8th Jun 2005 07:00
Wincanton PLC08 June 2005 8 June 2005 WINCANTON plc Preliminary Announcement of Results for the financial year ended 31 March 2005 "STRONG EARNINGS GROWTH AND FURTHER DEBT REDUCTION" 2005 2004 Change £m £m Turnover 1,725.9 1,680.5 +2.7% Adjusted Operating Profit 44.5 43.2 +3.0% Interest (9.5) (12.6) Adjusted Profit before tax 35.0 30.6 +14.4% Adjustments (Note) 0.2 (8.2) Profit before tax 35.2 22.4 Adjusted Basic earnings per share 17.5p 16.0p +9.4% Basic earnings per share 18.4p 9.6p Final Dividend 7.74p 7.08p Full Year Dividend 11.40p 10.56p +8.0% Note: Operating profit, profit before tax and earnings per share have been adjusted to exclude pension credit (+£4.0m), exceptional items (-£1.8m) and goodwill amortisation (-£2.0m). HIGHLIGHTS • Operationally, a year of sound performance on both new and existing contracts • Financially, near double-digit growth in adjusted earnings and a further reduction in net debt, to £53m • High levels of business development activity across the Group, £250m of wins and renewals in the year • Consolidating our position as a European leader Commenting on the results and outlook, Paul Bateman, Wincanton's ChiefExecutive, said: "A year of strong earnings growth and sound operational performance has seen usconsolidate our position as a European leader. Our new business development teams remain very active as we begin the newfinancial year and we have confidence in the Group's ability to build further onthe significant achievements of recent years." For further enquiries please contact: Wincanton plc Paul Bateman, Chief Executive Tel: 020 7466 5000 today, thereafterGerard Connell, Group Finance Director Tel: 01249 710741Charles Carr, Group Communications Director Buchanan Communications Ltd Tel: 020 7466 5000Charles Ryland, Jeremy Garcia WINCANTON plcPRELIMINARY ANNOUNCEMENTYear ended 31 March 2005 Chairman's statement The year to 31 March 2005 produced good new business wins and successfulcontract start-ups, confirming Wincanton's position as one of Europe's leadingsupply chain management companies. Financially, 14.4 per cent growth inadjusted pre-tax profit and 9.4 per cent growth in adjusted earnings per sharerepresents an excellent result. A full year dividend of 11.40p per share isproposed, giving an 8 per cent increase on the dividend paid last year. Our strategy of combining strength in national markets with a pan-Europeanpresence addresses the needs of our expanding customer base and is successfullygenerating opportunities for incremental growth. We benefit from a balancedand well-diversified customer base, including many of Europe's leadingmanufacturers and retailers, and are gaining share in a fragmented market. Theoutlook for the Group gives us continuing confidence. Our financial performance is generating significant cashflow which has funded agrowing dividend for shareholders. It has also given us the balance sheetstrength to be able to take advantage of new opportunities and drive our growthstrategy. In the year under review, our business in the UK and Ireland was again the majorcontributor to the profit and cashflow of the Group. High levels of newbusiness activity in the retail sector were a feature, as in previous years, butwe also saw renewed progress with manufacturing customers. We were particularlypleased to be awarded a substantial 10-year contract for a new automatedwarehouse for GlaxoSmithKline. Adding a new facility to our existing portfolioof contracts in this area consolidates Wincanton's market leadership in thedesign, build and operation of these highly complex projects. Developing our range of value-added services continues to be of importance tous. Further investment has been approved to expand capacity in both ourrecycling and data records management businesses, two fast-growing areas.Consilium, our consultancy operation, grew profitably in the year. PullmanFleet Services again grew well. Contract gains in both reverse and in-boundlogistics confirmed the potential in other new services. Expansionopportunities in areas such as these will add further momentum to our businessdevelopment activities. Building momentum in Continental Europe remains a key area of focus. Good newbusiness wins were registered in the year, for both national and cross-borderoperations, and awareness of our capabilities is growing. Further steps weretaken to re-shape some of our operations to create a more profitable platformfor future growth. There were business losses in certain areas which held backoverall progress, but we remain confident that our operations in ContinentalEurope will generate significant profit and cashflow for the Group. We continue to invest to ensure that we deliver a uniformly high-quality servicefor customers across all countries. We will consolidate our position in certainsectors and geographic markets through in-fill acquisitions, when suchopportunities arise, and were pleased to welcome in the year the employees ofmidiData, a business acquired in January. This acquisition, operatingprincipally in Germany, but which also has operations in the UK and theNetherlands, makes us a market leader in the hi-tech sector. Its integration isprogressing according to plan. We expect there to be other such opportunitiesin the future. An unfortunate occurrence, which we announced in February, but which did notaffect our financial performance in the year under review, concerned PGN, ajointly-owned entity acquired as part of the P&O Trans European transaction.PGN's sole customer chose to repudiate an important continuing contract. Thisaction is now going to arbitration, with claims and counter-claims, and willtake time to resolve. This puts pressure on our ability to make operatingprofit progress in the year to 31st March 2006, although the significantminority interest charge reduces the effect on earnings. The nature of thiscontract and the circumstances giving rise to the arbitration process areunusual and do not give cause for concern in respect of any other operations. The