP) was unqualified and did not contain a statement
under Section 498(2) or (3) of the Companies Act 2006. KPMG LLP's
report included a reference to a material uncertainty related to
going concern due to the Group's severe but plausible downside case
indicating that the Group would exceed its financial covenants in
March 2021. Their opinion was not modified in respect of this
matter.
An update to the going concern assessment is provided below and,
as a result, there is no material uncertainty at the date of this
report.
The Half Year Report, which includes the consolidated half year
financial statements, was approved by the Board on 4 November
2020.
Basis of preparation
The consolidated half year financial statements have been
prepared in accordance with IAS 34 Interim Financial Reporting. As
required by the Disclosure Guidance and Transparency Rules of the
UK's Financial Conduct Authority, the consolidated half year
financial statements have been prepared on the basis of the
accounting policies adopted by the Group and applied and disclosed
in its consolidated financial statements for the year ended 31
March 2020, except as described below.
The preparation of these consolidated half year financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates. In preparing these
consolidated half year financial statements, the significant
judgements made by management in applying the Group's accounting
policies and the key areas of estimation were the same as those
that applied to the consolidated financial statements for the year
ended 31 March 2020. In addition, an accounting policy for Income
from Government Grants is disclosed for the first time, due to
amounts received in the period.
Adoption of amended standards
The Group has adopted the following amendments to standards in
the year: Amendments to IAS 1 and IAS 8: Definition of Material,
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark
Reform, and Amendments to IFRS 3 Business Combinations. None of
these amendments have had a significant impact on the results or
net assets of the Group.
Accounting policy for income from Government Grants
Income from Government grants are recognised when there is
reasonable assurance that the Group has complied with the
conditions attached to the grant and that the grant will be
received. Government grants received from the Coronavirus Job
Retention Scheme (furlough) are recognised as a credit against the
related staff costs and not as an item of other income.
Notes to the consolidated half year financial statements
for the six months to 30 September 2020 (unaudited)
1 Accounting policies (continued)
Going concern
The Directors have concluded that it is reasonable to adopt a
going concern basis in preparing the interim financial statements.
In adopting the going concern basis, the Directors have considered
Wincanton's business activities, together with factors likely to
affect its future development and performance, as well as
Wincanton's principal risks and uncertainties.
The adoption of the going concern basis is based on an
expectation that the Group will have adequate resources to continue
in operational existence for at least twelve months from the
signing of the interim financial statements. The Group has reported
a profit before tax of GBP19.1m for the six months ended 30
September 2020 (2019: GBP28.5m), has net current liabilities of
GBP150.6m (September 2019: GBP120.1m, March 2020: GBP101.4m) and
net liabilities of GBP28.4m (September 2019: net liabilities
GBP57.4m, March 2020: net assets of GBP14.7m).
The Group's committed facilities at 30 September 2020 comprise a
syndicated Revolving Credit Facility (RCF) of GBP141.2m, which
matures in October 2023, and a GBP40m extension to this facility
which expires on 4 May 2021. The RCF requires the Group to comply
with the following three financial covenants at 30 September and 31
March each financial year:
-- Leverage ratio: Consolidated total net borrowings of no more
than 2.75 times Consolidated EBITDA for the preceding 12-month
period;
-- Interest cover: Consolidated EBITDA for the preceding
12-month period is not less than 3.5 times higher than Consolidated
net finance charges for the preceding 12-month period; and
-- Fixed charge cover: Consolidated EBITDA plus Operating lease
costs for the preceding 12-month period is not less than 1.4 times
higher than Consolidated net finance charges plus Operating lease
costs for the preceding 12 month period.
The financial covenant tests remain unchanged as a result of the
GBP40m extension.
In addition, the Group also has an uncommitted GBP50m Receivable
Purchase Facility, providing flexibility to manage net debt peaks
down and an uncommitted overdraft facility of GBP7.5m. In arriving
at the conclusion on going concern, the Directors have given due
consideration to whether the funding and liquidity resources above
are sufficient to accommodate the principal risks and uncertainties
faced by the Group.
