TIDMWIN
RNS Number : 1658Q
Wincanton PLC
17 June 2020
17 June 2020
Wincanton plc
Preliminary Announcement of Results for the financial year ended
31 March 2020
"Excellent financial foundations set to unlock potential for
growth"
Wincanton plc ('Wincanton' or the 'Group'), the largest British
third party logistics company, today announces its preliminary
results for the year ended 31 March 2020.
Key financial measures
Note: discussion of the results is on a comparable IAS 17 basis,
unless otherwise stated.
2020 2020 2019 Change
IFRS 16 (1) IAS 17 (1) IAS 17 vs IAS 17
------------------------------------------------ -------------------- ------------- --------- -----------
Revenue (GBPm) 1,201.2 1,201.2 1,141.5 5.2%
Underlying EBITDA (GBPm) (2,3) 104.1 68.9 66.7 3.3%
Underlying operating profit (GBPm)(3) 61.0 57.3 55.3 3.6%
Underlying profit before tax (GBPm)(3) 52.8 52.9 49.3 7.3%
Underlying EPS (p)(3) 36.1p 35.8p 33.5p 6.9%
Free cash flow (GBPm)(4) 40.8 40.8 57.0
Net debt excluding lease liabilities (GBPm)(5) 10.1 10.1 19.3
Statutory results
------------------------------------------------ -------------------- ------------- --------- -----------
Operating profit (GBPm)(3) 52.0 54.6
Profit before tax (GBPm) 43.8 48.6
Basic EPS (p) 31.1p 34.5p
FY19/20 operational and financial highlights
-- Strong year on year revenue growth of 5.2% to GBP1,201.2m
(2019: GBP1,141.5m) - notable growth in Retail Grocery (+26.0%) and
Retail General Merchandise (+5.8%)
-- Growth driven by new business in the year, including
transportation and vehicle maintenance services contract with
Morrisons and contracts with Wickes, Dwell and Sofa Club in our
market-leading Home and eFulfilment business
-- All major contract renewals successful in year, including
Sainsbury's, Waitrose & Partners, Williams Sonoma Inc.,
Ibstock, Müller Milk, Lucozade Ribena Suntory and adidas
-- Underlying profit before tax growth of 7.3% to GBP52.9m and
EPS growth of 6.9% to 35.8p, both driven by revenue growth, strong
operational performance and reduced levels of debt
-- Robust balance sheet with continued strong cash generation
leading to a reduction in net debt to GBP10.1m (2019: GBP19.3m)
-- Chief Executive's review completed - refocused strategic
direction and organisational structure aligned to growth focus:
"Great people delivering sustainable supply chain value"
COVID-19 update
-- Continuity of business operations secured throughout COVID-19
lockdown period and health and wellbeing of employees
safeguarded
-- Year to date revenue down c10% year on year with negative
impact on year to date profitability mostly in closed book
contracts, but May revenue up 7% from April
-- Signs of gradual increase in activity levels in segments most
affected (Construction and Transport Services)
-- Financial measures taken to mitigate short-term impacts of
COVID-19, including suspension of final dividend
-- Group well-positioned to capitalise on growth opportunities that continue to emerge
James Wroath, Chief Executive Officer, commented:
"Wincanton delivered another year of strong performance in
FY19/20, since when the COVID-19 crisis has created significant
challenges for the Group and our customers. The measures we have
implemented have ensured great service has continued during the
crisis period and opportunities for future growth have continued to
emerge. Furthermore, profitability continues to recover as our
sectors return towards normal levels of activity.
The overall direction of our strategy following my initial
review has not been altered by COVID-19. Wincanton has a strong
business model with an experienced management team, diversified
service offerings and an excellent reputation. I expect to use this
foundation as a springboard for growth to drive even greater
success in the future. Our focus on great people delivering
sustainable supply chain value will underpin the Group's
development. We remain on course for what I anticipate will be an
exciting next phase of growth and achievement for Wincanton as a
result of the huge commitment of our staff and our disciplined
approach."
For further enquiries please contact:
Wincanton plc Tel: 01249 710000
Tim Lawlor, Chief Financial Officer
Buchanan Tel: 020 7466 5000
Richard Oldworth, Victoria Hayns
A virtual meeting/conference call for analysts will be held
today, Wednesday 17 June 2020, commencing at 9.30am. Wincanton's
Preliminary Results 2020 are available at www.wincanton.co.uk
An audio webcast /recording of the analysts' meeting will be
available today on the Company's website.
Notes
(1) Wincanton reports key financial measures based on underlying
performance. IFRS 16 Leases, which replaces IAS 17 Leases, has been
adopted in the period using the modified retrospective approach and
accordingly prior periods are not restated. Consequently, the
results for the year ended 31 March 2020 under IFRS 16 are not
directly comparable with prior periods and therefore they have also
been presented on an IAS 17 basis.
(2) Underlying EBITDA refers to underlying operating profit
before depreciation and amortisation and is reconciled in Note 2 to
the accompanying financial statements.
(3) The section on Alternative Performance Measures (APMs) below
provides further information on these measures, including
definitions and a reconciliation of APMs to statutory measures.
(4) Free cash flow is defined as the movement in net debt,
before pension payments, dividends and the acquisition of own
shares. Further information is provided in the Financial Review
below.
(5) Net debt is the sum of cash and bank balances, bank loans
and overdrafts and excludes lease liabilities. Note 8 to the
accompanying financial statements provides a breakdown of net debt
for the current and prior periods.
COVID-19 update
The circumstances resulting from COVID-19 have created unprecedented
levels of uncertainty for the UK and beyond. The Group's first priority
throughout has been to safeguard the health and wellbeing of our
employees and their families, whilst continuing to provide our essential
logistics services to customers and playing a key role in helping
the nation to function. In so doing, Wincanton has implemented measures
in line with Government advice, the financial impacts of which are
described in more detail below.
Year to date impact
Year to date revenue at the end of May was a little over 10% below
the comparable period last year, but with an increase in May of
approximately 7% over April. The most significant volume shortfalls
have occurred in our Industrial & Transport sector, in particular
the Construction and Transport Services businesses.
The profit impact of the volume movements has varied according to
contract types, but as a whole the Group has seen a disproportionate
impact to its profitability in the financial year to date due to
the areas impacted tending to be closed book operations. Encouragingly,
however, profits increased in May as it was largely these closed
book operations that underpinned the month on month revenue growth.
It remains too early to confidently estimate the financial impact
of the COVID-19 crisis on the Group's full year results and there
remains uncertainty regarding the levels of demand and business
interruption for the remainder of the year.
At the onset of the COVID-19 crisis, we saw an increase in volume
and demand from both our Grocery and Consumer Products customers
as consumers prepared for the lockdown. Both areas have now returned
to the volumes we would expect at this time of year. In non-grocery
retail, volumes have remained lower than the prior year periods
reflecting a focus on 'essential' products and the lockdown impact
on shopping habits. The open book nature of most of the contracts
in this area has ensured that profitability has not been significantly
impacted by the volume movements.
In our closed book two-person home delivery network we were required
to cease operations at the end of March in line with safety guidelines,
resulting in a significant negative impact on profitability during
the shutdown. The service restarted in May and initial restart volumes
have been encouraging.
Our Construction business (representing 11.5% of Group revenue in
FY19/20) saw major parts of the network closed at the start of April,
due to the voluntary shutdown of many construction sites and builders'
merchants. Revenue during April was down by around 70%. There was
some benefit from construction sites starting up activity in May
with an increase in revenue, but volumes were still over 50% down
on the prior year and indications are that the return of volumes
will be gradual. Despite swift action to reduce the variable elements
of the cost base, the reduction in revenue had a substantial impact
on profitability in these largely closed book contracts.
Container volumes and Pullman Fleet Services ('PFS') revenue continue
to be below expectations, with the container business impacted in
April by reduced traffic from Asia and latterly by reduced consumer
demand in the UK. PFS workshop volumes have been depressed by general
lower demand for vehicle maintenance and repairs as a result of
less road activity during the lockdown period. Our energy business
has also experienced some slowdown due to reduced retail forecourt
fuel volumes in April and May, although we are starting to see some
signs of increasing demand as the country moves out of lockdown.
Financial position
The Group's balance sheet has been strengthened over recent years,
with a reduction in net debt and the pension deficit. Net debt at
the year end reduced to GBP10.1m (2019: GBP19.3m) and the pension
moved into a substantial surplus on an IAS 19 basis at 31 March
2020 (GBP94.4m surplus compared to a prior year net pension deficit
of GBP7.1m), although this surplus will reduce as financial markets
settle down.
The Group has a GBP141.2m Revolving Credit Facility ('RCF') with
a syndicate of five banks which matures in late 2023. In early May
the facility with the syndicate banks was extended by a further
GBP40m for one year under a pre-existing accordion facility. The
Group also has an uncommitted GBP7.5m overdraft facility.
The Group has had productive discussions with its Pension Trustee
regarding the timing of pension recovery payments and agreed an
amended Schedule of Contributions over the next 12 months which
will improve the Group's liquidity by approximately GBP6 million.
The agreement contains provisions for accelerated payment of deferred
contributions if dividends are paid within the deferral period.
As previously announced, management has taken a number of measures
to maximise liquidity during the period of uncertainty, including
ceasing all discretionary and non business-critical expenditure,
suspending cash bonus payments, introducing pay reductions of 20%
for the Board and executive management and taking lease payment
holidays where possible. The Group has taken advantage of government
initiatives including the deferral of VAT payments and in accordance
with the Government's Job Retention Scheme, a peak of c2,500 employees
(c15% of the workforce) were 'furloughed'.
The Board is not proposing a final dividend and will review the
ongoing payment of dividends when there is greater visibility of
the long term impact of COVID-19.
Impact on results for the year ended 31 March 2020
Underlying trading in the year ended 31 March 2020 was not materially
impacted by COVID-19 and underlying operating profit was in line
with expectations. Since the year end, as described above, COVID-19
has significantly affected economic activity and disrupted the business
operations of many of Wincanton's customers. In response to this,
and in line with guidance from the Financial Reporting Council,
the Group has reviewed all Cash Generating Units to determine whether
any of the assets related to these operations are impaired.
These reviews are performed by comparing the estimated future cash
flows to be generated under a contract with the carrying value of
the assets generating those cash flows. Forecasting future cash
flows inevitably involves a degree of estimation given the uncertainties
inherent in operating in a COVID-19 environment.
As a result of these reviews, non-current assets and inventories
within Transport Services (related to the containers and fleet maintenance
services businesses) and Construction in the Industrial & Transport
segment have been impaired - a non-cash impairment charge of GBP9.3m
has therefore been recognised as a non-underlying item in the Income
statement. Of the total charge, GBP8.0m of the impairment has been
taken on non-current assets and GBP1.3m on inventory. The degree
of the downturn causing the impairment is unprecedented and the
Directors therefore believe it is appropriate to disclose the impairment
separately in the Income statement as a non-underlying item.
CHAIRMAN'S REVIEW
Results
I am pleased to report a year of solid progress for Wincanton
with revenue up 5.2% and underlying profit before tax up 7.3%.
Reassuringly, the Group has delivered revenue growth on the back of
some significant new contracts. Net debt at the year-end fell 47.7%
from GBP19.3m to GBP10.1m despite increased dividend payments of
GBP13.8m and a GBP17.8m top up to our pension scheme.
As we closed the financial year, our balance sheet was strong
and our cash flow healthy. In normal circumstances, this would
provide strong reassurance to our various stakeholders, enable us
to deliver progressive dividends and put us in a good position to
develop our business. However, these are far from normal
circumstances. COVID-19 has impacted our business significantly and
there remains considerable uncertainty regarding the levels of
demand and business interruption for the remainder of the year.
Strong operational performance
The commitment of our people to doing things well has again been
evident in high levels of customer satisfaction and the Group's
impressive health and safety record. It has also been manifest in
the way our workforce has responded to the effects of COVID-19 and
the needs of our customers. This very much reflects the Group's
culture which we seek to nurture and maintain. For example, we have
recently launched a new purpose statement and Code of Conduct, 'the
Wincanton Way', for our employees. James Wroath provides more
details in his Chief Executive Statement.
During the year, we secured some valuable contract wins and
retained many long standing contracts. Encouragingly, we
experienced no significant contract losses. We are grateful to our
customers for trusting us to be a key part of their supply chain
and to our suppliers for supporting us in meeting our customer
needs.
We have continued our investment in innovation and in
fast-moving technologies to support our business. Our OneVAST
warehouse, one of the outputs from our W(2) Labs initiative, is now
fully operational. It brings buyers and sellers of space together
online by offering a cloud-based, virtual warehouse. Also of note
is our work with MiX Telematics, our Winsight in-cab technology,
our wearable 'ProGlove' device and 'Soter Spine' which enables our
operatives to lift items with reduced risk of injury.
Further tangible progress was made during the year on reducing
our carbon emissions which has also helped us to reduce our
operating costs.
Board changes
The financial year saw the appointment of our new Chief
Executive, James Wroath. James was Chief Operating Officer of North
America for LSG Sky Chefs from 2015 until he joined us in September
2019. He has deep experience in logistics and the broader business
services environment and is focused on exploiting Wincanton's
respected market position, its extensive national coverage and its
strong operational base to deliver profitable growth. James has now
played himself into his new role and made some significant
structural changes to take the business forward. This is discussed
further in his Chief Executive Statement.
Other Board changes were the previously announced arrival of
Debbie Lentz who joined the Board on 1 June 2019 and the
appointment of Mihiri Jayaweera on 7 April 2020. Debbie is
currently President of Global Supply Chain and a member of the
Senior Management Team of Electrocomponents plc, the FTSE 250
global multi-channel provider of industrial and electronic products
and solutions. She has a strong track record in digital and supply
chain management, both of which are highly relevant to the further
development of Wincanton's e-commerce propositions. Mihiri was,
until October 2019, Group Head of Strategy and a member of the
Group Executive Committee of TP ICAP Group, the FTSE 250
professional intermediaries firm, operating in financial, energy
and commodities markets internationally. She has a deep
understanding of investment banking and financial analysis. With
the appointment of these two Non-executive Directors, we now have a
balanced Board in place with wide ranging experience and broad
diversity of thought.
I should like to thank our previous Chief Executive, Adrian
Colman for his efforts at Wincanton. He joined the business in
January 2013 as Chief Financial Officer, was appointed Chief
Executive in August 2015 and played a major role in turning around
the Group over those years. We wish him well in his retirement. I
should also like to pay tribute to David Radcliffe who retired as a
Non-executive Director in December after seven and a half years'
service. David brought deep experience and insight to our
deliberations.
We completed an external Board evaluation in the year. Overall,
it was very encouraging but, as always, we have identified some
actions to be followed through.
Our people
My thanks, as always, go to our 19,100 colleagues who provide
the consistently high levels of service required to help us win and
retain business. Our people are the cornerstone of our impressive
and still improving health and safety record which is an important
differentiator for the Wincanton brand. I am particularly grateful
to them for the way they have responded to the effects of COVID-19
which has been exceptional in all parts of our business.
Stewart Oades, our Senior Independent Director, has been
appointed as our employee representative Non-executive Director and
has visited a number of our sites to hold consultations with our
workforce. This exercise has provided valuable feedback for the
Board.
We have a strong focus on diversity and inclusion within our
people strategy. We are also working to narrow our gender pay
gap.
Our current remuneration policy has been in place for three
years and we are presenting a new policy for approval at our Annual
General Meeting. The changes reflect current regulations and are in
line with the policies applying to our wider workforce. We have
been encouraged by the support our proposals have received during
consultations with our major investors. Given the particular
circumstances arising from COVID-19, we are also modifying short
term remuneration arrangements. We hope you will support the
changes we are recommending which align executive incentives to the
overall objectives of the Group and the interests of all our
stakeholders.