company has recently moved to a new head office in Chippenham, affordingbetter access to the motorway network, to airports and to Central London, andoffering significantly improved facilities for our workforce. I will be standing down as Chairman of Wincanton at this year's Annual Generalmeeting and will be succeeded by David Malpas, who has been the seniornon-executive Director of the company since its listing. Wincanton has madevery significant progress in the four years since its demerger. Our UK &Ireland business is performing at record levels and our Continental Europeanoperations are taking a clearer shape. We are a recognised industry leader.This is therefore a good time to hand over. I would like to take the opportunity to offer the thanks of the Board to all ouremployees for the commitment and professionalism which, in the company's shortlife to date as an independent entity, has successfully delivered both strategicchange and strong growth. Over this period the senior management team hasperformed extremely well, integrating a major acquisition without losingcustomer focus and without any loss of organic growth momentum. It has been apleasure to work with such an excellent group of Board colleagues over the lastfour years. Our new business development teams remain very active as we begin the newfinancial year and we have confidence in the Group's ability to build further onthe significant achievements of recent years. Our objective is for 2005/06 tobe another period of earnings growth and strategic progress, confirmingWincanton's position as a leader in its sector. I am sure that Wincanton will enjoy continuing success under David'schairmanship and the strong management of our executives. WINCANTON plcPRELIMINARY ANNOUNCEMENTYear ended 31 March 2005 Operating and Financial Report Our Strategy Wincanton's stated strategy on demerger in May 2001 was to continue to grow ourUK operations whilst seeking opportunities to develop into Continental Europe.Following a period of strong organic growth in the UK, a major acquisition inDecember 2002 delivered strategic step change, strengthening Wincanton'sposition as a market leader in the UK and bringing the benefits of both ageographic presence across Europe and a well-diversified and complementarycustomer base. The acquisition transformed the Group's scale financially, operationally andgeographically, enhancing our ability to support the growth strategies andchanging supply chain requirements of our customers. Since the acquisition, significant progress has been made in respect of ourintegration and implementation objectives. We have achieved double the level ofcost savings originally targeted. Focus on working capital and control ofcapital expenditure has generated strong cashflow, reducing net debt from£147.7m at 31 March 2003 to £53.0m at 31 March 2005. New business momentum hasbeen successfully restored and there are encouraging signs of opportunities toleverage the strengths of the Group's customer and skill base both within andacross national borders. Through the acquisition, its successful integration, and the continuing organicgrowth of our existing operations, Wincanton has successfully transformed itselfinto one of the leading supply chain management companies in Europe. TheEuropean Union is a market of 455 million consumers. It has a substantialmanufacturing and retailing infrastructure and significant national,cross-border and international flows of raw materials, finished products andservices. This is a market in which we have a leading presence and which offerscontinuing growth opportunities for the future. Our markets remain under-developed in many areas. Wincanton's presence acrossEurope is a competitive advantage in an industry which remains fragmented, withlarge numbers of small operators and a very limited number of Pan-Europeanservice providers. Many customers wish to consolidate their supply chainrequirements with a smaller number of service providers. There areopportunities to continue to expand our service offering and the range of ourvalue-added activities. Changes in legislation, strategy, technology and theeconomy lead to both tactical and strategic change in the supply chainrequirements of our customers. We expect our strategy, which is designed toensure that we benefit from changes such as these, to continue to add value forboth customers and shareholders. We will continue to invest in our people, our services, our systems and ourprocesses to ensure that our competitive advantages are reinforced. In additionto positioning ourselves for faster organic growth, we will consideropportunities for acquisition where businesses are found to complement ourexisting activities and reinforce our leading industry positions. 2004/05 Summary The financial year to 31 March 2005 was a year of further progress, bothoperationally and financially. In a busy and successful year across Europe forour operational and business development teams, we delivered double-digit growthin adjusted pre-tax profit and near double-digit growth in adjusted earnings.A further considerable reduction in net debt confirmed the strong cashflowpotential of the business and its asset base. The year was not without its difficulties and challenges but we continued toreinforce our market position and create a stronger platform for industryleadership and sustainable growth. Acquisition activity by competitors and further sector consolidation, bothpotential and actual, was again a feature. We monitor and review developmentsin our sector with interest and work aggressively to take advantage of customeruncertainty about competitors. UK & Ireland : Performance Highlights Our businesses in the UK & Ireland reported £19.1m of adjusted operating profitin the second half, an increase of 5.5 per cent on the same period last year anda 4.4 per cent increase on the £18.3m reported in the first six months of thisfinancial year, to give a full year adjusted operating profit of £37.4m. Thefull year adjusted operating profit for 