The Directors have reviewed the financial forecasts, prepared to
31 March 2022, across a range of scenarios. Wincanton has modelled
a base case based on revenue and profit run rates at the end of
September 2020, which were materially ahead of the expectations
used in the going concern forecasts prepared in connection with the
financial statements for the year ended 31 March 2020. The
continuation of management actions already taken to protect the
Group's liquidity in the first half of the financial year,
including the cessation of all discretionary and non-business
critical expenditure to the extent they have been contractually
agreed or are under management's control in the forecast period,
have been included in this scenario.
Due to the uncertainty created by COVID-19, there remains a risk
that the second wave of the pandemic could affect our markets.
Accordingly, a severe but plausible downside scenario has also been
modelled based on further waves of the pandemic.
The severe but plausible downside case assumes that the second
virus-driven national lockdown from 5 November 2020 continues
through to February 2021, with Group revenue and profit before tax
reduced by GBP26.0m and GBP5.8m respectively, similar amounts to
those experienced during the first national lockdown from March to
May 2020. This scenario assumes the businesses will then recover on
similar trajectories to those experienced following the first
lockdown. This scenario also assumes a major cash shock based on a
large customer going into administration and a deterioration in
working capital performance compared to the base case. These
downsides would be offset by the application of further mitigating
actions to the extent they are under management's control,
including further deferrals of capital expenditure.
In both scenarios, the Group has sufficient liquidity and
adequate headroom in the committed facilities set out above to fund
itself without the use of uncommitted facilities throughout the
forecast period. In addition, in both scenarios the Group complies
with the financial covenants under the RCF at 30 September and 31
March throughout the forecast period.
Notes to the consolidated half year financial statements
for the six months to 30 September 2020 (unaudited)
2 Operating segments
Wincanton plc provides contract logistics services in the UK and
Ireland. The management structure was reorganised with effect from
1 April 2020 as a result of the review of strategy, as referred to
in the Chief Executive statement in the financial statements for
the year ended 31 March 2020. The purpose of the reorganisation was
the rationalisation and streamlining of the existing business,
including the introduction of a matrix management system with
customer-facing business units being supported by entity-wide
functions such as sales, transport operations, project management
and training.
Before 1 April 2020, o perations had previously been organised
in two sectors, Retail & Consumer ('R&C') and Industrial
& Transport ('I&T'), each with its own Managing Director -
under the legacy structure each sector was identified as an
operating and reportable segment for the purposes of IFRS 8.
Following the reorganisation, the business has been structured as
one operating segment with one segment manager who reports to the
Chief Executive Officer (CEO). The CEO is a member of the Executive
Management Team and of the Board and is the Chief Operating
Decision Maker. The results of the business are presented to the
Board and the performance of the business is assessed on the basis
of the Group's performance as a whole.
3 Revenue
Customer contracts are disaggregated by business unit with
revenue generally being recognised over time. Further detail is
given in the table below:
Year ended
Six months to 30 Sept 2020 Six months to 30 Sept 2019 31 March 2020
GBPm GBPm GBPm
------------------------------ -------------------------- -------------------------- --------------
Digital & eFulfilment revenue 65.0 56.2 115.3
Grocery & Consumer revenue 215.4 206.5 426.3
General Merchandise revenue 149.6 145.9 299.1
Public & Industrial revenue 106.6 137.2 268.2
Specialist Services revenue 42.1 47.1 92.3
------------------------------- -------------------------- -------------------------- --------------
Total Revenue (GBPm) 578.7 592.9 1,201.2
------------------------------- -------------------------- -------------------------- --------------
Revenue of GBP123.3m (30 September 2019: GBP115.2m) and GBP65.4m
(30 September 2019: GBP70.2m) arose from sales to the Group's two
largest customers, being groups of companies under common control.
No other single customer or group of customers under common control
contributed 10% or more to the Group's revenue in either the
current or prior period.
4 Non-underlying items
Six months to 30 Sept 2020 Six months to 30 Sept 2019 Year ended 31 March 2020
GBPm GBPm GBPm
Net profit on disposal of
freehold property - 2.3 2.3
Professional fees in relation
to M&A activities - - (2.0)
COVID-19 impairment charges - - (9.3)
- 2.3 (9.0)
------------------------------------------------------------- --------------------------- -------------------------
There are no non-underlying items in the current period. In the
prior period the disposal of two freehold properties was completed.