Dividends
Given the uncertainties regarding the effects of COVID-19, the
Board wishes to retain as much cash as possible in the Group. The
measures we have taken include agreeing the rescheduling of
payments to the pension scheme and implementing a temporary 20% pay
reduction for the Board and senior management. We have also
announced that the final dividend, which would ordinarily be paid
in July, will be suspended. Whilst the Board very much recognises
the importance of the dividend to our shareholders, we consider it
prudent to hold as much cash as possible until we can fully assess
the financial implications of the COVID-19 crisis on the Group's
business. We will keep dividend payments under review as the year
progresses with a view to recommencing payments as soon as it is
prudent to do so.
Strategic development
Wincanton is a much respected brand with extensive national
coverage and strong operational performance. Our new management
team has been focusing on how we can use these strengths to grow
our business profitably, shifting it towards more value-added
activities to deliver benefits to our customers and to improve our
margins. This is discussed further in the Chief Executive
Statement. We had anticipated that the first benefits of our new
initiatives would become evident during the course of the new
financial year but are mindful that the current COVID-19 crisis is
likely to slow our progress.
As well as a focus on market-facing development and innovation,
we had also planned to direct significant investment at improving
the efficiency of our operational and support functions this coming
year. Again, COVID-19 is likely to necessitate an extension to our
original timetable.
Despite the short term challenges, we continue to remain alert
to opportunities in our industry. In this context, I should mention
the work we put into evaluating the potential acquisition of Eddie
Stobart Logistics plc (Eddie Stobart) last autumn. We saw this as a
major opportunity to increase our scale and the breadth of our
offerings and to deliver major cost synergies. We therefore devoted
considerable time and effort to reviewing this business. However,
we concluded that the underlying profitability of Eddie Stobart and
the ongoing liquidity concerns would not enhance Wincanton's
shareholder value. We therefore aborted the project. Having spent a
number of years getting our own business back onto a sound
financial footing, we did not want to take disproportionate risks
with its future.
We will continue to look for opportunities to grow our business
inorganically but only where we feel that the balance of risk and
reward makes sense.
Outlook
Given the effects of COVID-19, it is difficult to provide a
reliable outlook statement for the coming year. However, logistics
are crucial for most of our customers and for the country in
general so we do not expect persistent and widespread major falls
in the demand for our services. We are highly conscious of the need
to manage cash carefully and have taken a number of measures to
maintain liquidity within the business. All that said, in the
medium to long term, we continue to see excellent opportunities for
Wincanton.
Dr. Martin Read CBE
Chairman
CHIEF EXECUTIVE STATEMENT
I have certainly had an interesting time since joining Wincanton
in September of last year. This is a strong business at a
fascinating time for the industry. I would like to thank Adrian
Colman and Tim Lawlor for the work they have done to put our
business on its firm financial footing. I am excited to work with
an excellent team on the next steps of our journey.
The potential acquisition of Eddie Stobart, coming so early in
my tenure, gave me a great opportunity to review the UK market and
the strategic direction of our organisation. I was also able to
engage in substantive discussions with our shareholders. Ultimately
the risks associated with that transaction proved to be too great,
but the lessons I learned about our business were very useful in
determining our next steps.
More recently, the challenges we have faced from COVID-19 have
demonstrated the resilience Wincanton has both in the calibre of
our people and the diversity of our trading sectors. I would like
to pay tribute to all our great people who have worked tirelessly
throughout the crisis. They are delivering not only for our
customers and our business, but also for the country. I am proud to
lead such a committed and talented group of logistics
professionals. The impact of this global pandemic is covered in
more detail elsewhere in this report, but it should not overshadow
a successful year for the Group.
Business reflections
The impression I had of the business before joining was a
positive one. I saw a well led business with a strong balance
sheet, reliable dividends and longstanding customer relationships.
The reality has been even better than I expected as I have found
all those things plus a great team delivering value for our
customers every day. I have been fortunate enough to visit a number
of our locations across several diverse sectors in both business to
business ('B2B') and business to consumer ('B2C'). We have in-built
resilience as a result of our diversity of activity, managing
supply chains for everything from bricks to wine.
Throughout my visits I have been really impressed with the depth
and breadth of our people's expertise, adding value to our
customers through being a true extension of their own business. We
have a strong spirit embedded in impressive tenure of both our
colleagues and our customer relationships. The quality of our
operations shines through and our regular renewals are evidence of
our customers' appreciation for what we do for them.
I intend to build on the excellent financial foundations to
unlock the potential for growth of the business. This potential
exists in the range and scope of expertise we have; it exists in
the passion and experience within our teams; and it exists in the
strength of our customer showcases and our market leading
technologies.
Financial and business performance overview
In the year ended 31 March 2020 we delivered another period of
improving financial performance. Revenue grew by over 5% on the
back of significant new business secured in the previous year and
several wins in early 2019. Our underlying profit before tax on an
IAS 17 basis grew by 7.3%, due to the new business and a strong
operating performance, particularly in Retail & Consumer
('R&C'). Despite the arrival of COVID-19 before the end of the
year, we were able to reduce our year end net debt to GBP10.1m,
down GBP9.2m from the prior year.
At a sector level, R&C delivered strong volumes and profit
performance driven by both new customer wins and core business
growth. There remains active interest in our services and I am
confident that we can continue to be successful across the sector.
Our largest win was with Morrisons to operate three transport
locations and five fleet maintenance units for them. The contract
is for five years and we are delighted to add their impressive
brand to our retail business sector.
It was also a good year for our home delivery service team. We
gained multi-year contracts with Sofa Club, Dwell, Homebase, Cormar
Carpets and Wickes (Kitchen and Bathrooms) for a range of
technology enabled one and two-person home deliveries. This is a
strong sector for Wincanton with high levels of measurable consumer
and customer satisfaction.
Other notable R&C wins were with Stuffstr, an innovative
apparel recirculation platform and with Fentimans, the brewer of
botanical beverages.
Conversely, our Industrial & Transport ('I&T') sector
experienced some pressure in the second half of the year which
contributed to a decline in revenue. The fall in revenue also
included the impact of the exit of the underperforming Britvic
general haulage contract in the prior year.
Pullman Fleet Services ('PFS') has faced an increasingly
competitive market including increased competition from vehicle
manufacturers ('OEMs') offering repair and maintenance deals with
vehicle purchases. We also elected to exit a contract for a home
delivery fleet rather than convert from an open book to a closed
book arrangement. We have incurred restructuring costs in PFS in
the second half of the year to re-shape the cost base and
rationalise our workshop network. Market conditions for our
containers business also remain tough and these have been
exacerbated by the global COVID-19 situation and its impact on
international container traffic. Considering the uncertainty
surrounding these businesses as a result of COVID-19 and the impact
this has had on their forecasts it has been necessary to take an
impairment of assets in these businesses as part of the year end
process.
Other areas within the sector had broadly flat volumes except
for defence which benefitted from previously awarded new business
flowing through. The start-up of new business wins in Construction
compensated for lower core volumes. Plans to enhance profitability
in this area have been severely impacted by COVID-19 and the
temporary shutdown of many UK construction sites.
Nevertheless, I&T does have some of our most attractive
opportunities and there were notable wins and renewals in the year.
We won a major piece of business with Hapag Lloyd supplying
dedicated contract vehicles for containers and we expanded our
energy business with a contract for artic tanking services for
Watson Fuels. We also saw continued growth in our relationship with
EDF Energy, supporting the construction of the new Hinkley Point
power plant, with task orders for a range of technology and
fulfilment services. This engagement is a fantastic opportunity for
us to showcase our logistics capabilities in the major
infrastructure construction sector.
The high profile renewals in the year included M ü ller Milk and
Phillips 66 in tanking; Kingfisher in containers; Monier and
Wienerberger in Construction; adidas in our haulage business; and
General Dynamics in defence. Strong service performance and
relationship management are a key feature in our successful
retention of customers for the long term. In this context, it is
worth highlighting that our M ü ller Milk contract for milk
distribution, in various guises, goes back almost 100 years!
The service performance of our operations was again excellent,
underlining Wincanton's reputation for delivering quality on a
large scale. The Black Friday and Christmas peaks were notable for
the consistency of performance and a clear reflection of the skill
and commitment of our exceptional teams. This even included five
new sites in our grocery network that delivered outstanding first
peak seasons.
Our COVID-19 response has reflected the core strength of the
operational capability of the business, reacting with agility to
the volatile demand patterns we have seen in recent months.
Safety & sustainability
Safety is a clear priority within this business. The
prioritisation of the safety of each member of our team is clear in
every site visit I have made and in all my interactions with our
people. I am pleased to say that this passionate focus is apparent
in the results that are delivered. Once again, a clear year on year
improvement has been made in our safety performance. While the
pursuit of a safe environment for our colleagues is a never ending
goal, this is an achievement that the team is rightly proud to
celebrate. The Lost Time Incident Frequency Rate performance
indicator improved again from 0.51 last year to 0.41 this year, a
reduction of a third in two years.
Although there are unique challenges from COVID-19 to our ways
of working, safety has continued to be paramount in our business as
we have played a vital role in keeping the country moving.
From an environmental sustainability perspective, I am pleased
to see that our carbon intensity ratio decreased again year on
year. To maintain the critical focus in this area , we will publish
a new Sustainability Strategy in 2020. Vehicle emissions is where
our operations have the greatest impact on the environment and so
this will continue to be our highest focus area. We will continue
to utilise the latest vehicle and planning technologies to drive
them further downwards .
Colleague engagement
We continued with our process of 'pulse' engagement surveys
across the Group, with two conducted in the year. Over the last 12
months, engagement has risen by 2% to 69% group wide, reflecting
the good levels of commitment to the business that have been
apparent on my site visits. Key strengths include Health and
Safety, Autonomy, and Line Management Support with steady increases
in all such areas.
The launch of 'The Wincanton Way' in January was also very well
received. This new Code of Conduct sets out what we stand for as a
business. It is underpinned by a corporate governance structure and
robust risk, controls, and compliance programme. The Code enables
our colleagues to make the right choices and demonstrate the
highest standards of integrity and ethical behaviour, in everything
that we do. Our comprehensive framework of policies and standards
is applied across our business regardless of location or level.
'The Wincanton Way' will bring our Mission, Vision and Values
together and deliver a resultant increase in engagement to the
Group.
Our colleagues are at the heart of everything we do at
Wincanton, so we are investing in diversity and inclusion. This can
be viewed as a traditional, male-dominated industry and there is a
real opportunity for us to outperform by continuing to widen the
talent pool. This purpose has been chosen to reflect the high
quality and commitment of our Wincanton people being at the
forefront of everything we do. It also recognises the importance of
seeing opportunities for our services throughout the supply chain.
Finally, we must continue to deliver ongoing value to our customers
and to do so in a sustainable way - ethically, safely,
environmentally and financially.
Our strategy
The business already has a good track record of success, but I'm
certain the quality of our offering will attract more opportunities
in the market.
To support this, we will ensure the business is focused on four
key areas:
1. Our people
An inclusive culture supporting performance and growth for our
colleagues; developing the best teams that attract and retain the
most talented people in the industry
Our business has great people and has consistently championed
several leading development initiatives such as the growing
Apprenticeship scheme and our 'Warehouse to Wheels' programme. We
have also had for many years the 'Driver of the Year' competition
which I had the honour of attending for the first time in 2019. It
is a hard fought day where our best 16 drivers and 16 warehouse
operatives battle it out in tasks focused on safe and expert
driving skills. We are increasingly able to identify our best
drivers with our extensive vehicle telematics systems that provide
data on all aspects of driving performance.
We recognise the ever increasing battle for talent and so we
will leverage our position as the largest British owned 3PL company
to ensure that we continue to attract the best people, creating
engaging opportunities and careers with us. We will put more
investment into training academies to grow our own talent, develop
our colleagues and to make sure that we have the skills our
customers need. We will also invest in our systems so that when our
people need to engage with us on pay or holidays or any other
practical issue, the process is easy, instantaneous and
accurate.
In our industry, where it is often so important to be an
extension of our customer's business and for our people to
understand and be part of their culture, it can be difficult to
form a true Wincanton identity with our people. Safety is an
impressive example of where we have succeeded in doing this, new
and prospective customers recognise it when they interact with our
people, and I have noticed it in every operation I have visited.
Our people understand and engage with the Wincanton safety
programme and that is why we deliver market leading performance in
this area. Our challenge is to drive more of this, without
undermining our commitment to engage seamlessly with our customers.
We will seek to harmonise policies and conditions wherever
possible, make more use of recognition initiatives and internally
branded development and career pathway programmes to drive a
greater 'one company' feel to the organisation.
We will also use our new Code of Conduct - 'The Wincanton Way'
to underpin our whole business.
2. Our products and services
Customer propositions that deliver sustainable value and
innovation throughout the supply chain, meeting changing market
demands and harnessing the best technologies
The W(2) programme has placed Wincanton in a leading position
when it comes to innovation in the supply chain and logistics
industry. The oneVASTwarehouse platform, a digital marketplace that
is revolutionising the procurement of flexible and short term
warehousing space, is just one example of how W(2) can place
Wincanton at the forefront of supply chain innovation. An
innovative approach to solutions for our customers will continue to
be a central component of our strategy.
As operators of some of the country's most sophisticated
automated facilities, such as for Screwfix and Nestle Purina, we
also intend to make investments to be ahead of the curve in the
development of both automation and robotics solutions. We will use
the expertise in our teams to play a critical role in ensuring that
'substance' in the use of such technology is prioritised over
'style', delivering genuine supply chain value to our current and
future customers.
IT technology will also continue to play an important part in
our products and services offering. This is particularly true in
our infrastructure operations where we will leverage the investment
that we have made in a state-of-the-art Logistics Management System
(LMS). This software provides customers with a true control tower.
IT capability in this area has been instrumental in our growing
relationship with EDF Energy as we support them with the
construction of Hinkley Point C.
Another key area of future opportunity is for us to leverage our
scale for customers when it comes to financing new supply chain
projects. We will work with our financial partners to identify
projects that can add real value to the industry.
3. Our markets
Deliberately chosen markets for investment that offer the
potential for organic and inorganic growth, leveraging both our
capabilities and our expertise
Our business is active in an impressively wide range of sectors
and industries and will continue to be so. We want to focus our
growth plans on those areas where we can increase both our top and
bottom line. We will do this by leveraging our existing experience
either directly in the markets we operate in today or in adjacent
ones.
The markets we focus on will necessarily evolve but to begin
with we will be most focused on major infrastructure projects,
eCommerce fulfilment and opportunities to be deeper into retailer
supply chains. The COVID-19 crisis has underlined the need to focus
in these areas with a marked shift to online shopping and an
expectation of economic stimulation through infrastructure
investment.
We believe there are significant organic opportunities if we
invest into the right business development and key account
management resources, but we will also consider strategic
acquisitions where they can be synergistic from a revenue or
efficiency perspective.
4. Our operating model
A disciplined and efficient operating model that is agile and
easy for our customers and our people to engage with; and enables
economies of scale
In this highly competitive marketplace agility is a key
attribute. Much of the time the competition we face for new
business is from large organisations headquartered outside the UK.
As the largest British based 3PL company, we have a clear
opportunity to provide our customers and teams with an empowered
environment. Decisions can be made in the right timeframe for us to
deliver more successfully than the competition. Customers can meet
and have strategic discussions with the decision makers in our
business and together we can add transformational supply chain
value.
From a practical perspective, Wincanton is also a large
organisation with considerable scale in both customer relationships
and numbers of people. There is an absolute requirement of
continuously improving to be as lean and efficient as possible
throughout our administration processes. There are a wide range of
customer engagements that can make consistency in this area
difficult. However, economies of scale are essential for us to be
successful and we will focus our efforts on ensuring that we
increase the harmonisation of our processes wherever possible.
The nature of many of our customer contracts means that it is
also critical that our Operating Model can engage effectively with
our partners to provide the data they need to run their own
businesses. We will invest in upgrading our IT systems to deliver
this and we will review our processes to ensure that they can
seamlessly interface with our customers and our people.
New organisation structure
As CEO, I believe that one of my most important tasks is to
ensure that we have an organisation structure that really supports
our people to deliver for our customers and our shareholders and
makes Wincanton the best place it can possibly be to come to enjoy
work and be safe. It is also important that we are set up in a way
that positions us to successfully grow in our chosen markets, a key
task for the Group moving forward. Following a review of the
business I have made changes to the Executive Management Team in
pursuit of this goal.