2004/05, on turnover up 5.4 per cent to£1,097.8m represented a margin on turnover of 3.4 per cent. Encouraging progress was made in all areas of the business. We benefited fromcustomer growth, in both the retail and manufacturing sectors, and by winningbusiness from our competitors. Amongst the general retailers, we commenced the implementation of a newautomated warehouse for Matalan and a transport optimisation project for Argos,for whom we are also currently commissioning a new warehouse at Corby. Ourbusiness with B&Q expanded in both transport and warehousing, including a newwarehouse operation in Coventry. We were awarded a seasonal goods warehouse byFocus, adding to the existing warehouse in Tamworth. Our strong performancetrack record with another leading retailer, Comet, for whom we successfullymanage a distribution centre in Westbury, led to the award of a three-yearcontract to run another centre in Harlow. In addition, we were awarded oursecond home delivery operation for Comet. The grocery retail sector also continued to provide opportunities for growth.Another warehouse in Daventry successfully commenced operations to manageTesco's growing non-food activities. A new contractual relationship wasestablished with Morrisons to renew and extend sites previously managed forSafeway. Volumes of bonded wines and spirits, managed for Waitrose at ourGreenford site, expanded further following Waitrose's acquisition of a number ofex-Safeway stores. We also re-opened a site for Somerfield in Scotland tohandle the company's distribution requirements following its acquisition of anumber of stores from Safeway. Progress with Sainsbury included a seasonalwarehousing operation and consultancy work on transport planning andoptimisation. There were also discussions with several leading ContinentalEuropean retailers who are aware of our leading position in the grocery retailsector in the UK and who we believe may provide opportunities for us in thefuture. With respect to our newer services for retailers, a reverse logistics operationwas established for Index, the catalogue retailer, our in-bound logisticscapability led to new business with Homebase and our in-store fittings operationfor Marks & Spencer continued to make progress. There was good progress within our manufacturing customer base, which consistsprincipally of leading international companies in the fast-moving consumer goodssector. Our national transport contract for Heinz was renewed for a further five years,as was a bonded warehouse and transport contract for Pernod Ricard. Anothersuccessful contract extension, this time until 2007, was agreed in respect ofthe automated warehouse operated for Britvic. The scope of our activity at theLutterworth site has also been extended to cover transport management. GlaxoSmithKline is another customer with whom business was both renewed andextended in the year. A new 10-year contract, believed to be the largestawarded in the logistics industry this year, builds on our long-termrelationship with GlaxoSmithKline, consolidating and extending the contract termin respect of the existing automated warehousing operation near Gloucester, andspecifying the design and operation of a new automated distribution centre inCheshire. This major contract award confirms Wincanton's pre-eminence in thedesign, build and operation of automated warehouses. Other customers with whom we expanded business in the year include DeLonghi-Kenwood, Twyfords and Unilever UK Foods. Following a strategic review of our chilled consolidation network, steps weretaken to reduce the assets employed in this sector through the closure of afacility in Milton Keynes. The network previously served the needs of foodmanufacturers, but had seen significant volume reduction in recent yearsfollowing a change in the supply chain policies of the grocery retailers.Following a loss in the previous financial year, the chilled consolidationoperations reported a positive financial performance, before exceptionals, in2004/05 and this is set to continue into the new financial year. Services provided to our industrial customer base tend to focus on the provisionof raw materials and ingredients, at the beginning of the supply chain, andwaste management and recycling, at the end of the supply chain. We have a strong presence in the bulk handling of products such as milk, foodingredients, petroleum and gases. Contract renewals and extensions in theseareas included a three-year renewal with First Milk and a five-year extension toour contract to manage Statoil's national distribution requirements in Ireland.As part of the new contract, Wincanton will become Statoil's sole logisticscontractor and will also take responsibility for route planning and networkoptimisation. At the end of the supply chain, we operate a recycling plant in Billinghamhandling the waste management needs of local authorities, manufacturers andretailers. We also have CFC de-gassing and re-packaging capabilities in afacility in Widnes. Further investment is planned at the Billingham site toensure that we are able to meet the growing recycling responsibilities of ourretail customer base across a broader range of electrical goods. Activity in the year included a contract to clear 40,000 fridges from a site inTrafford Park and an expansion of our national contract with Comet for thedisposal of their electrical returns. We also ran a pilot scheme for a numberof leading retailers to assist in their preparation for the implementation ofthe Waste Electrical and Electronic Equipment Directive. This new directivewill create significant recycling obligations on both retailers andmanufacturers. We are investing to develop our service offering in this fieldand believe ourselves to be well positioned given our nationwide transportnetwork, our in-house processing facilities and our strong relationships withmajor retailers and manufacturers. Recycling, in its broadest sense, is agrowing business opportunity for Wincanton. Our portfolio of businesses in the UK & