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Wincanton’s policy of expanding in growing markets helped it push its underlying operating profit up 15 per cent to 52.4m in the year to 31 March. As the same time sales rose by 12 per cent to £2.16bn.
The group, which is now working on a bid for TDG, said year end return on capital employed remained high, though, at 50.1 per cent, it was slightly lower than the prior year’s 55.2 per cent. Wincanton said its “asset light” business model generally enabled it to deliver significant growth without extensive use of balance sheet capacity.
Wincanton has been buying companies in niche markets to expand its portfolio of services. This has enabled it to move into the construction sector and expand in the home delivery market. Last year it bought Swales to expand its construction business and Hanbury Davies to build its position in the container logistics market. And in Germany it bought Hebo, a specialist in high-tech logistics.
Since the year end, it has bought Product Support Holdings, which offers logistics services to defence and aerospace markets, in a deal worth up to £30m.
But the big target is now TDG, which would add almost £700m of sales. On 9th May Wincanton made an indicative offer of 281.25p a share for TDG though it warned that a full formal offer was dependent on due diligence supporting its assumptions indicate that a transaction would be substantially value-enhancing for Wincanton shareholders.
The City’s takeover panel has given Wincanton, along with Laxey partners – the other potential bidder, until 20th June to make up its mind.
Wincanton chairman David Malpas said: “As at the date of our preliminary results announcement, 5th June, due diligence was continuing. A further announcement will be made in due course.”
Wincanton growth strategy has meant creating a new structure within the business. The group said: “Our strategy process identifies both opportunities with existing customers and services and the potential for growth with new customers in new sectors and new services. We have created a new business unit, Emerging Solutions, to ensure that a number of these new sectors and new services receive the operational and strategic focus that will help to deliver their full, above-average growth potential.”
While the UK proved to be a strong market for Wincanton, it has work to do in improving the profitability of some of its operations on the continent.
It said that in mainland Europe, underlying operating profit in the second half of the year was £3.1m, an increase on both the first half of this year and the corresponding period last year. On second half revenue of £414.1m, this represented an accounting margin of 0.8 per cent, compared to a margin of 0.6 per cent in the first half and 0.6 per cent in the corresponding period last year.
“This reported increase is after charging higher costs arising from increased marketing spend, which is successfully delivering marked improvements in brand awareness, and higher employment costs as a consequence of the renewing and strengthening of our senior management teams.
“This level of reported profitability and margin clearly remains some way below our targeted operating profit margin of 2 per cent. There are, however, encouraging signs that material progress in profitability can be delivered in Mainland Europe and that progress is being made towards this target.”
Overall, said chief executive Graeme McFaull: “Wincanton continues to expand organically and through acquisition, in growing markets. We are pleased to report another year of strong profit growth and cashflow generation building further on the group’s track record of generating value for shareholders.”