To drive greater collaboration across our entire business unit
structure, we will move to a single Chief Operating Officer ('COO')
reporting line. Supplementing this team will be a Business
Development Director taking responsibility for pulling together our
growth focused resources into a single team. Furthermore, we will
have a Group Operations Director who will lead the functions that
deliver across our customer facing business units - Health and
Safety; Transport Operations; Project Management; Implementation;
Operations Excellence; and Sustainability.
The position of Strategy Director is also created, reporting to
me, recognising the importance of the Group having a single focus
and ensuring that our plans are programme managed through to
successful delivery.
These changes will facilitate delivery of our future growth
strategy.
COVID-19: Our agile and rapid response
COVID-19 has highlighted the importance of the services
Wincanton provides to the nation both practically and economically.
Our people have shown remarkable agility in their response to
working in hugely challenging circumstances and have embraced the
changes required, without ever compromising on the safety
principles that are at the heart of the Wincanton Way.
The business remains robust and resilient with trading through
the crisis reflecting the diversity of our customer base. We have
seen the full range of market reactions, from record volumes in
Retail Grocery in March 2020 to a complete shutdown in our
two-person home delivery network during April. This diversity is a
strength in a multi-paced economy, but we have taken substantial
hits to our business in areas such as Construction that do
negatively impact our financial position.
In response to this, we have put in place all the necessary
measures for Wincanton to be in the best position to navigate the
short term and to thrive in the longer run. Cash management has
been prioritised with additional banking facilities secured; VAT
and pension deficit payments delayed; and dividend payments
suspended. In terms of our cost base, the variable elements have
been fully leveraged with close management of subcontractor and
agency resource. We have also limited our labour costs by utilising
the Government's Coronavirus Job Retention Scheme to furlough
employees and by implementing temporary action on executive and
management compensation.
In taking these actions, we are demonstrating our clear intent
to emerge from COVID-19 in a stronger position than our
competition. This will allow us to maximise the growth
opportunities that will be generated from the higher profile of the
value of the outsourced physical and digital supply chain services
we provide.
Our refocused strategic direction is even more relevant in a
post COVID-19 UK economy, we will ensure that Wincanton plays our
full part with "Great people delivering sustainable supply chain
value".
James Wroath
Chief Executive Officer
FINANCIAL REVIEW
The Directors present the results of the business on an
underlying basis, excluding non-underlying items, for operating
profit, profit before tax and EPS, as they believe this better
represents the performance of the business. The definition of
non-underlying items and details of the items reported as
non-underlying in the current and prior years are included in Note
3 to the accompanying financial statements below. IFRS 16 Leases
was adopted with effect from 1 April 2019 - to aid comparison with
the prior year, the alternative performance measures for the year
ended 31 March 2020 set out below are also provided on an IAS 17
basis. These measures have been used by the Board for evaluating
performance of the sectors during the year.
A reconciliation of these measures to their statutory equivalent
is shown in the Alternative Performance Measures table at the end
of this Financial Review.
Performance summary
2020 2020 2019
IFRS 16(1) IAS 17(1) IAS 17(1) Change
-------------------------------------- ----------- ---------- ---------- -------
Revenue (GBPm) 1,201.2 1,201.2 1,141.5 5.2%
-------------------------------------- ----------- ---------- ---------- -------
Underlying EBITDA (GBPm)(2) 104.1 68.9 66.7 3.3%
-------------------------------------- ----------- ---------- ---------- -------
Underlying operating profit (GBPm)(3) 61.0 57.3 55.3 3.6%
Underlying operating margin (%)(3) 5.1% 4.8% 4.8% 0bps
Net financing costs (GBPm) (8.2) (4.4) (6.0) (26.7)%
-------------------------------------- ----------- ---------- ---------- -------
Underlying profit before tax (GBPm) 52.8 52.9 49.3 7.3%
Non-underlying items (GBPm) (9.0) (9.0) (0.7)
-------------------------------------- ----------- ---------- ---------- -------
Profit before tax (GBPm) 43.8 43.9 48.6 (9.7)%
Income tax (GBPm) (5.3) (5.8) (5.8)
-------------------------------------- ----------- ---------- ---------- -------
Profit after tax (GBPm) 38.5 38.1 42.8 (11.0)%
-------------------------------------- ----------- ---------- ---------- -------
Underlying EPS (pence) 36.1p 35.8p 33.5p 6.9%
Basic EPS (pence) 31.1p 30.8p 34.5p (10.7)%
Dividend per share 3.9p 3.9p 10.89p
Closing net debt (GBPm) (10.1) (10.1) (19.3)
-------------------------------------- ----------- ---------- ---------- -------
1 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures. As a
result, the discussion of results is based on an IAS 17 basis,
unless otherwise stated. Information on the impact of adopting IFRS
16 is presented in Note 10 to the accompanying financial
statements.
2 Underlying EBITDA refers to underlying operating profit before
depreciation and amortisation and is reconciled in Note 2 to the
accompanying financial statements.
3 Further information on Alternative Performance Measures
(APMs), including definitions and a reconciliation of APMs to
statutory measures are provided in the Alternative Performance
Measures table at the end of this review.
4 The definition of non-underlying items and the details of
items reported as non-underlying in the current and prior year are
included in Note 3 to the accompanying financial statements.
Revenue in the year ended 31 March 2020 increased 5.2% to
GBP1,201.2m (2019: GBP1,141.5m). Growth was particularly strong in
Grocery due to a major new contract with Morrisons in the year and
the full-year benefit of new contracts with the Co-op and
Sainsbury's won towards the end of last year. Revenue growth was
also helped by a combination of new business in Construction, and
Other services, principally in Defence and Energy, and account
growth across the business.
The increase in revenue was despite some market pressures driven
by Brexit uncertainty, particularly around the end of 2019 which
impacted volumes in both our Construction and Transport Services
businesses. Transport Services was the only business to see a
revenue decline in the year, partly driven by lower volumes and
also due to the full-year effects of contracts exited during the
prior year.
The Group's underlying operating profit margin was maintained at
4.8%, on an IAS17 basis, benefitting from increased operational
efficiency and scale benefits in our Retail and Consumer sector
which offset some adverse volume mix movements which reduced the
margin in Industrial and Transport sector.
Retail & Consumer
2020 2020 2019
IFRS 16(1) IAS 17(1) IAS 17(1) Change
-------------------------------------- ----------- ---------- ---------- ------
Revenue (GBPm) 782.3 782.3 708.9 10.4%
Underlying operating profit (GBPm)(2) 39.0 36.4 31.2 16.7%
Underlying margin (%) 5.0% 4.7% 4.4% 30bps
-------------------------------------- ----------- ---------- ---------- ------
1 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures. As a
result, the discussion of results is based on an IAS 17 basis,
unless otherwise stated. Information on the impact of adopting IFRS
16 is presented in Note 10 to the accompanying financial statements
below.
2 Further information on Alternative Performance Measures
(APMs), including definitions and a reconciliation of APMs to
statutory measures are provided in the Alternative Performance
Measures table at the end of this review.
Retail & Consumer reported revenue of GBP782.3m for the
year, an increase of 10.4% on the previous year. Underlying
operating profit margin on an IAS 17 basis increased due to scale
efficiencies being realised across the business and, when combined
with the top line growth, the enhanced margins resulted in a 16.7%
increase in underlying operating profit for the year to GBP36.4m
(2019: GBP31.2m).
The split of Retail & Consumer revenue by the industry
sectors it serves is as follows:
2020 2019
GBPm GBPm Change
--------------------------- ------ ----- ------
Retail General Merchandise 448.2 423.8 5.8%
Retail Grocery 227.8 180.8 26.0%
Consumer Products 106.3 104.3 1.9%
--------------------------- ------ ----- ------
782.3 708.9 10.4%
--------------------------- ------ ----- ------
Retail Grocery performed particularly strongly with a 26.0%
increase in revenue to GBP227.8m (2019: GBP180.8m). The growth
included the full year benefit from contracts won in the prior
year, including Co-op and Sainsbury's, and a new five year contract
won in the year with Morrisons. The Morrisons contract sees
Wincanton provide transportation, planning and operational services
for three Morrisons sites, and also includes the provision of
vehicle maintenance services. Wincanton's ability to provide
holistic services and innovative solutions to the Grocery sector
was key in securing this contract.
Retail General Merchandise recorded solid growth of 5.8% to
GBP448.2m (2019: GBP423.8m) driven by organic growth within our
core customer base including Kingfisher, with whom we have a
longstanding relationship, and new business with Jollyes and Roper
Rhodes. Our continued growth within this area highlights our proven
capabilities in the multichannel eFulfilment arena, where we excel
in areas such as services to the Home & DIY marketplace,
including our market-leading two person home delivery service
proposition. During the year we won a home delivery contract with
Wickes for kitchen and bathroom products and in the final quarter
we won a three year contract with Sofa Club for a complete supply
chain and eFulfilment solution, including its bespoke two person
home delivery service.
Consumer Products achieved growth of 1.9% to GBP106.3m (2019:
GBP104.3m) with the full year benefit of the new contract with The
Weetabix Food Company secured last year being offset in part by
some smaller contract losses.
Wincanton prides itself on customer service and the continual
development of solutions to meet the requirements of both our
customers and their end consumers - key customer renewals are an
endorsement of the benefits our services deliver in practice. Key
renewals in the year included a three year extension of dedicated
transport and warehousing services for Sainsbury's in West London,
extending our relationship to over twenty-five years; the extension
of our bonded warehousing and transport services for Waitrose &
Partners, continuing a partnership which has been in place for more
than a decade; and the renewal of our warehousing and
transportation contract with high-end furnishings specialist
Williams Sonoma for another four years.
Industrial & Transport
2020 2020 2019
IFRS 16(1) IAS 17(1) IAS 17 Change
-------------------------------------- ----------- ---------- ------- -------
Revenue (GBPm) 418.9 418.9 432.6 (3.2)%
Underlying operating profit (GBPm)(2) 22.0 20.9 24.1 (13.3)%
Underlying Margin (%) 5.3% 5.0% 5.6% (60)bps
-------------------------------------- ----------- ---------- ------- -------
1 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures. As a
result, the discussion of results is based on an IAS 17 basis,
unless otherwise stated. Information on the impact of adopting IFRS
16 is presented in Note 10 to the accompanying financial statements
below.
2 Further information on Alternative Performance Measures
(APMs), including definitions and a reconciliation of APMs to
statutory measures are provided in the Alternative Performance
Measures table at the end of this review.
Revenue fell in our Industrial & Transport sector by 3.2%,
mainly due to prior year contract exits and lower activity levels
in some of our transport network, partly attributable to the delay
of projects amid the general election uncertainty in late 2019 and
the early impact of COVID-19 on the containers business. These
reductions were partly offset by new business revenue in our
Energylink business and new contracts with Aggregate Industries and
HMRC.
Underlying operating profit decreased to GBP20.9m (2019:
GBP24.1m), impacted by the decline in volumes and lower utilisation
levels. Underlying operating profit was also impacted by a downturn
in our Pullman fleet management services business, notably due to
an open book contract servicing a home delivery fleet which we
chose to exit rather than transfer to a higher risk closed book
arrangement, and some restructuring costs in connection with the
rationalisation of the workshop network.
The split of Industrial & Transport revenue by the
activities undertaken is as follows:
2020 2019
GBPm GBPm Change
------------------- ----- ----- -------
Transport Services 150.6 171.4 (12.1)%
Construction 138.2 136.7 1.1%
Other 130.1 124.5 4.5%
------------------- ----- ----- -------
418.9 432.6 (3.2)%
------------------- ----- ----- -------
Our Transport Services activity includes general haulage,
Containers and Pullman Fleet Services. Revenue declined by 12.1% in
this area of the business to GBP150.6m (2019: GBP171.4m). Lost
revenue included the full year effects of the exit from
underperforming general haulage contracts during the prior year and
some contract losses in Pullman. Our Containers business was the
earliest area of our business to feel the effects of the COVID-19
pandemic due to the slowdown in Far East container traffic in early
2020. The revenue reduction decrease was offset in part by the
Weetabix transport and DCS contract wins which became operational
at the end of last year.
While underlying trading in the last quarter of this year was
not significantly impacted by the economic effects of COVID-19, the
revised forecasts for our containers and fleet maintenance
businesses used in our year-end analysis indicated a significant
downturn. As a result, certain assets used in these businesses have
been impaired with this impairment being reported as a
non-underlying cost at the year end.
Our Construction business recorded 1.1% revenue growth to
GBP138.2m (2019: GBP136.7m) due to the expansion of our
relationship with Aggregate Industries and the commencement of the
EDF Energy contract at Hinkley Point more than offsetting prior
period contract losses and subdued volumes due to Brexit-related
uncertainty throughout the second half of the year.
Other services grew revenue by 4.5% to GBP130.1m (2019:
GBP124.5m). This growth was due to the full year benefit of the
contract win with HMRC, where we have been providing logistics
services to support air and sea freight inspections as part of a
five year agreement and new business in our Energylink fuel tanker
network.
The Industrial & Transport business was also successful in
renewing all major contracts up for renewal during the year. These
included a further three year extension to our long standing
partnership with M ü ller Milk, a three year extension to the
warehouse and transport services agreement with Lucozade Ribena
Suntory that will take this relationship beyond 25 years, and a two
year extension of our transportation agreement with Monier, the
roofing specialists.
Net financing costs
2020 2020 2019
IFRS 16(1) IAS 17(1) IAS 17(1)
GBPm GBPm GBPm
------------------------------------------------------ ------------ ---------- ----------
Net interest payable 3.9 3.9 4.2
Interest payable on leases 3.8 - -
Unwinding of discount on provisions 0.5 0.5 0.8
Interest on the net defined benefit pension liability - - 1.0
------------------------------------------------------ ------------ ---------- ----------
Net financing costs 8.2 4.4 6.0
------------------------------------------------------ ------------ ---------- ----------
1 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures. As a
result, the discussion of results is based on an IAS 17 basis,
unless otherwise stated. Information on the impact of adopting IFRS
16 is presented in Note 10 to the accompanying financial statements
below.
Net financing costs were GBP4.4m (2019: GBP6.0m), GBP1.6m lower
year on year.
Interest payable was GBP3.9m (2019: GBP4.2m), a decrease of
GBP0.3m due to more efficient use of the syndicated loan facility
and interest rate swaps expiring early in the year.
Non-cash financing items totalled GBP0.5m (2019: GBP1.8m).
Interest on the defined benefit pension charge in the period was
GBPnil (2019: GBP1.0m) due to the elimination of the pension
deficit and cash contributions paid into the Scheme during the
year. The unwinding of discounts on provisions of GBP0.5m (2019:
GBP0.8m) has decreased in line with the movement in insurance and
property provisions during the year.
On an IFRS 16 basis, a financing charge of GBP3.8m has been
recognised for the first time this year in respect of the interest
on lease liabilities.
Non-underlying items
2020 2020 2019
IFRS 16(1) IAS 17(1) IAS 17
GBPm GBPm GBPm
-------------------------------------------------------------------------------- ----------- ---------- -------
Net profit on disposal of freehold property 2.3 2.3 6.0
Professional fees in relation to M&A activities (2.0) (2.0) -
COVID-19 related impairments (9.3) (9.3) -
Pension Scheme - Guaranteed Minimum Pension (GMP) - - (8.2)
Revision to property provisions previously recognised through exceptional items - - 1.5
-------------------------------------------------------------------------------- ----------- ---------- -------
Net non-underlying items(2) (9.0) (9.0) (0.7)
-------------------------------------------------------------------------------- ----------- ---------- -------
1 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures. As a
result, the discussion of results is based on an IAS 17 basis,
unless otherwise stated. Information on the impact of adopting IFRS
16 is presented in Note 10 to the accompanying financial statements
below.
2 The definition of non-underlying items is included in Note 3
to the accompanying financial statements.