Gross sales proceeds were GBP5.5m and costs of disposal and
transitioning operations to another site were GBP0.8m. The carrying
value of the properties was GBP2.4m generating a net profit on the
disposal and transition of GBP2.3m.
For the year ended 31 March 2020, further non-underlying costs
were recognised in respect of professional fees in relation to
M&A activities, principally an evaluation of a potential bid
for Eddie Stobart Logistics plc, and in respect of impairment
charges which arose as a result of COVID-19 impacts on the
business.
Notes to the consolidated half year financial statements (continued)
for the six months to 30 September 2020 (unaudited)
5 Net financing costs
Six Six
months to months to Year
30 Sept 30 Sept ended
2020 2019 31 March 2020
GBPm GBPm GBPm
--------------------------------------------------- ----------- ----------- ---------------
Recognised in the income statement
Interest income 0.1 0.1 -
Interest on the net defined benefit pension asset 1.1 - -
--------------------------------------------------- ----------- ----------- ---------------
1.2 0.1 -
--------------------------------------------------- ----------- ----------- ---------------
Interest expense (1.4) (2.0) (3.9)
Interest on lease liabilities (1.8) (1.9) (3.8)
Unwinding of discount on provisions (0.3) (0.3) (0.5)
(3.5) (4.2) (8.2)
--------------------------------------------------- ----------- ----------- ---------------
Net financing costs (2.3) (4.1) (8.2)
--------------------------------------------------- ----------- ----------- ---------------
6 Government grants and other support
The UK Government made available a range of financial support to
help companies affected by COVID-19, including the Coronavirus Job
Retention Scheme (CJRS). During the six months to 30 September 2020
the Group has received GBP12.4m in Government grants from the CJRS
(furlough), of which GBP4.6m has been passed to customers through
open book mechanisms. The scheme has been utilised as it was
intended in order to avoid redundancies in areas of the business
that have been significantly impacted by the pandemic.
The Group has elected to recognise the grant as a credit against
the related staff costs and not as an item of other income.
7 Income tax expense
Six Six Year
months to months to ended
30 Sept 30 Sept 31 March
2020 2019 2020
Recognised in the income statement GBPm GBPm GBPm
----------------------------------- ---------- ---------- ---------
Current tax expense
Current year 2.8 3.4 5.1
Adjustments for prior years (1.2) (1.3) (1.5)
----------------------------------- ---------- ---------- ---------
1.6 2.1 3.6
----------------------------------- ---------- ---------- ---------
Deferred tax expense
Current year 1.5 2.1 1.7
Adjustments for prior years - - -
----------------------------------- ---------- ---------- ---------
1.5 2.1 1.7
----------------------------------- ---------- ---------- ---------
Total income tax expense 3.1 4.2 5.3
----------------------------------- ---------- ---------- ---------
Recognised in other comprehensive income
Items which will not subsequently be reclassified to the Income statement:
Remeasurements of defined benefit pension asset (13.9) 1.0 15.8
--------------------------------------------------------------------------- ------ --- -----
Recognised directly in equity
Current tax on share based payment transactions - - (0.3)
Deferred tax on share based payment transactions (0.1) - -
--------------------------------------------------------------------------- ------ --- -----
In accordance with IAS 34 Interim Financial Reporting the tax
expense recognised in the income statement for the half year is
calculated on the basis of the estimated underlying effective full
year tax rate of 16.1% (30 September 2019: 16.2%, 31 March 2020:
15.3%).
Notes to the consolidated half year financial statements (continued)
for the six months to 30 September 2020 (unaudited)
7 Income tax expense (continued)
The main UK Corporation tax rate remained at 19% (30 September
2019: 19%).
The closing UK deferred tax asset is calculated based on the
rate of 19% which was substantively enacted at the balance sheet
date.
8 Earnings per share
The basic earnings per share of 12.9p (30 September 2019: 19.7p)
is calculated based on the profit attributable to the equity
shareholders of Wincanton plc of GBP16.0m (30 September 2019:
GBP24.3m) and the weighted average shares of 124.0m (30 September
2019: 123.6m) which have been in issue throughout the period.
The diluted earnings per share of 12.8p (30 September 2019:
19.5p) is calculated based on there being 1.3m (30 September 2019:
1.0m) additional shares deemed to be issued at GBPnil consideration
under the Company's share option schemes.
The weighted average number of ordinary shares for both basic
and diluted earnings per share is calculated as follows:
Six months to Six months to
30 Sept 30 Sept Year ended
2020 2019 31 March 2020
millions Millions Millions
--------------------------------------------------------------------- -------------- -------------- ---------------
Weighted average number of Ordinary Shares (basic)
Issued Ordinary Shares at the beginning of the period 123.9 123.6 123.6
Net effect of shares issued and purchased during the period 0.1 - 0.1
--------------------------------------------------------------------- -------------- -------------- ---------------
124.0 123.6 123.7
--------------------------------------------------------------------- -------------- -------------- ---------------
Weighted average number of Ordinary Shares (diluted)
Weighted average number of Ordinary Shares at the end of the period 124.0 123.6 123.7
Potential ordinary shares 1.3 1.0 1.3
--------------------------------------------------------------------- -------------- -------------- ---------------
125.3 124.6 125.0
--------------------------------------------------------------------- -------------- -------------- ---------------
An alternative earnings per share number is set out below, being
earnings before non-underlying items, since the Directors consider
that this provides further useful information on the underlying
performance of the Group:
Six months to Six months to Year ended
30 Sept 30 Sept 31 March
2020 2019 2020
Pence Pence Pence
------------------------------- -------------- -------------- -----------
Underlying earnings per share
- basic 12.9 17.8 36.1
- diluted 12.8 17.7 35.8
------------------------------- -------------- -------------- -----------
Underlying earnings are determined as follows:
Six months to Six months to Year ended
30 Sept 30 Sept 31 March
2019 2019 2020
GBPm GBPm GBPm
----------------------------------------------------- -------------- -------------- -----------
Profit for the period attributable to equity
shareholders of Wincanton plc 16.0 24.3 38.5
Non-underlying items - (2.3) 9.0
Tax impact of above items and exceptional tax items - - (2.8)
----------------------------------------------------- -------------- -------------- -----------
Underlying earnings 16.0 22.0 44.7
----------------------------------------------------- -------------- -------------- -----------
Notes to the consolidated half year financial statements (continued)
for the six months to 30 September 2020 (unaudited)
9 Dividends
No final dividend relating to the year end 31 March 2020 was
paid during the period (2019: 7.29p per share).
The Board has declared an interim dividend of 2.85p per share
for the period ended 30 September 2020 (30 September 2019: 3.90p
per share) which will be paid on 22 January 2021 to shareholders on
the register on 8 January 2021, an estimated total of GBP3.5m.
10 Intangible assets
Additions and disposals
During the half year to 30 September 2020 the Group acquired
intangible assets with a cost of GBP1.6m (30 September 2019:
GBP1.6m).
11 Property, plant & equipment
Additions and disposals
During the half year to 30 September 2020 the Group acquired
tangible fixed assets with a cost of GBP1.2m (30 September 2019:
GBP3.1m). Assets with a carrying amount of GBP0.4m were disposed of
during the half year to 30 September 2020 (30 September 2019:
GBP2.7m).
Capital commitments
At 30 September 2020 the Group had entered into contracts to
purchase property, plant and equipment for GBP0.3m (30 September
2019: GBP0.6m); delivery is expected in the second half of the year
to 31 March 2021.
12 Analysis of changes in net debt
1 April Non-cash movements 30 Sept
2020 Cash flow GBPm 2020
GBPm GBPm GBPm
-------------------------------------- -------- ---------- ------------------- --------
Cash and bank balances 60.9 2.4 - 63.3
Bank loans and overdrafts (71.0) 71.0 - -
Net debt excluding lease liabilities (10.1) 73.4 - 63.3
-------------------------------------- -------- ---------- ------------------- --------
Lease liabilities (134.4) 18.0 (0.5) (116.9)
-------------------------------------- -------- ---------- ------------------- --------
Net debt including lease liabilities (144.5) 91.4 (0.5) (53.6)
-------------------------------------- -------- ---------- ------------------- --------
1 April Adoption of IFRS 16 Non-cash movements 30 Sept
2019 GBPm Cash flow GBPm 2019
GBPm GBPm GBPm
-------------------------------------- -------- -------------------- ---------- ------------------- --------
Cash and bank balances 12.7 - 26.5 - 39.2
Bank loans and overdrafts (32.0) - (22.0) - (54.0)
Other financial liabilities - - - - -
-------------------------------------- -------- -------------------- ---------- ------------------- --------
Net debt excluding lease liabilities (19.3) - 4.5 - (14.8)
-------------------------------------- -------- -------------------- ---------- ------------------- --------
Lease liabilities - (137.4) 17.7 (4.0) (123.7)
-------------------------------------- -------- -------------------- ---------- ------------------- --------
Net debt including lease liabilities (19.3) (137.4) 22.2 (4.0) (138.5)
-------------------------------------- -------- -------------------- ---------- ------------------- --------
Notes to the consolidated half year financial statements (continued)
for the six months to 30 September 2020 (unaudited)
12 Analysis of changes in net debt (continued)
1 April Adoption of IFRS 16 Non-Cash movements 31 March
2019 GBPm Cash flow GBPm 2020
GBPm GBPm GBPm
-------------------------------------- -------- -------------------- ---------- ------------------- ---------
Cash and bank balances 12.7 - 48.2 - 60.9
Bank loans and overdrafts (32.0) - (39.0) - (71.0)
Other financial liabilities - - - - -
-------------------------------------- -------- -------------------- ---------- ------------------- ---------
Net debt excluding lease liabilities (19.3) - 9.2 - (10.1)
-------------------------------------- -------- -------------------- ---------- ------------------- ---------
Lease liabilities - (137.4) 39.5 (36.5) (134.4)
-------------------------------------- -------- -------------------- ---------- ------------------- ---------
Net debt including lease liabilities (19.3) (137.4) 48.7 (36.5) (144.5)
-------------------------------------- -------- -------------------- ---------- ------------------- ---------
Cash and bank balances include restricted cash, being deposits
held by the Group's insurance subsidiary of GBP3.5m (30 September
2019: GBP4.9m, 31 March 2020: GBP4.9m).
13 Assets and Liabilities classified as held for sale
Following a review of the Group's activities, the Board
identified the Containers business as non-core. A short competitive
tender process was held in the first half of the year and a
purchaser identified. In addition, certain vehicles are surplus to
requirement at 30 September 2020 and their value is expected to be
recovered by their sale and not through ongoing use in the
business.
The related assets and liabilities are therefore classified as
held for sale at 30 September 2020. No impairment was recognised on
classification as held for sale.
The major classes of assets and liabilities classified as held
for sale at 30 September 2020 are:
GBPm
Property, Plant and Equipment 4.0
Right-of-use assets 1.6
Inventories 0.2
Assets classified as held
for sale 5.8
--------------------------------- ------
Lease liabilities (3.1)
Liabilities classified
as held for sale (3.1)
--------------------------------- ------
The disposal of the Containers business completed on 17 October
2020, resulting in a small net gain on disposal after transaction
and other disposal costs are taken into account. The Containers
business does not meet the definition of a discontinued
operation.
14 Leases
Additions and disposals
During the half year to 30 September 2020 the Group recognised
lease liabilities and corresponding right-of-use assets with a
value of GBP6.8m (30 September 2019: GBP2.2m). Right-of-use assets
with a carrying amount of GBP5.0m were disposed of and lease
liabilities of GBP5.0m were derecognised during the half year to 30
September 2020 (30 September 2019: GBP0.1m).
Lease commitments
At 30 September 2020 the Group had committed to enter into lease
arrangements valued at GBP8.2m (31 March 2020: GBP9.7m); delivery
is expected in the second half of the year to 31 March 2021.