During the year we completed the disposal of two freehold
properties receiving gross sales proceeds of GBP5.5m and incurring
disposal costs of GBP0.8m. The combined carrying value of the
properties was GBP2.4m, generating a net profit on disposal of
GBP2.3m. In the prior year we completed the disposal of a freehold
property receiving gross sales proceeds of GBP14.5m and incurring
costs of disposal and transitioning operations to another site of
GBP1.2m and GBP0.5m respectively. The carrying value of the
property was GBP6.8m, which generated a net profit on disposal of
GBP6.0m.
Professional fees associated with M&A activity have been
recognised within non-underlying items. The principal activity was
an extensive evaluation of a potential bid for Eddie Stobart
Logistics plc.
Underlying trading in the year ended 31 March 2020 was not
materially impacted by COVID-19 and underlying operating profit was
in line with expectations. However, since the year end COVID-19 has
significantly affected economic activity and disrupted the business
operations of many of Wincanton's customers. In response to this,
and in line with guidance from the Financial Reporting Council, the
Group has reviewed all Cash Generating Units to determine whether
any of the assets related to these operations are impaired. As a
result of these reviews, non-current assets and inventories within
Transport Services (related to the containers and fleet maintenance
services businesses) and Construction in the Industrial &
Transport segment have been impaired - a non-cash impairment charge
of GBP9.3m has therefore been recognised as a non-underlying item
in the income statement. Of the total charge, GBP8.0m of the
impairment has been taken on non-current assets and GBP1.3m on
inventory.
In the prior year, the High Court of Justice of England and
Wales issued a judgement relating to Lloyds Banking Group requiring
equality of treatment of historic pension benefits for men and
women. This resulted in the recognition of a non-cash past service
cost of GBP8.2m in the year.
Also in the prior year, the Group negotiated an exit from a long
standing onerous property lease in Dublin on favourable terms. The
full novation of this lease, partly offset by an increase in
provision for another long-standing lease, resulted in a net
exceptional credit of GBP1.5m.
Taxation
2020 2020 2019
IFRS 16(1) IAS 17(1) IAS 17(1)
------------------------------------------------------- ----------- ---------- ----------
Underlying profit before tax (GBPm)(2) 52.8 52.9 49.3
------------------------------------------------------- ----------- ---------- ----------
Underlying tax (GBPm) (8.1) (8.6) (7.8)
Non-underlying tax (GBPm) 2.8 2.8 2.0
------------------------------------------------------- ----------- ---------- ----------
Tax as reported (GBPm) (5.3) (5.8) (5.8)
------------------------------------------------------- ----------- ---------- ----------
Effective tax rate on underlying profit before tax (%) 15.3% 16.3% 15.9%
------------------------------------------------------- ----------- ---------- ----------
1 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures. As a
result, the discussion of results is based on an IAS 17 basis,
unless otherwise stated. Information on the impact of adopting IFRS
16 is presented in Note 10 to the accompanying financial statements
below.
2 Further information on Alternative Performance Measures (APMs)
including definitions and a reconciliation of APMs to statutory
measures are provided in the Alternative Performance Measures table
at the end of this review.
Underlying tax of GBP8.6m (2019: GBP7.8m) represents an
effective tax rate of 16.3% (2019: 15.9%) on underlying profit
before tax and is stated before net tax credits in respect of
non-underlying items of GBP2.8m (2019: GBP2.0m). The capital gain
for tax purposes on the non-underlying property disposal is nil and
therefore no tax charge arises.
Underlying tax on an IFRS 16 basis of GBP8.1m represents an
effective tax rate of 15.3%, the difference being primarily due to
the impact of the rate change on the deferred tax asset recognised
on transition to IFRS 16.
The effective tax rate is lower than the statutory rate of 19.0%
due to adjustments arising from finalising prior year positions and
recognising the rate change on the opening deferred tax assets. The
non-underlying tax credit in the prior year of GBP2.0m arose
principally on recognition of a deferred tax asset in relation to
the exceptional GMP charge.
The total net deferred tax balance is a liability at year end of
GBP13.8m (2019: GBP4.2m asset), with the change versus the prior
year primarily due to the defined benefit pension deficit moving
into an asset position.
Profit after tax and earnings per share
Underlying profit before tax for the year increased to GBP52.9m
on an IAS 17 basis (2019: GBP49.3m) due to the growth in revenue
while holding margins flat leading to an increase in underlying
operating profit. This was combined with reduced net financing
costs, principally due to the elimination of the pension
deficit.
Underlying profit after tax for the year is GBP44.3m (2019:
GBP41.5m) on an IAS 17 basis. The increase of GBP2.8m is due to the
improved underlying profit before tax, offset in part by an
increase in the effective tax rate to 16.3% (2019: 15.9%).
Profit after tax for the year on a statutory basis is GBP38.5m
(2019: GBP42.8m), the reduction of GBP4.3m being primarily due to
net non-underlying items of GBP(9.0)m, partly offset by the
improvements in underlying profit after tax of GBP3.2m. This
improvement includes the impact of IFRS 16 of GBP0.4m which is
mainly due to the tax impact of GBP0.5m explained above.
Non-underlying items including their related tax impact total
GBP(6.2)m, an additional charge of GBP7.5m from the prior year
(2019: GBP1.3m).
Underlying EPS, which excludes earnings from non-underlying
items, increased by 6.9% to 35.8p (2019: 33.5p). Basic EPS
decreased by 9.9% to 31.1p (2019: 34.5p).
The calculation of these EPS measures is set out in Note 6 to
the accompanying financial statements.
Dividends
2020 2019
pence pence
----------------- ------ ------
Interim 3.90 3.60
Final (proposed) - 7.29
----------------- ------ ------
Total 3.90 10.89
----------------- ------ ------
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.
In light of the economic impacts of the COVID-19 pandemic,
including the cost-efficiency and liquidity measures taken to
safeguard the long term viability of the business, and in order to
retain near term flexibility, the Board has determined that the
final dividend for the year ended 31 March 2020, which would
ordinarily be paid in July, should be suspended (2019: 7.29p per
share). The Board recognises the importance of the dividend to our
shareholders and will keep dividend payments under review as the
year progresses with a view to return to payments as soon as
appropriate.
Dividend payments of GBP13.8m (2019: GBP12.7m) in the year
comprised the final dividend of 7.29p per share for the period
ended 31 March 2019 and the 2020 interim dividend of 3.90p per
share.
Financial position
The summary financial position of the Group is set out
below:
2020 2020 2019
IFRS 16(1) IAS 17(1) IAS 17
GBPm GBPm GBPm
--------------------------------------------------------- ----------- ---------- -------
Non-current assets 226.6 113.8 122.9
Net current liabilities (excl. net debt) (162.3) (129.6) (133.2)
Non-current liabilities (excl. net debt/pension deficit) (133.9) (43.0) (30.4)
Net debt (10.1) (10.1) (19.3)
Pensions asset/(deficit) (excl deferred tax) 94.4 94.4 (7.1)
--------------------------------------------------------- ----------- ---------- -------
Net assets/(liabilities) 14.7 25.5 (67.1)
--------------------------------------------------------- ----------- ---------- -------
1 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures. As a
result, the discussion of results is based on an IAS 17 basis,
unless otherwise stated. Information on the impact of adopting IFRS
16 is presented in Note 10 to the accompanying financial statements
below.
The GBP92.6m movement from a net liabilities position to a net
assets position prior to the transition to IFRS 16 is primarily due
to the underlying profit after tax of GBP44.3m and the improvement
in the pension position net of deferred tax of GBP68.2m, which have
been partly offset by the non-underlying items net of tax of
GBP(6.2)m. A significant part of the improvement in the pension
position is due to market uncertainty and is likely to reverse when
markets stabilise, this is explained in more detail in the Pension
section below.
A reconciliation of the numbers to an IFRS 16 basis is presented
in Note 10 to the accompanying financial statements.
Cash flows and net debt
The Group delivered a GBP9.2m reduction in net debt (2019:
GBP10.2m inflow) in the year, with free cash flow before capital
expenditure of GBP44.6m (2019: GBP52.9m) and a free cash flow of
GBP40.8m (2019: GBP57.0m). Free cash flow is defined as the
movement in net debt, before pension payments, dividends and the
acquisition of own shares.
2020 2020 2019
IFRS 16(1) IAS 17(1) IAS 17
GBPm GBPm GBPm
------------------------------------------ ----------- ---------- -------
Underlying EBITDA(2) 104.1 68.9 66.7
Working capital (4.0) (8.3) 0.8
Tax (7.0) (7.0) (1.5)
Net interest (7.8) (4.0) (4.2)
Other items (5.0) (5.0) (8.9)
------------------------------------------ ----------- ---------- -------
Free cash flow before capital expenditure 80.3 44.6 52.9
Repayment of obligations under leases (35.7) - -
Capital expenditure (9.3) (9.3) (9.7)
Net proceeds from asset disposals 5.5 5.5 13.8
------------------------------------------ ----------- ---------- -------
Free cash flow 40.8 40.8 57.0
Pension recovery payment (17.8) (17.8) (32.3)
Dividends (13.8) (13.8) (12.7)
Own shares acquired - - (1.8)
------------------------------------------ ----------- ---------- -------
Reduction in net debt 9.2 9.2 10.2
------------------------------------------ ----------- ---------- -------
1 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures. As a
result, the discussion of results is based on an IAS 17 basis,
unless otherwise stated. Information on the impact of adopting IFRS
16 is presented in Note 10 to the accompanying financial statements
below.
2 Further information on Alternative Performance Measures (APMs)
including definitions and a reconciliation of APMs to statutory
measures are provided in the Alternative Performance Measures table
at the end of this review.
The working capital outflow of GBP8.3m for the year (2019:
GBP0.8m inflow) arose due to investments in mobilising new
contracts and the timing of payment runs just before the year
end.
The Group paid cash tax in the current year of GBP7.0m (2019:
GBP1.5m) with the increase on the prior year driven by changes in
HMRC rules for the timing of payments on account and tax benefits
in the prior year from a GBP15.0m one-off contribution to the
pension scheme. The cash tax payable continues to trend below the
underlying charge primarily due to the impact of tax relief on the
pension deficit recovery payments made in the year.
The amount of cash net interest paid, excluding fees, of GBP4.0m
(2019: GBP4.2m) decreased marginally, reflecting lower fees being
incurred from more efficient use of the syndicated loan facility
and interest rate swaps expiring early in the year.
Other items of GBP5.0m are GBP3.9m lower than last year due to
lower cash restructuring costs and lower property provision spend
in the year.
Capital expenditure of GBP9.3m (2019: GBP9.7m) arose on
continued investment in IT systems, including the enhancement of
our transport management system and warehouse management system
implementations.
Net proceeds from asset disposals comprise the disposal of two
under-utilised freehold properties, which were disposed of for
gross proceeds of GBP5.5m, with costs of disposal of GBP0.8m. In
the prior year an under-utilised property was disposed of for gross
proceeds of GBP14.5m, with costs of disposal and transition of
GBP1.7m. Net proceeds from other asset disposals were GBP0.8m
(2019: GBP1.0m).
The cash contribution to fund the pension deficit on a technical
provisions basis of GBP17.8m comprises GBP18.5m of annual deficit
contributions, less GBP0.7m of administrative expenses incurred by
the Company. Contributions for the year ended 31 March 2021 were
scheduled to be GBP18.2m, being the annual deficit contribution of
GBP18.9m less the administrative costs incurred directly by the
Company but, in response to the COVID-19 situation, agreement has
been reached with the Scheme Trustee to defer GBP6.1m of these
contributions into the following financial year, subject to the
level of cash dividends paid in the year.
Equity dividends of GBP13.8m (2019: GBP12.7m) were paid in the
year up 8.7% from the prior year.
The Group did not acquire any of its own shares during the year
(2019: a cash outflow of GBP1.8m). The policy of purchasing own
shares is for the purpose of the Employee Benefit Trust in respect
of long term incentive plan commitments. The level of shares
required to fulfil these obligations are reviewed periodically,
with the assessment made during the year that the level of shares
held in the Employee Benefit Trust was sufficient, and no further
purchase was required.
Financing and covenants
The Group has a committed syndicated bank facility of GBP141m as
at 31 March 2020 (2019: GBP141m) and the headroom between this
facility and reported net debt at 31 March 2020 was GBP131m (2019:
GBP122m). The Group also has operating overdrafts and a Receivables
Purchase Facility with Santander UK plc which provide day to day
flexibility, amounting to a further GBP8m and GBP30m respectively
in uncommitted facilities. GBP15.5m of the Receivables Purchase
Facility was utilised as at 31 March 2020.
Wincanton operates comfortably within its banking covenants, as
summarised in the table below:
Covenant Ratio At 31 March 2020
-------------------------- -------- ----------------
Adjusted net debt: EBITDA <2.75:1 0.5
Interest cover >3.5:1 19.3
Fixed charge cover >1.4:1 3.2
-------------------------- -------- ----------------
The Board has considered in detail the impact of the COVID-19
pandemic on the Group and, as described above, in May 2020 we
extended our committed facilities by GBP40m for a period of 12
months. Details of the areas considered, scenarios tested and the
impact on the Group's ability to meet its covenant requirements are
provided within the going concern section of the Accounting
Policies note (Note 1 to the accompanying financial
statements).
Pensions
The Group operates a number of pension arrangements in the UK
and Ireland.
Defined benefit arrangements
The Wincanton plc Pension Scheme (the Scheme) includes defined
benefit sections which were closed to future accrual on 31 March
2014.
The membership data split by key categories is as follows:
2020 2019
----------- ------ ------
Deferred 6,805 7,102
Pensioners 6,006 5,887
----------- ------ ------
12,811 12,989
----------- ------ ------
At 31 March 2020, the Group has reported an IAS 19 surplus of
GBP94.4m (2019: deficit of GBP(7.1)m).
The movement from deficit to a significant surplus is primarily
due to market uncertainty as a result of the COVID-19 pandemic and
the impact of the hedging in the Scheme. 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. The difference is expected to reverse
in the post year end period, as a result of which the size of the
surplus is expected to be significantly reduced.
Other movements primarily relate to cash contributions of
GBP18.9m in the year, including the agreed annual payment of
GBP18.5m. The Company reached an agreement with the Trustee on the
2017 triennial valuation and recovery plan in the prior year. The
net annual deficit contributions have been agreed at GBP17.3m per
annum increasing by RPI over the three years to March 2021 and
GBP24.3m per annum from April 2021 increasing by RPI to March 2027.
These payments are deductible for UK corporation tax purposes in
the year they are paid and therefore materially reduce the net cash
impact of the contributions to the Group.
Since the year end we have agreed an amended Schedule of
Contributions delaying GBP6.1m of contributions due in the year
ended 31 March 2021 to the following year.
The Company has commenced discussions with the Trustee on the
2020 Triennial valuation and is hopeful to conclude these
discussions before the end of the financial year.
The interest and inflation rate risks facing the Scheme are
hedged and the Trustee has maintained the level of this hedge
during the year to 100% of the Scheme's assets. The discount rate
for calculating liabilities has reduced by 0.1% compared to the
prior year and on the IAS 19 basis of measurement. At 31 March
2019, a 0.1% reduction in the rate would have increased liabilities
by approximately GBP22.0m while the hedging in place meant assets
would have increased by GBP24.0m Due to volatility in the financial
markets caused by COVID-19 at 31 March 2020, a 0.1% reduction in
the rate would increase the liabilities of the Scheme by
approximately GBP18m while the hedging would cause the Scheme's
assets, the valuation of which was less impacted by the volatility,
would increase by approximately GBP24m. This difference in the
hedging movements is expected to reduce as stability returns to the
financial markets.
Over recent years, the Trustee has pursued a diversification of
the investment portfolio as part of a de-risking strategy, and this
programme continued in the year ended 31 March 2020. As at 31 March
2020 the Scheme's investments were split between 30% in
return-seeking assets and 70% in defensive assets.
The Scheme currently holds unquoted assets valued at
approximately GBP96.9m the latest valuations of which precede the
negative impact of COVID-19 on the financial markets. We have
therefore applied an estimated adjustment by reference to market
indices to the valuations of these assets provided by the portfolio
investment manager.
Defined contribution arrangements
The Group's defined contribution arrangements include the
Retirement Savings Section, including the Auto Enrolment section,
and the Pension Builder Plan in the UK and a separate similar local
scheme in Ireland. Active membership of these schemes was 16,502
(2019: 15,661) in the year. The charge incurred for these
arrangements totals GBP33.7m (2019: GBP24.6m).
Brexit
Although there remains uncertainty on the nature and timing of
the UK's proposed withdrawal from the European Union (Brexit), our
understanding of potential risks and impacts are regularly reviewed
and assessed.
We have, for example, reviewed the potential impact of Brexit,
including adverse economic consequences, on our existing contract
base, workforce, bidding activities and supply chain.
We continue to believe that Wincanton will not be materially
affected by the UK withdrawing from the European Union, which is
currently scheduled to occur at the end of December 2020. This is
based on the following key points:
-- Our operations are generally delivered locally in-country and
are not critically dependent on a cross-border supply chain or
workforce. Wincanton's operations in Ireland are not a significant
part of the Group and represent c.1% of Group revenue.
-- As a British focused 3PL business there is potential for
additional demand for our services under most Brexit scenarios,
including demand for warehouse space and management, management of
bonded goods and supply of container storage and
transportation.
-- Most of our existing contracts have provisions which allow
for inflationary and other adjustments (e.g. fuel price movements,
tariffs on imported vehicles) to be charged to our customers and
approximately 60% of our contracts are open book contracts in which
we do not bear the direct impact of increasing costs.
-- Should the UK's exit from the EU at the end of 2020 result in
a 'hard' Brexit without a transition period and/or an orderly
withdrawal may cause regulatory and compliance uncertainty on some
contracts that require performance under EU regulation, bodies
and/or standards; however, we believe such uncertainties will be
addressed under proposed new UK regulations following any
withdrawal.
-- We have reviewed our supply chain and are broadly comfortable
with our key suppliers' ability to maintain the provision of goods
and services on key contracts.
IFRS 16
IFRS 16 Leases was issued by the IASB in January 2016 and became
effective for the Group for the year ended 31 March 2020. IFRS 16
sets out the principles for the recognition, measurement,
presentation and disclosure of leases for both lessees and lessors.
The Group applied IFRS 16 on 1 April 2019 using the modified
retrospective approach; the cumulative effect of initial adoption
being recognised as an adjustment to the opening balance of
retained earnings as at 1 April 2019 with no restatement of
comparative information. The Group recognised right-of-use assets
of GBP117.6m and lease liabilities of GBP137.4m on 1 April 2019,
together with a deferred tax asset of GBP2.0m and a charge to
reserves of GBP11.2m. There is no cash impact of adopting IFRS
16.
Further information on the impact of adopting IFRS 16 in the
year is set out in Note 10 to the accompanying financial
statements.
Alternative Performance Measures
Alternative performance measures (APMs) are used by the Board to
assess 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 profit before tax
is used in determining annual bonus payments and underlying EPS is
used as a key performance indicator for the Long Term Incentive
Plan. 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, profit
before tax and EPS which are calculated as the statutory measures
stated before non-underlying items, including exceptional items,
amortisation of acquired intangibles, related tax and exceptional
tax items, where applicable. The definition of non-underlying items
can be found in Note 3 to the accompanying financial statements.
The table below reconciles the APMs to the statutory reported
measures.
2020 2019
------------------- ------------------------------------------------------------- ----------------------------------
Statutory Non-underlying Underlying IFRS 16 Underlying Statutory Exceptional Underlying
IFRS 16 Items(1) IFRS 16 Impact(2) IAS 17 IAS 17 Items(1) IAS 17
------------------- --------- -------------- ---------- ---------- ---------- --------- ----------- ----------
Revenue (GBPm) 1,201.2 - 1,201.2 - 1,201.2 1,141.5 - 1,141.5
------------------- --------- -------------- ---------- ---------- ---------- --------- ----------- ----------
EBITDA (GBPm) (3) 103.1 1.0 104.1 (35.2) 68.9 66.0 0.7 66.7
------------------- --------- -------------- ---------- ---------- ---------- --------- ----------- ----------
Operating profit
(GBPm) 52.0 9.0 61.0 (3.7) 57.3 54.6 0.7 55.3
Operating margin
(%) 4.3 - 5.1 4.8 4.8 - 4.8
Net financing costs
(GBPm) (8.2) - (8.2) 3.8 (4.4) (6.0) - (6.0)
------------------- --------- -------------- ---------- ---------- ---------- --------- ----------- ----------
Profit before tax
(GBPm) 43.8 9.0 52.8 0.1 52.9 48.6 0.7 49.3
Income tax (GBPm) (5.3) (2.8) (8.1) (0.5) (8.6) (5.8) (2.0) (7.8)
------------------- --------- -------------- ---------- ---------- ---------- --------- ----------- ----------
Profit after tax
(GBPm) 38.5 6.2 44.7 (0.4) 44.3 42.8 (1.3) 41.5
------------------- --------- -------------- ---------- ---------- ---------- --------- ----------- ----------
Earnings per share
(4) 31.1p 36.1p 35.8p 34.5p 33.5p
Dividend per share 3.9p 3.9p 3.9p 10.89p 10.89p
Net debt excluding
lease liabilities
(GBPm) (5) (10.1) (10.1) (19.3)
------------------- --------- -------------- ---------- ---------- ---------- --------- ----------- ----------
1 Note 3 to the accompanying financial statements provides the
definition of non-underlying items and details of the items
reported as non-underlying in the current and prior year.
2 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures.
Consequently, the results for the year ended 31 March 2020 are not
directly comparable with prior periods and therefore they have also
been presented on an IAS 17 basis.
3 EBITDA refers to operating profit before depreciation,
amortisation and impairment of non-current assets and is reconciled
in Note 2 to the accompanying financial statements.
4 Note 6 to the accompanying financial statements provides
further detail of underlying earnings per share.
5 Net debt is the sum of cash and bank balances, bank loans and
overdrafts and other financial liabilities excluding lease
liabilities. Note 8 to the accompanying financial statements
provides a breakdown of net debt for the current and prior
periods.
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 MARCH 2020
2020(1) 2019
Note GBPm GBPm
------------------------------------------------------------ ---- ------- -------
Revenue 2 1,201.2 1,141.5
------------------------------------------------------------ ---- ------- -------
Underlying operating profit 3 61.0 55.3
Non-underlying items 3 (9.0) (0.7)
------------------------------------------------------------ ---- ------- -------
Operating profit 52.0 54.6
Financing income 4 - 0.1
Financing cost 4 (8.2) (6.1)
------------------------------------------------------------ ---- ------- -------
Net financing costs 4 (8.2) (6.0)
------------------------------------------------------------ ---- ------- -------
Profit before tax 43.8 48.6
Income tax expense 5 (5.3) (5.8)
------------------------------------------------------------ ---- ------- -------
Profit attributable to equity shareholders of Wincanton plc 38.5 42.8
------------------------------------------------------------ ---- ------- -------
Earnings per share
- basic 6 31.1p 34.5p
- diluted 6 30.8p 34.2p
------------------------------------------------------------ ---- ------- -------
1 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in Note
10 to these financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MARCH 2020
2020(1) 2019
Note GBPm GBPm
------------------------------------------------------------------------------------------ ---- ------- -----
Profit for the year 38.5 42.8
------------------------------------------------------------------------------------------ ---- ------- -----
Other comprehensive income/(expense)
Items which will not subsequently be reclassified to the income statement
Remeasurements of defined benefit liability 9 84.0 20.3
Income tax relating to items that will not subsequently be reclassified to profit or loss 5 (15.8) (3.5)
------------------------------------------------------------------------------------------ ---- ------- -----
68.2 16.8
Items which are or may subsequently be reclassified to the income statement
Net foreign exchange gain on investment in foreign subsidiaries 0.1 -
Effective portion of changes in fair value of cash flow hedges - 0.1
------------------------------------------------------------------------------------------ ---- ------- -----
0.1 0.1
------------------------------------------------------------------------------------------ ---- ------- -----
Other comprehensive income for the year, net of income tax 68.3 16.9
------------------------------------------------------------------------------------------ ---- ------- -----
Total comprehensive income attributable to equity shareholders of Wincanton plc 106.8 59.7
------------------------------------------------------------------------------------------ ---- ------- -----
1 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in Note
10 to these financial statements.
CONSOLIDATED BALANCE SHEET
AT 31 MARCH 2020
2020(1) 2019
Note GBPm GBPm
---------------------------------------------- ---- ------- -------
Non-current assets
Goodwill and intangible assets 85.6 84.0
Property, plant and equipment 26.6 34.5
Right-of-use assets(1) 114.2 -
Investments, including those equity accounted 0.2 0.2
Deferred tax assets - 4.2
Employee benefits 9 96.5 -
---------------------------------------------- ---- ------- -------
323.1 122.9
---------------------------------------------- ---- ------- -------
Current assets
Inventories 2.0 3.7
Trade and other receivables 135.0 137.7
Assets classified as held for sale - 2.4
Cash and cash equivalents 8 60.9 12.7
---------------------------------------------- ---- ------- -------
197.9 156.5
---------------------------------------------- ---- ------- -------
Current liabilities
Income tax payable (2.4) (6.1)
Borrowings and other financial liabilities 8 - -
Lease liabilities(1) (36.6) -
Trade and other payables (248.1) (260.8)
Provisions (12.2) (10.1)
---------------------------------------------- ---- ------- -------
(299.3) (277.0)
---------------------------------------------- ---- ------- -------
Net current liabilities (101.4) (120.5)
---------------------------------------------- ---- ------- -------
Total assets less current liabilities 221.7 2.4
---------------------------------------------- ---- ------- -------
Non-current liabilities
Borrowings and other financial liabilities 8 (71.0) (32.0)
Lease liabilities(1) (97.8) -
Employee benefits (2.1) (7.1)
Provisions (24.8) (30.4)
Deferred tax liabilities (11.3) -
---------------------------------------------- ---- ------- -------
(207.0) (69.5)
---------------------------------------------- ---- ------- -------
Net assets/(liabilities) 14.7 (67.1)
---------------------------------------------- ---- ------- -------
Equity
Issued share capital 12.5 12.5
Share premium 12.9 12.9
Merger reserve 3.5 3.5
Hedging reserve - -
Translation reserve (0.2) (0.3)
Retained earnings (14.0) (95.7)
---------------------------------------------- ---- ------- -------
Total equity/(deficit) 14.7 (67.1)
---------------------------------------------- ---- ------- -------
1 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in Note
10 to these financial statements.
These financial statements were approved by the Board of
Directors on 16 June 2020 and were signed on their behalf by:
J Wroath T Lawlor
Chief Executive Officer Chief Financial Officer
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2020
Retained earnings
-------------------
Issued Total
share Share Merger Hedging Translation Own Profit and equity/
capital premium reserve reserve reserve shares loss (deficit)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- -------- -------- -------- -------- ----------- ------- ---------- ----------
Balance at 1 April 2018 12.5 12.9 3.5 (0.1) (0.3) (2.0) (139.0) (112.5)
Profit for the year - - - - - - 42.8 42.8
Other comprehensive income - - - 0.1 - - 16.8 16.9
-------------------------------- -------- -------- -------- -------- ----------- ------- ---------- ----------
Total comprehensive income - - - 0.1 - - 59.6 59.7
-------------------------------- -------- -------- -------- -------- ----------- ------- ---------- ----------
Share based payment transactions - - - - - 1.3 (1.5) (0.2)
Current tax on share based
payment transactions - - - - - - 0.1 0.1
Own shares acquired - - - - - (1.5) - (1.5)
Dividends paid to shareholders - - - - - - (12.7) (12.7)
-------------------------------- -------- -------- -------- -------- ----------- ------- ---------- ----------
Balance at 31 March 2019 12.5 12.9 3.5 - (0.3) (2.2) (93.5) (67.1)
-------------------------------- -------- -------- -------- -------- ----------- ------- ---------- ----------
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 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
-------------------------------- -------- -------- -------- -------- ----------- ------- ---------- ----------
1 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in Note
10 to these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 MARCH 2020
2020(1) 2019
GBPm GBPm
--------------------------------------------------------------------------- ------- ------
Operating activities
Profit before tax 43.8 48.6
Adjustments for
- depreciation and amortisation 43.1 11.4
- interest expense on borrowings 4.4 6.0
- interest expense on leases(1) 3.8 -
- impairments 9.3 -
- profit on disposal of property, plant and equipment (2.3) (6.0)
- share based payment transactions (0.3) (0.2)
--------------------------------------------------------------------------- ------- ------
101.8 59.8
Decrease in trade and other receivables 10.4 3.0
Decrease in inventories 0.4 0.7
Decrease in trade and other payables (11.2) (2.9)
Decrease in provisions (6.6) (11.2)
Increase in employee benefits before pension deficit payment 0.3 9.2
Income taxes paid (7.0) (1.5)
--------------------------------------------------------------------------- ------- ------
Cash generated before pension deficit payment 88.1 57.1
Pension deficit payment (17.8) (32.3)
--------------------------------------------------------------------------- ------- ------
Cash flows from operating activities 70.3 24.8
--------------------------------------------------------------------------- ------- ------
Investing activities
Proceeds from sale of property, plant and equipment 5.5 13.8
Interest received - 0.1
Trade investment - (0.1)
Additions of property, plant and equipment (5.9) (6.4)
Additions of computer software (3.4) (3.3)
--------------------------------------------------------------------------- ------- ------
Cash flows from investing activities (3.8) 4.1
--------------------------------------------------------------------------- ------- ------
Financing activities
Own shares acquired - (1.8)
Increase/(decrease) in borrowings 39.0 (15.0)
Payment of lease liabilities (35.7) -
Equity dividends paid (13.8) (12.7)
Interest paid on borrowings (4.0) (4.3)
Interest paid on lease liabilities (3.8) -
--------------------------------------------------------------------------- ------- ------
Cash flows from financing activities (18.3) (33.8)
--------------------------------------------------------------------------- ------- ------
Net increase/(decrease) in cash and cash equivalents 48.2 (4.9)
Cash and cash equivalents at beginning of the year 12.7 17.6
--------------------------------------------------------------------------- ------- ------
Cash and cash equivalents at end of the year 60.9 12.7
--------------------------------------------------------------------------- ------- ------
Represented by:
- cash at bank and in hand 56.0 7.9
- restricted cash, being deposits held by the Group's insurance subsidiary 4.9 4.8
--------------------------------------------------------------------------- ------- ------
60.9 12.7
--------------------------------------------------------------------------- ------- ------
1 IFRS 16 was adopted on 1 April 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in Note
10 to these financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting policies
The financial information set out in this preliminary
announcement does not constitute Wincanton plc's statutory accounts
for the years ended 31 March 2020 and 31 March 2019. Statutory
accounts for the year ended 31 March 2020 will be delivered to the
Registrar of Companies following the Company's Annual General
Meeting. The Auditor has reported on those accounts; their report
was (i) unqualified, (ii) contains a material uncertainty in
respect of going concern to which the Auditor drew attention by way
of emphasis without modifying their report and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies
Act 2006. Statutory accounts for the year ended 31 March 2019 have
been delivered to the Registrar of Companies. The Auditor has
reported on those accounts; their report was unqualified and did
not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
The preliminary announcement has been prepared and approved by
the Directors in accordance with International Financial Reporting
Standards (IFRS) and its interpretations as adopted by the
International Accounting Standards Board (IASB) and by the EU
(Adopted IFRS).
Standards, amendments and interpretations effective or adopted
in the year
IFRS 16 Leases became effective in the year and has had a
material impact on the consolidated financial statements of the
Group. The impact of adoption of this standard and the key changes
to the accounting policies are disclosed below and in Note 10 to
these financial statements.