Notes to the consolidated half year financial statements (continued)
for the six months to 30 September 2020 (unaudited)
15 Provisions
Other provisions
Insurance Property GBPm Total
GBPm GBPm GBPm
At 1 April 2020 23.4 10.4 3.2 37.0
Provisions made during the year 5.0 0.6 1.1 6.7
Provisions used during the year (3.4) (0.1) (1.3) (4.8)
Provisions released during the
year (1.6) (0.5) - (2.1)
Unwinding of discount 0.2 0.1 - 0.3
--------------------------------- ------------ ----------- ----------------- --------
At 30 September 2020 23.6 10.5 3.0 37.1
--------------------------------- ------------ ----------- ----------------- --------
Current 7.3 2.2 3.0 12.5
Non-current 16.3 8.3 - 24.6
--------------------------------- ------------ ----------- ----------------- --------
23.6 10.5 3.0 37.1
--------------------------------- ------------ ----------- ----------------- --------
The Group owns 100% of the share capital of an insurance company
which insures certain risks of the Group. The insurance provisions
in the above table are held in respect of outstanding insurance
claims, the majority of which are expected to be paid within one to
seven years. Provisions are released when the obligation no longer
exists or there is a reduction in management's estimate of the
liability. The discount unwinding arises primarily on the
employers' liability policy which is discounted over a period of
seven years at a rate based on the Group's assessment of a risk
free rate.
The property provisions are determined on a site by site basis
and comprise primarily provisions for dilapidations. Dilapidation
provisions comprise dilapidation estimates made in the normal
course of business. Provisions are released when the obligation no
longer exists or there is a reduction in the estimate. There
remains a small level of onerous lease provisions relating to short
term leases which are utilised over the relevant lease term, with
the majority expected to be utilised over the next year. The
dilapidations provisions are expected to be utilised at the end of
the lease term. Estimated costs have been discounted at a rate
based on the Group's assessment of a risk free rate.
Other provisions include the estimated costs of restructuring
together with provision for sundry claims and settlements.
16 Contingent liability
The Group has been notified by HMRC of potential claims for
Excise duty and related VAT in connection with the historic
transfers of a group of former customers' excise goods. These
movements occurred from one of Wincanton's bonded warehouses to a
common third party UK export agent. HMRC suspects irregularities to
have occurred during the export process and the export agent has
subsequently entered administration. Due to the nature of the
excise regime Wincanton operates in, HMRC considers Wincanton to be
jointly and severally liable for Excise duty and VAT arising as a
result of these irregularities.
Wincanton is confident in its legal position having received
clear, expert advice and is vigorously disputing the potential
claims. As a result of the legal advice, no liability has been
recognised in respect of these claims, noting that the total value
of the potential claims could be up to approximately GBP50m before
interest and legal costs. We expect that any claims made by HMRC
will be received in the second half of the year.
Unless earlier resolution is achieved, the Group expects to
proceed to have the claims heard before a Tax Tribunal and the full
legal process could take in excess of two years. Under current
regulations, some or all of the claims could be required to be paid
shortly after issuance and in advance of the outcome of a Tribunal.
The Group is in discussion with HMRC regarding the process and
potential options to minimise the risk of cash outflows in advance
of a Tribunal. In parallel with the legal process, the Group is
reviewing options regarding its insurance cover.
17 Employee benefits
In September 2020 the Group reached an agreement with the
Trustee of the Scheme on the 2020 triennial valuation and recovery
plan. The annual deficit funding contributions have been agreed at
GBP18.9m per annum from 1 April 2021 increasing by RPI over the
three years to March 2024, followed by GBP22.0m per annum from
April 2024, increasing by RPI to March 2027 and additional
protection has been provided to the Scheme in the form of a letter
of credit of GBP3.0m. The Group will continue to pay certain
administration costs directly and, in line with the Schedule of
contributions, these will be deducted from the deficit funding
contributions.
Notes to the consolidated half year financial statements
(continued)
for the six months to 30 September 2020 (unaudited)
17 Employee benefits (continued)
The Group and Trustee also agreed to a substantial acceleration
of the planned de-risking of the Scheme's investments to lock in a
lower deficit position and reduce future volatility.
In April 2020 the Group agreed an amended Schedule of
Contributions delaying GBP6.1m of contributions due in the half
year to 30 September 2020 until the earlier of 30 September 2021 or
the payment of a dividend. Following the Board's declaration of an
interim dividend for the period ended 30 September 2020, the
GBP6.1m of deferred contributions will be paid in December
2020.