IFRS 16 Leases was issued by the International Accounting
Standards Board (IASB) in January 2016 and is effective for the
Group for the year ended 31 March 2020. IFRS 16 sets out the
principles for the recognition, measurement, presentation and
disclosure of leases for both lessees and lessors. For lessees the
distinction between operating leases and finance leases has been
removed and replaced by a single lease accounting model. Under this
model lessees recognise a right-of-use asset, representing the
right to use the underlying asset, and a corresponding lease
liability, representing the obligation to make lease payments for
all leases except where the lease term is 12 months or less or the
underlying asset is of a low value. In the Income statement
operating lease rentals have been replaced with the amortisation of
the right-of-use asset and lease finance costs.
The Group has applied the modified retrospective approach, where
the cumulative effect of applying IFRS 16 is recognised in retained
earnings with no restatement to prior years. The lease liabilities
on transition were the present value of lease payments discounted
using the incremental borrowing rate at 1 April 2019. The
right-of-use assets were valued at an amount equal to either the
lease liability or the carrying amount as if IFRS 16 had been
applied since the start of the lease, but using the discount rate
at 1 April 2019 (the date of initial application), determined on a
lease by lease basis. The Group took advantage of practical
expedients to:
-- apply IFRS 16 only to contracts previously identified as
leases under IAS 17 Leases and IFRIC 4 Determining whether an
Arrangement contains a Lease;
-- exclude leases where the lease term is 12 months or less from
the date of initial application and class such leases as short term
leases;
-- exclude low value assets;
-- exclude initial direct costs from the measurement of the
right-of-use asset at the date of initial application;
-- use hindsight, such as in determining the lease term if the
contract contains options to extend or terminate;
-- apply a single discount rate to a portfolio of leases with
similar characteristics; and
-- rely on its assessment as to whether a lease is onerous by
applying IAS 37 Provisions, Contingent Liabilities and Contingent
Assets immediately before the date of initial application as an
alternative to performing an impairment review.
The effect on the Group's results for the year to 31 March 2020
compared to those that would have been reported under IAS 17 are
shown in Note 10 to these financial statements.
The covenant requirements for the Group's committed financing
facilities are based on 'Frozen GAAP' and therefore are not
impacted by the transition to IFRS 16.
Going concern
The Directors have concluded that it is reasonable to adopt a
going concern basis in preparing the financial statements. This is
based on an expectation that the Company and the Group have
adequate resources to continue in operational existence for at
least twelve months from the date of signing these accounts. The
Group has reported a profit before tax of GBP43.8m for the year to
31 March 2020 (2019: GBP48.6m), has net current liabilities of
GBP101.4m (2019: GBP120.5m) and net assets of GBP14.7m (2019: net
liabilities of GBP67.1m).
The Group's committed facilities at 31 March 2020 comprise a
syndicated Revolving Credit Facility (RCF) of GBP141.2m which
matures in October 2023 - GBP71.0m was drawn down on the RCF at 31
March 2020 of which GBP50.0m was placed on deposit. On 5 May 2020
the Group secured 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 given particular consideration to the risk
and uncertainty caused by the coronavirus outbreak as a potential
material uncertainty. Cash flow and covenant compliance forecasts
have been prepared comprising a base case and a severe but
plausible downside to assess how the virus could impact the Group
in the period to 30 September 2021.
The base case assumes that Group revenue will reduce by cGBP40m
and profit before tax by cGBP10m compared to normal levels in the 3
months until the end of June 2020 due to the impacts of COVID-19
before gradually recovering throughout the rest of the financial
year to 31 March 2021, with most Business Units achieving
pre-COVID-19 revenue and profit before tax levels from April 2021.
It also assumes the mitigations described in the Chief Financial
Officer's Financial Review, such as delays in VAT payments, the
agreed amended pension contributions, the cessation of all
discretionary and non-business critical expenditure and the
suspension of the dividend, remain in place to the extent they have
been contractually agreed or are under management's control in the
forecast period.
The severe but plausible downside case assumes a second
virus-driven lockdown from October to December 2020, with Group
revenue reduced by a further cGBP50m and profit before tax by a
further cGBP10m compared to normal levels for the duration of the
second lockdown period to the end of December 2020, gradually
recovering through to 30 September 2021, with most Business Units
achieving pre-COVID-19 revenue and profit before tax levels from
October 2021. This scenario assumes a major cash shock such as a
large customer going into administration and a deterioration in
working capital performance compared to the base case with the
application of further mitigating actions, including further
deferrals of capital expenditure and the continued suspension of
the dividend, to the extent they are under management's
control.
In both scenarios, the Group has sufficient liquidity and
adequate headroom in the committed facilities above to fund itself
without the use of uncommitted facilities. In the severe downside
case only, the Group exceeds the leverage ratio covenant described
above at 31 March 2021. In the event the leverage ratio covenant is
exceeded, the syndicate banks have the right to cancel the RCF and
outstanding amounts under the RCF may become immediately payable.
In this scenario the Board would expect to negotiate with the
syndicate banks to temporarily amend the leverage ratio covenant so
that it would not be breached.
In the context of this severe but plausible downside scenario,
the absence as at the date of signing these accounts of amended
loan documentation confirming the flexing of the leverage ratio
covenant at 31 March 2021 gives rise to a material uncertainty, as
defined in auditing and accounting standards, related to events or
conditions that may cast significant doubt on the Group's ability
to continue as a going concern and in such circumstances, it may
therefore be unable to realise its assets and discharge its
liabilities in the normal course of business.
Despite this, the Board is confident that the Company and the
Group have adequate resources to continue in operational existence
for at least 12 months from the date of signing these accounts, and
therefore believe it remains appropriate to prepare the accounts on
a going concern basis. The financial statements do not include any
adjustments that would result from the basis of preparation being
inappropriate.
2. Operating segments
Wincanton plc provides contract logistics services in the UK and
Ireland. The Group manages its operations in two distinct operating
segments; Retail & Consumer (including Retail General
Merchandise, Retail Grocery and Consumer Products) and Industrial
& Transport (including Transport Services, Construction and
Other).
The results of the operating segments are regularly reviewed by
the Executive Management Team (EMT) to allocate resources to these
segments and to assess their performance. The Group evaluates the
performance of the operating segments on the basis of revenue and
underlying operating profit. Assets and liabilities are reviewed at
a consolidated level only, therefore segmental information is not
provided.
Industrial & Industrial &
Retail & Consumer Transport Total Retail & Consumer Transport Total
2020 2020 2020 2019 2019 2019
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ---- ----------------- ----------------- ------- ----------------- ----------------- -------
Revenue from
external
customers(1) 782.3 418.9 1,201.2 708.9 432.6 1,141.5
------------------ ---- ----------------- ----------------- ------- ----------------- ----------------- -------
Underlying
EBITDA(2) 58.6 45.5 104.1 36.9 29.8 66.7
Depreciation of
property, plant
and equipment (4.6) (5.0) (9.6) (4.5) (5.0) (9.5)
Depreciation of
right-of-use
assets (13.7) (17.8) (31.5) - - -
Amortisation of
software
intangibles (1.3) (0.7) (2.0) (1.2) (0.7) (1.9)
------------------ ---- ----------------- ----------------- ------- ----------------- ----------------- -------
Underlying
operating
profit(2) 39.0 22.0 61.0 31.2 24.1 55.3
Non-underlying
items 3 (9.0) (0.7)
------------------ ---- ----------------- ----------------- ------- ----------------- ----------------- -------
Operating profit 52.0 54.6
Net financing
costs 4 (8.2) (6.0)
------------------ ---- ----------------- ----------------- ------- ----------------- ----------------- -------
Profit before tax 43.8 48.6
------------------ ---- ----------------- ----------------- ------- ----------------- ----------------- -------
Total Group
assets(3) 521.0 279.4
Additions to
reportable segment
non-current
assets:
- property, plant
and equipment 2.9 3.0 5.9 3.6 2.8 6.4
- right-of-use
assets 15.8 18.0 33.8 - - -
- computer
software costs 2.2 1.2 3.4 2.0 1.3 3.3
Total Group
liabilities (506.3) (346.5)
------------------ ---- ----------------- ----------------- ------- ----------------- ----------------- -------
1 Included in segment revenue is GBP1,188.4m (2019: GBP1,129.0m)
in respect of customers based in the UK.
2 Underlying EBITDA refers to underlying operating profit before
depreciation and amortisation. Underlying operating profit is
stated before non-underlying items.
3 Total Group assets include non-current assets of GBP323.1m
(2019: GBP122.9m), of which GBP323.1m (2019: GBP122.9m) are held in
the UK.
Revenue of GBP238.0m (2019: GBP213.1m) and GBP133.7m (2019:
GBP131.9m) arose from sales to the Group's two largest single
customers, being groups of companies under common control, and is
reported within the Retail & Consumer segment above. 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 year.
3. Non-underlying items
Non-underlying items
The Group separately identifies and discloses those items that
in management's judgement need to be disclosed by virtue of their
size, nature or incidence (termed 'non-underlying items').
Non-underlying items are used to derive the underlying results as
presented in the accompanying consolidated income statement.
Underlying results are consistent with the way that financial
performance is measured by management and assists in providing an
additional analysis of the reported trading results of the Group.
Non-underlying items may not be comparable to similarly titled
measures used by other companies. In determining whether an event
or transaction is non-underlying, management considers quantitative
as well as qualitative factors. Examples of charges or credits
meeting the above definition and which have been presented as
non-underlying items in the current and/or prior years include
profits and losses on disposal of freehold properties, fees and
charges related to potential M&A activities, retrospective
regulatory matters and revisions to historic provisions that were
originally recognised as non-underlying items. In the event that
items meet the criteria, which are applied consistently from year
to year, they are treated as non-underlying items. We have also
included the impacts of COVID-19 on various balance sheet items as
at 31 March 2020 as non-underlying. The impact of COVID-19 on
underlying trading in the year ended 31 March 2020 was immaterial
and has not been recognised as a non-underlying item.
2020 2019
GBPm GBPm
------------------------------------------------------------------------ ----- -----
Net profit on disposal of freehold property 2.3 6.0
Professional fees in relation to M&A activities (2.0) -
COVID-19 impairment charges (9.3) -
Pension Scheme - Guaranteed Minimum Pension ('GMP') - (8.2)
Revision to property provisions previously recognised as non-underlying - 1.5
------------------------------------------------------------------------ ----- -----
(9.0) (0.7)
------------------------------------------------------------------------ ----- -----
During the year the Group completed the disposal of two freehold
properties receiving gross sales proceeds of GBP5.5m and incurring
disposal costs of GBP0.8m. The combined carrying value of the
properties was GBP2.4m, generating a net profit on disposal of
GBP2.3m. In the prior year we completed the disposal of a freehold
property receiving gross sales proceeds of GBP14.5m and incurring
costs of disposal and transitioning operations to another site of
GBP1.2m and GBP0.5m respectively. The carrying value of the
property was GBP6.8m, which generated a net profit on disposal of
GBP6.0m.
M&A activities were undertaken during the year, including a
takeover bid for a competitor, Eddie Stobart Logistics plc. The
professional fees associated with these M&A activities have
been recognised within non-underlying items.
As at 31 March 2020 we recognised one-off, non-cash impairment
charges of GBP9.3m relating to the impact of COVID-19 on assets
used in certain parts of the business. The impairment charge has
arisen where the carrying amount of the assets is no longer
expected to be fully recovered through the cash flows those assets
generate due to the impact of COVID-19.
In the prior year, the High Court of Justice of England and
Wales issued a judgement relating to Lloyds Banking Group requiring
equality of treatment of historic pension benefits for men and
women. This resulted in the recognition of a non-cash past service
cost of GBP8.2m in the year.
Also in the prior year, the Group negotiated an exit from a long
standing onerous property lease in Dublin on favourable terms. The
full novation of this lease, partly offset by an increase in
provision for another long standing lease, resulted in a net
exceptional credit of GBP1.5m.
4. Net financing costs
Recognised in the income statement
2020 2019
Note GBPm GBPm
-------------------------------------------- ---- ----- -----
Interest income - 0.1
-------------------------------------------- ---- ----- -----
Interest expense (3.9) (4.3)
Interest on lease liabilities (3.8) -
Unwinding of discount on provisions (0.5) (0.8)
Interest on the net defined benefit pension 9 - (1.0)
-------------------------------------------- ---- ----- -----
(8.2) (6.1)
-------------------------------------------- ---- ----- -----
Net financing costs (8.2) (6.0)
-------------------------------------------- ---- ----- -----
5. Income tax expense
Recognised in the income statement
2020 2019
GBPm GBPm
---------------------------- ----- -----
Current tax expense
Current year 5.1 3.3
Adjustments for prior years (1.5) (1.3)
---------------------------- ----- -----
3.6 2.0
---------------------------- ----- -----
Deferred tax expense
Current year 1.7 3.6
Adjustments for prior years - 0.2
---------------------------- ----- -----
1.7 3.8
---------------------------- ----- -----
Total income tax expense 5.3 5.8
---------------------------- ----- -----
2020 2019
GBPm GBPm
---------------------------------------------------------------- ----- -----
Reconciliation of effective tax rate
Profit before tax 43.8 48.6
Income tax using the UK corporation tax rate of 19% (2019: 19%) 8.3 9.2
Non-deductible expenditure 0.3 0.1
Non-underlying items in income statement (0.9) (2.0)
Change in UK corporation tax rate (0.9) (0.4)
Adjustments for prior years
- current tax (1.5) (1.3)
- deferred tax - 0.2
---------------------------------------------------------------- ----- -----
Total tax expense for the year 5.3 5.8
---------------------------------------------------------------- ----- -----
Recognised in other comprehensive income
2020 2019
GBPm GBPm
--------------------------------------------------------------------------- ----- -----
Items which will not subsequently be reclassified to the Income statement:
Remeasurements of defined benefit pension liability 15.8 3.5
--------------------------------------------------------------------------- ----- -----
Total recognised in other comprehensive income 15.8 3.5
--------------------------------------------------------------------------- ----- -----
Recognised directly in equity
2020 2019
GBPm GBPm
------------------------------------------------ ----- -----
Current tax on share based payment transactions (0.3) (0.1)
------------------------------------------------ ----- -----
(0.3) (0.1)
------------------------------------------------ ----- -----
The main UK Corporation tax rate remained at 19% (2019: 19%).
The previously enacted reduction in the rate from 19% to 17% as
from 1 April 2020 was reversed and the 19% was substantively
enacted on 17 March 2020.
The Group maintains a provision against tax risks, which is
included within income tax payable.
The total tax expense above includes tax on non-underlying items
of GBP2.8m (2019: GBP2.0m).
6. Earnings per share
The basic earnings per share of 31.1p (2019: 34.5p) is
calculated based on the profit attributable to the equity
shareholders of Wincanton plc of GBP38.5m (2019: GBP42.8m) and the
weighted average shares in issue, excluding those held within an
Employee Benefit Trust, throughout the year as calculated below of
123.7m (2019: 124.0m). The diluted earnings per share calculation
is based on there being 1.3m (2019: 1.3m) additional shares deemed
to be issued at GBPnil consideration under the Company's share
option schemes.
2020 2019
millions millions
------------------------------------------------------------------- --------- ---------
Weighted average number of Ordinary Shares (basic)
Issued Ordinary Shares at the beginning of the year(1) 123.6 123.7
Net effect of shares issued and purchased during the year 0.1 0.3
------------------------------------------------------------------- --------- ---------
123.7 124.0
------------------------------------------------------------------- --------- ---------
Weighted average number of Ordinary Shares (diluted)
Weighted average number of Ordinary Shares for the year (as above) 123.7 124.0
Effect of share options on issue 1.3 1.3
------------------------------------------------------------------- --------- ---------
125.0 125.3
------------------------------------------------------------------- --------- ---------
1 The number of shares excludes 0.6m Ordinary Shares (2019:
0.8m) being the weighted average number of the Company's own shares
held within an Employee Benefit Trust.
An alternative earnings per share measure is set out below,
being earnings before non-underlying items, including exceptional
items, amortisation of acquired intangibles, related tax and
exceptional tax items where applicable, since the Directors
consider that this provides further information on the underlying
performance of the Group:
2020 2019
pence pence
------------------------------ ------ ------
Underlying earnings per share
- basic 36.1 33.5
- diluted 35.8 33.1
------------------------------ ------ ------
Underlying earnings are determined as follows:
2020 2019
Note GBPm GBPm
------------------------------------------------------------------------- ---- ----- -----
Profit for the year attributable to equity shareholders of Wincanton plc 38.5 42.8
Non-underlying items 3 9.0 0.7
Tax impact of above items and non-underlying tax items (2.8) (2.0)
------------------------------------------------------------------------- ---- ----- -----
Underlying earnings 44.7 41.5
------------------------------------------------------------------------- ---- ----- -----
7. Dividends
Dividends paid in the year comprise:
2020 2019
GBPm GBPm
----------------------------------------------------------------------------------------- ----- -----
Final dividend for the year ended 31 March 2019 of 7.29p per share (2018: 6.63p) 9.0 8.2
Interim dividend for the period ended 30 September 2019 of 3.90p per share (2018: 3.60p) 4.8 4.5
----------------------------------------------------------------------------------------- ----- -----
13.8 12.7
----------------------------------------------------------------------------------------- ----- -----
In light of the economic impacts of the COVID-19 pandemic,
including the cost-efficiency and liquidity measures taken to
safeguard the long term viability of the business, the Board does
not consider it appropriate to propose a final dividend for the
year ended 31 March 2020 (2019: 7.29p per share).
The Employee Benefit Trust has waived the right to receive
dividends in respect of the shares it holds.
8. Financial instruments
Analysis of changes in net debt
1 April 2019 Cash flow Non-cash movements 31 March 2020
GBPm Adoption of IFRS 16 GBPm GBPm GBPm GBPm
-------------------------------- ------------ ------------------------ --------- ------------------ -------------
Bank loans and overdrafts (32.0) - (39.0) - (71.0)
Other financial liabilities - - - - -
Financial liabilities arising
from financing activities (32.0) - (39.0) - (71.0)
Cash and bank balances 12.7 - 48.2 - 60.9
-------------------------------- ------------ ------------------------ --------- ------------------ -------------
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)
-------------------------------- ------------ ------------------------ --------- ------------------ -------------
9. Employee benefits
Pension schemes
Employees of Wincanton participated in funded pension
arrangements in the UK and Ireland during the year ended 31 March
2020 details of which are given below.
The principal Wincanton Scheme in the UK (the Scheme) is a
funded arrangement which has two defined benefit sections and two
defined contribution sections, called the Wincanton Retirement
Savings Section and the Wincanton Pension Builder Plan. The
employees of Wincanton Ireland Limited are eligible to participate
in a separate defined contribution scheme. Assets of these pension
arrangements are held in separate Trustee administered funds
independent of Wincanton. The weighted average duration of the
funded defined benefit obligation is approximately 18 years.
In previous years, a small number of employees, who were subject
to the statutory earnings cap on pensionable earnings prior to 6
April 2006, were entitled to participate in an unfunded unapproved
arrangement in addition to accruing benefits from the Scheme. There
have been no active members of this arrangement throughout current
or comparative years.
The defined benefit sections of the Scheme were closed to future
accrual on 31 March 2014. This means that no future service benefit
will accrue but pensions built up to the date of closure have been
preserved.
Triennial valuation
The latest formal valuation of the Scheme was carried out as at
31 March 2017 by the Scheme actuary, Hymans Robertson, and was
agreed with the Trustee in August 2018. The annual deficit funding
contributions were agreed at GBP18.0m per annum from 1 April 2018
increasing by RPI over the three years to March 2021, followed by
GBP25.0m per annum from April 2021 to March 2027, increasing
annually in line with the Retail Prices Index. In addition, the
Group made a one-off contribution of GBP15.0m in August 2018. The
agreement is also subject to other provisions agreed with the
Trustee being:
-- Additional contributions become payable if distributions to
shareholders (dividends and share buy-backs) grow year on year in
excess of 10%. The matching will only be in relation to the
distribution amounts above the threshold and are calculated at 50%
of the excess or 100% of any distribution growth above 15%.
-- Additional contribution payments become payable in the event
of severe adverse Scheme investment performance where the actual
deficit in the Scheme exceeds an agreed threshold above the
expected deficit at the end of two consecutive six-month reporting
periods.
-- A one-off payment to the Scheme of GBP6.0m in any year if
both the underlying profit after tax is lower than the level of
profit after tax reported in the 2017/18 financial year and the
dividend payout ratio increases to over 40% of profit after
tax.
-- In the event of disposals of businesses within the Group, an
amount will be paid to the Scheme equal to 50% of the combined net
proceeds for the first GBP30.0m of the proceeds in any financial
year.
As with the previous agreement, it has been agreed that certain
administration expenses would be paid directly by the Group and
deducted from the deficit funding contributions. The expenses,
which amount to GBP0.7m (2019: GBP0.7m) are not included in the
contributions below.
The agreement constitutes a minimum funding requirement (MFR)
under IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction. The Group has
recognised a surplus in the Scheme as at 31 March 2020 and has not
recognised any liabilities in relation to the MFR, as under the
Scheme rules the Group has an unconditional right to a refund of
the surplus.
Discussions with regards to the 2020 Triennial valuation have
commenced and are expected to be concluded before the end of the
financial year.
Contributions
The deficit funding contribution in the year, net of the above
expenses was GBP17.8m, (2019: GBP32.3m including a GBP15m one-off
payment). In addition, other administration costs of the Scheme
were borne directly by the Group and a contribution made towards
administration costs incurred, totalling GBP1.1m.
In the year commencing 1 April 2020, the Group was expecting to
make deficit funding contributions of GBP18.2m being the annual
deficit contributions of GBP18.9m less certain administration
expenses mentioned above. In May 2020, due to the impact of
COVID-19, the Group has agreed an amended Schedule of Contributions
with the Trustee delaying GBP6.1m of contributions until 2021/22
subject to the level of cash dividends paid in the year. In
addition, other administration costs of the Scheme will be borne
directly by the Group, these are expected to total GBP0.7m.
Risks
The defined benefit sections of the Scheme expose the Group to
various risks: longevity risk (members living longer than
expected), inflation and interest rate risk (higher or lower than
expected), and market (investment) risk (lower returns than
expected). The Trustee and Group have taken steps to mitigate these
risks through the use of:
-- hedging instruments within the investment portfolio; and
-- diversification of the investment portfolio.
The Group is not exposed to any unusual, entity specific or
scheme specific risks.
Net defined benefit asset/(liability)
The assets and liabilities of the defined benefit sections of
the Group are calculated in accordance with IAS 19 Employee
Benefits (Revised) and are set out in the tables below.
The calculations under IAS 19 are based on actuarial assumptions
which are the best estimates chosen from a range of possible
assumptions about the long term future which, unless by chance,
will not necessarily be borne out in practice. The fair value of
the assets, which are not intended to be realised in the short
term, may be subject to significant change before they are
realised, and the present value of the liabilities are derived from
cash flow projections over long periods and are thus inherently
uncertain.
2020 2019
GBPm GBPm
------------------------------------------------------ --------- ---------
Present value of unfunded defined benefit obligations (2.1) (2.5)
Present value of funded defined benefit obligations (1,061.0) (1,151.2)
Fair value of Scheme assets 1,157.5 1,146.6
------------------------------------------------------ --------- ---------
Net defined benefit asset/(liability) 94.4 (7.1)
------------------------------------------------------ --------- ---------
The movement in the above net defined benefit asset/(liability)
in the year was primarily the result of the impact of market
uncertainty as a result of COVID-19. Scheme liabilities are
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.The net defined benefit asset, after taking into account
the related deferred tax liability, is GBP76.5m (2019: liability of
GBP(5.9)m).
Movements in the present value of the net defined benefit
liability
Net Unfunded Total net
Assets Obligations (liability)/asset arrangements (liability)/asset
31 March 2020 GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ------- ----------- ------------------ ------------- ------------------
Opening position 1,146.6 (1,151.2) (4.6) (2.5) (7.1)
Included in Income statement:
Administration costs (1.7) - (1.7) - (1.7)
Interest on the net defined benefit
liability 27.2 (27.1) 0.1 (0.1) -
Cash:
Employer contributions 18.9 - 18.9 - 18.9
Benefits paid (41.9) 41.9 - 0.3 0.3
Included in Other comprehensive
income:
Changes in financial assumptions - 72.2 72.2 0.2 72.4
Changes in demographic assumptions - (3.4) (3.4) - (3.4)
Experience - 6.6 6.6 - 6.6
Return on assets excluding amounts
included in net financing costs 8.4 - 8.4 - 8.4
--------------------------------------- ------- ----------- ------------------ ------------- ------------------
Closing defined benefit asset 1,157.5 (1,061.0) 96.5 (2.1) 94.4
--------------------------------------- ------- ----------- ------------------ ------------- ------------------
Unfunded Total
Assets Obligations Net liability arrangements net liability
31 March 2019 Note GBPm GBPm GBPm GBPm GBPm
-------------------------------------------- ---- ------- ----------- ------------- ------------- --------------
Opening position 1,075.9 (1,123.1) (47.2) (2.3) (49.5)
Included in Income statement:
Administration costs (1.9) - (1.9) - (1.9)
Past service cost 3 - (8.2) (8.2) - (8.2)
Interest on the net defined benefit
liability 28.0 (28.9) (0.9) (0.1) (1.0)
Cash:
Employer contributions 33.2 - 33.2 - 33.2
Benefits paid (36.2) 36.2 - - -
Included in Other comprehensive income:
Changes in financial assumptions - (58.7) (58.7) (0.1) (58.8)
Changes in demographic assumptions - 25.0 25.0 - 25.0
Experience - 6.5 6.5 - 6.5
Return on assets excluding amounts included
in net financing costs 47.6 - 47.6 - 47.6
-------------------------------------------- ---- ------- ----------- ------------- ------------- --------------
Closing defined benefit liability 1,146.6 (1,151.2) (4.6) (2.5) (7.1)
-------------------------------------------- ---- ------- ----------- ------------- ------------- --------------
The amounts recognised in the income statement comprise
administration costs, past service costs, and interest on the net
defined benefit asset/(liability). These charges are included in
the following lines in the Income statement:
2020 2019
Note GBPm GBPm
------------------------------------------------------ ---- ----- ------
Within underlying operating profit:
Administrative expenses (1.7) (1.9)
Within non-underlying items:
Past service costs - (8.2)
Within finance costs:
Interest on the net defined benefit asset/(liability) 4 - (1.0)
------------------------------------------------------ ---- ----- ------
Recognised in Income statement (1.7) (11.1)
------------------------------------------------------ ---- ----- ------
The market value of the Scheme assets held at the end of the
year were as follows:
2020 2019
GBPm GBPm
------------------------------------------------------------------ ------- -------
Equities and synthetic equities 131.8 143.3
Property and other growth assets/(liabilities) 0.8 7.1
Corporate bonds 304.1 302.9
Secured finance 90.3 86.6
Senior real debt 28.0 30.9
Senior private debt and private debt 96.9 87.7
Index-linked gilts (LDI portfolio collateral) 596.8 593.4
Notional exposure for synthetic equities/LDI hedging arrangements (101.2) (111.8)
Other, including cash 10.0 6.5
------------------------------------------------------------------ ------- -------
1,157.5 1,146.6
------------------------------------------------------------------ ------- -------
All equities, LDI portfolio collateral, corporate bonds and
funds have quoted prices in active markets. The senior real estate
and private debt along with the property assets are illiquid,
unquoted assets and trade on a less regular basis.
Senior private debt and private debt includes unquoted
investment funds which were initially measured at GBP101.2m using
the most recent Net Asset Valuations (NAV), adjusted for cash
movements between the latest valuation date and 31 March 2020. As
these initial valuations precede the negative impact of the
COVID-19 pandemic on the financial markets, the Group has
determined the fair value based on the latest observable prices
(the latest NAV), updated with reference to movements in
comparable, observable benchmarked market indices to the reporting
date and adjusted to reflect the difference in liquidity between
the assets and the benchmarked indices. The benchmark indices
selected were the S&P Leveraged Loan indices (US and EUR) and
the Bank of America High Yield indices (US$ and Euro) as these were
deemed the most comparable to the underlying investment. The
movements on the indices have been reduced by 50% reflecting the
Group's estimate for liquidity. The overall impact of this
adjustment, net of the liquidity adjustment, has been to reduce the
initial NAV of these assets by GBP5.2m to GBP96.9m.
The calculation of this adjustment contains additional
uncertainty over that of a formal valuation. Whilst intended to
capture material market driven asset valuation movements in the
period to 31 March 2020, the calculation of this estimated
adjustment contains additional uncertainty over that of the formal
valuation process for these assets. An increase/(decrease) of 10bps
in either the liquidity adjustment applied or other movement in the
indices would (reduce)/increase the valuation by GBP1.7m.
Property investments of GBP4.2m are based on an open market
value from an independent valuer. In light of the negative impact
of COVID-19, the independent valuers have included a material
uncertainty clause in respect of the valuations. The Directors
still consider these to be the best estimate of the property
investment. A 10% increase/(decrease) in the valuation would
increase/(reduce) the asset valuation by GBP0.4m.
The synthetic equities provide exposure to the UK, North
America, Europe, Asia-Pacific and Japan. The LDI portfolio
currently hedges 100% of the defined benefit scheme's inflation
rate risk and interest rate risk (relative to Scheme assets)
through holding a combination of index-linked gilts, interest rate
and inflation swaps, gilt total return swaps, gilt repos and cash.
The Scheme does not directly hold any financial instruments issued
by the Company.
Actuarial assumptions
The principal actuarial assumptions for the Scheme and for the
UK unfunded arrangement at the balance sheet date were as
follows:
2020 2019
% %
-------------------------------------------- --------- ---------
Discount rate 2.30 2.40
Price inflation rate - RPI 2.75 3.45
Price inflation rate - CPI 1.85 2.45
Rate of increase of pensions in deferment 1.85 2.45
Rate of increase of pensions in payment (1) 1.60-2.70 1.90-3.30
-------------------------------------------- --------- ---------
1 A range of assumed rates exist due to the application of
annual caps and floors to certain elements of service.
In September 2019, the Chancellor of the Exchequer highlighted
the UK Statistics Authority's proposals to change RPI to align with
CPIH (Consumer Pricing Index, including housing costs). The
Chancellor commented that any change would not be made before 2025
and possibly not until 2030. At the March 2020 budget, the
Chancellor launched a public consultation on these proposals which
is due to close in August 2020. To provide an indication of the
differential between RPI and CPIH, broadly CPIH increases are
expected to average around 1% p.a. below RPI in the long-term
(about the same as CPI), so this change could have a significant
impact on many pension schemes. A reduction in RPI will result in a
reduction in Scheme liabilities although this will be partly offset
by the Scheme holding inflation-linked assets.
The assumptions used for mortality rates for members of these
arrangements at the expected retirement age of 65 years are as
follows:
2020 2019
Years Years
--------------------- ------ ------
Male aged 65 today 20.7 20.6
Male aged 45 today 22.4 22.6
Female aged 65 today 22.8 22.3
Female aged 45 today 25.3 25.2
--------------------- ------ ------
Sensitivity table
The sensitivity of the present value of the Scheme obligations
to changes in the key actuarial assumptions are set out in the
following table. The illustrations consider the result 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,
for example, a fall in interest rates will increase the Scheme
obligations, but may also trigger an offsetting increase in market
value of certain Scheme assets.
(Increase)/decrease Increase/(decrease)
Change in in liability in assets
assumption GBPm GBPm
---------------------- ----------- ------------------- -------------------
Discount rate +0.5% 89.0 (115.0)
Credit spread -0.25% (51.0) 7.0
Price inflation - RPI +0.25% (36.0) 48.0
Mortality rate + 1 year (43.0) -
---------------------- ----------- ------------------- -------------------
Movement since the year end
At 31 May 2020 the discount rate has reduced to 1.5%, a
reduction of 80 basis points, this is primarily due to a fall in
the credit spreads which were higher than usual at 31 March 2020
due to the uncertainty in the markets caused by COVID-19. As a
result, the surplus in the Scheme on an IAS 19 basis has reduced by
approximately 60%.