Movements in the net pension obligations have been recognised as
follows:
Assets Total
30 Sept Liabilities 30 Sept 30 Sept 31 March
2020 30 Sept 2020 2020 2019 2020
GBPm GBPm GBPm GBPm GBPm
---------------------------------------------------------------- -------- ------------- -------- ------- --------
Opening position 1,157.5 (1,063.1) 94.4 (7.1) (7.1)
Included in Income statement:
Administration costs (0.9) - (0.9) (0.9) (1.7)
Interest on the net defined benefit liability 13.2 (12.1) 1.1 - -
Cash:
Employer contributions 3.3 - 3.3 9.7 18.9
Benefits paid (23.0) 23.0 - 0.3 0.3
Included in Other comprehensive income:
Changes in financial assumptions - (216.0) (216.0) (115.3) 72.4
Changes in demographic assumptions - - - - (3.4)
Experience - 8.0 8.0 (4.1) 6.6
Return on assets excluding amounts included in net financing
costs 134.4 - 134.4 125.5 8.4
---------------------------------------------------------------- -------- ------------- -------- ------- --------
Closing defined benefit asset/(liability) 1,284.5 (1,260.2) 24.3 8.1 94.4
---------------------------------------------------------------- -------- ------------- -------- ------- --------
Presented as:
Non-current asset 26.9 8.1 96.5
Non-current liability (2.6) - (2.1)
---------------------------------------------------------------- -------- ------------- -------- ------- --------
24.3 8.1 94.4
---------------------------------------------------------------- -------- ------------- -------- ------- --------
Liabilities in the table above include unfunded
arrangements.
As mentioned above, the Group, in agreement with the Trustee,
has arranged to pay certain administration expenses directly and,
in line with the Schedule of Contributions, these amounts have been
deducted from the deficit funding contributions and are therefore
not included in the above table. Other administration expenses are
paid directly by the Group in addition to the deficit funding
contributions. These total GBP0.3m in the period and are included
in employer contributions in the table above.
The movement in the defined benefit pension net surplus in the
period was primarily the result of a reduction in the discount
rate. The discount rate has fallen as credit spreads return to
normal following the significant increase caused by market
uncertainty due to the impact of COVID-19. The defined benefit
surplus, after taking into account the related deferred tax
liability, is GBP19.7m (30 September 2019: GBP6.7m).
The principal actuarial assumptions for the Scheme and for the
UK unfunded arrangement at the balance sheet date were as
follows:
30 Sept 31 March
2020 30 Sept 2019 2020
% % %
------------------------------------------- --------- ------------ ---------
Discount rate 1.55 1.80 2.30
Price inflation rate - RPI 3.10 3.25 2.75
Price inflation rate - CPI 2.20 2.35 1.85
Rate of increase of pensions in deferment 2.20 2.35 1.85
Rate of increase of pensions in payment(1) 1.80-3.05 1.85-3.15 1.60-2.70
------------------------------------------- --------- ------------ ---------
1. A range of assumed rates exists due to the application of
annual caps and floors to certain elements of service.
Notes to the consolidated half year financial statements
(continued)
for the six months to 30 September 2020 (unaudited)
17 Employee benefits (continued)
Sensitivity to changes in assumptions
The sensitivity of the present value of the Scheme's liabilities
and, due to hedging, the fair value of its assets, to changes in
key actuarial assumptions are set out in the following table.
(Increase)/ Increase/
decrease in liability (decrease) in assets
Change in assumption GBPm GBPm
--------------------------- -------------------- ---------------------- ---------------------
Discount rate +0.5% 111.0 (120.0)
Credit spread -0.25% (65.0) 23.0
Price inflation rate - RPI +0.25% (42.0) 45.0
Mortality rate + 1 year (51.0) -
--------------------------- -------------------- ---------------------- ---------------------
The illustrations consider the results of only a single
assumption changing with the others assumed unchanged and includes
the impact of the interest rate and inflation rate hedging. In
reality, it is more likely that more than one assumption would
change and potentially the results would offset each other.
18 Post balance sheet events
As noted above, the disposal of the containers business
completed in October. After fees and provision for costs of
transition and separation, the Group expects to report a small
non-underlying gain on the disposal in H2.
INDEPENT REVIEW REPORT TO WINCANTON PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2020 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated statement of cash flows and
the related explanatory notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34, as adopted by
the European Union, and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
INDEPENT REVIEW REPORT TO WINCANTON PLC (continued)
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London
4 November 2020
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
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(END) Dow Jones Newswires
November 05, 2020 02:00 ET (07:00 GMT)
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