Defined contribution schemes
The total expense relating to the Group's defined contribution
schemes in the current year was GBP33.7m (2019: GBP24.6m).
10. Adoption of new accounting standards
In the current year, the Group has adopted and applied IFRS 16
Leases issued by the International Accounting Standards Board
relevant to the operations of the Group.
The impact of the adoption of this new standard on the Group's
financial statements is explained below.
IFRS 16 Leases
Under IFRS 16, there is a single lease accounting model in which
lessees recognise a right-of-use asset, representing the right to
use the underlying asset, and a corresponding lease liability,
representing the obligation to make lease payments for all leases
except where the lease term is 12 months or less or the underlying
asset is of a low value. In the Income statement operating lease
rentals have been replaced with the amortisation of the
right-of-use asset and lease finance costs.
Adoption method
During the year, the Group adopted IFRS 16 Leases using the
modified retrospective approach. Comparative information has not
been restated and continues to be reported under IAS 17 Leases and
IFRIC 4 Determining Whether an Arrangement Contains a Lease. The
details of the current and prior years' accounting policies are
disclosed separately below.
Details of the practical expedients taken are included in Note 1
to these consolidated financial statements.
Accounting Policies
Policy applicable from 1 April 2019
For contracts entered into on or after 1 April 2019, the Group
assesses at inception whether the contract is, or contains, a
lease. A lease exists if the contract conveys the right to control
the use of an identified asset for a period of time in exchange for
consideration. The Group assessment includes whether the contract:
involves the use of an identified asset; has the right to obtain
substantially all of the economic benefits from the use of the
asset throughout the contract period; and has the right to direct
the use of the asset.
The Group as a lessee
At the commencement of a lease, the Group recognises a
right-of-use asset along with a corresponding lease liability. The
lease liability is initially measured at the present value of the
remaining lease payments, discounted using the rate implicit in the
lease, or where this is not available, the Group's incremental
borrowing rate. The lease term comprises the non-cancellable period
of the contract, together with periods covered by an option to
extend the lease if the lessee is reasonably certain to exercise
that option; and periods following an option to terminate the lease
if the lessee is reasonably certain not to exercise that option
based on operational needs and contractual terms. Subsequently, the
lease liability is measured at amortised cost by increasing the
carrying amount to reflect interest on the lease liability and
reducing it by the lease payments. The lease liability is
remeasured when the Group changes its assessment of whether it will
exercise an extension or termination option.
Right-of-use assets are initially measured at cost, comprising
the initial measurement of the lease liability adjusted for any
lease payments made at or before the commencement date, estimated
asset retirement obligations, lease incentives received and initial
direct costs. Subsequently, right-of-use assets are measured at
cost, less any accumulated depreciation and any accumulated
impairment losses, and are adjusted for certain remeasurements of
the lease liability. Depreciation is calculated on a straight-line
basis over the length of the lease.
The Group has elected to apply exemptions for short term leases
and leases for which the underlying asset is of low value. For
these leases, payments are charged to the income statement on a
straight-line basis over the term of the lease. Right-of-use assets
are presented within non-current assets on the face of the balance
sheet, and lease liabilities are shown separately on the balance
sheet in current liabilities and non-current liabilities depending
on the length of the lease term.
Policy applicable prior to 1 April 2019
Lease payments made under operating leases are recognised in the
income statement on a straight-line basis over the term of the
lease. Lease incentives received are recognised in the income
statement as an integral part of the total lease expense.
The Group as a lessor
The Group acts as an intermediate lessor of property assets and
equipment. When the Group is an intermediate lessor, it accounts
for its interests in the head lease and the sub-lease separately.
The Group accounts for finance leases as finance lease receivables,
using the effective interest rate method.
31 March 2019
as previously reported IFRS 16 adjustments 1 April 2019 as adjusted
Note GBPm GBPm GBPm
--------------------------------------- ----- ----------------------- ------------------- ------------------------
Consolidated Balance Sheet
--------------------------------------- ----- ----------------------- ------------------- ------------------------
Non-current assets
Goodwill and Intangible assets 84.0 - 84.0
Property, plant and equipment 34.5 - 34.5
Right-of-use assets a - 117.6 117.6
Investments including those equity accounted 0.2 - 0.2
Deferred tax assets b 4.2 2.0 6.2
--------------------------------------- ----- ----------------------- ------------------- ------------------------
122.9 119.6 242.5
--------------------------------------------- ----------------------- ------------------- ------------------------
Current assets
Inventories 3.7 - 3.7
Trade and other receivables c 137.7 3.1 140.8
Assets classified as held for sale 2.4 - 2.4
Cash and cash equivalents 12.7 - 12.7
---------------------------------------------- ----------------------- ------------------- ------------------------
156.5 3.1 159.6
--------------------------------------------- ----------------------- ------------------- ------------------------
Current liabilities
--------------------------------------- ----- ----------------------- ------------------- ------------------------
Income tax payable (6.1) - (6.1)
Lease liabilities d - (31.5) (31.5)
Trade and other payables c (260.8) 1.5 (259.3)
Provisions c (10.1) 0.7 (9.4)
--------------------------------------- ----- ----------------------- ------------------- ------------------------
(277.0) (29.3) (306.3)
--------------------------------------------- ----------------------- ------------------- ------------------------
Net current liabilities (120.5) (26.2) (146.7)
---------------------------------------------- ----------------------- ------------------- ------------------------
Total assets less current liabilities 2.4 93.4 95.8
---------------------------------------------- ----------------------- ------------------- ------------------------
Non-current liabilities
Borrowings and other financial liabilities (32.0) - (32.0)
Lease liabilities d - (105.9) (105.9)
Employee benefits (7.1) - (7.1)
Provisions c (30.4) 1.3 (29.1)
--------------------------------------- ----- ----------------------- ------------------- ------------------------
(69.5) (104.6) (174.1)
--------------------------------------------- ----------------------- ------------------- ------------------------
Net liabilities (67.1) (11.2) (78.3)
---------------------------------------------- ----------------------- ------------------- ------------------------
Equity
--------------------------------------- ----- ----------------------- ------------------- ------------------------
Issued share capital 12.5 - 12.5
Share premium 12.9 - 12.9
Merger reserve 3.5 - 3.5
Translation reserve (0.3) - (0.3)
---------------------------------------------- ----------------------- ------------------- ------------------------
Retained earnings e (95.7) (11.2) (106.9)
--------------------------------------- ----- ----------------------- ------------------- ------------------------
Total equity deficit (67.1) (11.2) (78.3)
---------------------------------------------- ----------------------- ------------------- ------------------------
Notes to IFRS 16 restatement:
a. Right-of-use assets: valued at an amount equal to the
carrying amount as if IFRS 16 had been applied since the start of
the lease but using the discount rate at 1 April 2019 (the date of
initial application), apart from a small number of property leases
where the amounts involved were immaterial or insufficient
historical information was available. For these leases the
right-of-use assets were valued at an amount equal to the lease
liability. Where applicable, the asset value has been adjusted by
the amount of onerous lease provision held immediately prior to
restatement.
b. Deferred tax asset: under IAS 12, the net liability
recognised on transition to IFRS 16 creates a temporary difference
from that which will be deducted for tax purposes, therefore a
deferred tax asset is recognised.
c. Reclassification of balance sheet items: lease incentive
accruals and onerous lease provisions have been reclassified to
right-of-use assets on adoption. Rent prepayments and accruals are
no longer required as they form part of the lease liability. Lease
receivable recognised where the Group is a lessor.
d. Lease liabilities: measured at the present value of the
remaining lease payments, discounted using the Group's weighted
average incremental borrowing rate of 3.09%.
e. Retained deficit: for the majority of leases the Group has
calculated the right-of-use asset as though IFRS 16 had been
applied since the start of the lease and depreciated, resulting in
a charge to retained earnings as the right-of-use asset is lower
than the finance lease liability recognised.
The reconciliation between operating lease commitments
previously reported in the financial statements for the year ended
31 March 2019 discounted at the Group's incremental borrowing rate
and the lease liabilities recognised in the balance sheet on
initial application of IFRS 16 is shown below.
GBPm
------------------------------------------------------------------------- ------
Operating lease commitment disclosed as at 31 March 2019 201.8
Discounted using the lessee's incremental borrowing rate at 1 April 2019 (66.7)
Recognition exemption for:
Short term leases(1) (4.3)
Lease termination options(2) 7.8
Other reconciling items (net) (1.2)
------------------------------------------------------------------------- ------
Lease liabilities recognised at 1 April 2019 137.4
------------------------------------------------------------------------- ------
(1) The Group has applied the practical expedient to exclude
leases where the lease term is 12 months or less from the date of
initial application and class such leases as short term leases.
(2) Operating lease commitments disclosed as at 31 March 2019
only included the non-cancellable period of a lease agreement.
Under IFRS 16 the lease term also includes periods following an
option to extend or terminate the lease if the Group is reasonably
certain the lease will continue beyond the option date.
The following table summarises the quantitative impact of
adopting IFRS 16 on the Group's financial statements for the year
to 31 March 2020:
As reported IFRS 16 IFRS 16 adjustments Amounts before adoption of IFRS16
GBPm GBPm GBPm
----------------------------------------- ------------------- ------------------- ---------------------------------
Income Statement
Revenue 1,201.2 - 1,201.2
----------------------------------------- ------------------- ------------------- ---------------------------------
Underlying operating profit 61.0 (3.7) 57.3
Non-underlying items (9.0) - (9.0)
----------------------------------------- ------------------- ------------------- ---------------------------------
Operating profit 52.0 (3.7) 48.3
Financing cost (8.2) 3.8 (4.4)
----------------------------------------- ------------------- ------------------- ---------------------------------
Net Financing costs (8.2) 3.8 (4.4)
----------------------------------------- ------------------- ------------------- ---------------------------------
Profit before tax 43.8 0.1 43.9
Income tax expense (5.3) (0.5) (5.8)
----------------------------------------- ------------------- ------------------- ---------------------------------
Profit after tax 38.5 (0.4) 38.1
----------------------------------------- ------------------- ------------------- ---------------------------------
Consolidated Balance Sheet
Non-current assets
Goodwill and Intangible assets 85.6 - 85.6
Property, plant and equipment 26.6 1.4 28.0
Right-of-use assets 114.2 (114.2) -
Investments including those equity
accounted 0.2 - 0.2
Employee benefits 96.5 - 96.5
----------------------------------------- ------------------- ------------------- ---------------------------------
323.1 (112.8) 210.3
----------------------------------------- ------------------- ------------------- ---------------------------------
Current assets:
Inventories 2.0 - 2.0
Trade and other receivables 135.0 0.3 135.3
Cash and cash equivalents 60.9 - 60.9
----------------------------------------- ------------------- ------------------- ---------------------------------
197.9 0.3 198.2
----------------------------------------- ------------------- ------------------- ---------------------------------
Current liabilities
Income tax payable (2.4) - (2.4)
Lease liabilities (36.6) 36.5 (0.1)
Trade and other payables (248.1) (1.3) (249.4)
Provisions (12.2) (2.8) (15.0)
----------------------------------------- ------------------- ------------------- ---------------------------------
(299.3) 32.4 (266.9)
----------------------------------------- ------------------- ------------------- ---------------------------------
Net current liabilities (101.4) 32.7 (68.7)
----------------------------------------- ------------------- ------------------- ---------------------------------
Total assets less current liabilities 221.7 (80.1) 141.6
----------------------------------------- ------------------- ------------------- ---------------------------------
Non-current liabilities
Borrowings and other financial
liabilities (71.0) - (71.0)
Lease liabilities (97.8) 96.5 (1.3)
Employee benefits (2.1) - (2.1)
Provisions (24.8) (3.1) (27.9)
Deferred tax liabilities (11.3) (2.5) (13.8)
----------------------------------------- ------------------- ------------------- ---------------------------------
(207.0) 90.9 (116.1)
----------------------------------------- ------------------- ------------------- ---------------------------------
Net assets 14.7 10.8 25.5
----------------------------------------- ------------------- ------------------- ---------------------------------
Equity
Issued share capital 12.5 - 12.5
Share premium 12.9 - 12.9
Merger reserve 3.5 - 3.5
Translation reserve (0.2) - (0.2)
Retained earnings (14.0) 10.8 (3.2)
----------------------------------------- ------------------- ------------------- ---------------------------------
Total equity 14.7 10.8 25.5
----------------------------------------- ------------------- ------------------- ---------------------------------
As a result of adopting IFRS 16, operating lease rental costs
have been replaced by depreciation of right-of-use assets and
interest on lease liabilities. This has resulted in an increase in
underlying operating profit of GBP3.7m compared to that reported on
the previous IAS 17 basis. Net financing costs have increased by
GBP3.8m leaving underlying profit before tax GBP0.1m lower under
IFRS 16 compared to on an IAS 17 basis. The income tax charge is
GBP0.5m higher under IFRS 16 due to the impact of the change in the
deferred tax rate on the opening transition adjustment.
As reported IFRS 16 IFRS 16 adjustments Amounts before adoption of IFRS16
Cash flow statement GBPm GBPm GBPm
----------------------------------------- ------------------- ------------------- ---------------------------------
Operating activities
Profit before tax 43.8 0.1 43.9
Adjustments for
- depreciation and amortisation 43.1 (31.5) 11.6
- interest expense on borrowings 4.4 - 4.4
- interest expense on leases 3.8 (3.8) -
- impairments 9.3 - 9.3
- profit on disposal of property, plant
and equipment (2.3) - (2.3)
- share based payment transactions (0.3) - (0.3)
------------------- ------------------- ---------------------------------
101.8 (35.2) 66.6
Decrease in trade and other receivables 10.4 (8.0) 2.4
Decrease in inventories 0.4 - 0.4
Decrease in trade and other payables (11.2) (0.2) (11.4)
Decrease in provisions (6.6) 3.9 (2.7)
Increase in employee benefits before
pension deficit payment 0.3 - 0.3
Income taxes paid (7.0) - (7.0)
----------------------------------------- ------------------- ------------------- ---------------------------------
Cash generated before pension deficit
payment 88.1 (39.5) 48.6
Pension deficit payment (17.8) - (17.8)
----------------------------------------- ------------------- ------------------- ---------------------------------
Cash flows from operating activities 70.3 (39.5) 30.8
----------------------------------------- ------------------- ------------------- ---------------------------------
Investing activities
Proceeds from sale of property, plant and
equipment 5.5 - 5.5
Additions of property, plant and
equipment (5.9) - (5.9)
Additions of computer software (3.4) - (3.4)
----------------------------------------- ------------------- ------------------- ---------------------------------
Cash flows from investing activities (3.8) - (3.8)
----------------------------------------- ------------------- ------------------- ---------------------------------
Financing activities
Increase in borrowings 39.0 - 39.0
Payment of finance lease liabilities (35.7) 35.7 -
Equity dividends paid (13.8) - (13.8)
Interest paid on borrowings (4.0) - (4.0)
Interest paid on lease liabilities (3.8) 3.8 -
----------------------------------------- ------------------- ------------------- ---------------------------------
Cash flows from financing activities (18.3) 39.5 21.2
----------------------------------------- ------------------- ------------------- ---------------------------------
Net increase/(decrease) in cash and cash
equivalents 48.2 - 48.2
Cash and cash equivalents at beginning of
period 12.7 - 12.7
----------------------------------------- ------------------- ------------------- ---------------------------------
Cash and cash equivalents at end of the
period 60.9 - 60.9
----------------------------------------- ------------------- ------------------- ---------------------------------
Represented by:
- cash at bank and in hand 56.0 - 56.0
- restricted cash, being deposits held by
the Group's insurance subsidiary 4.9 - 4.9
----------------------------------------- ------------------- ------------------- ---------------------------------
Although IFRS 16 has no impact on the Group's total cash flow,
outflows from financing activities increase while the cash inflows
from operating activities have increased as rental costs previously
recognised solely as cash outflows from operations are now
apportioned between finance charges and a reduction of the lease
liability.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SFFEFMESSEIM
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June 17, 2020 02:00 ET (06:00 GMT)
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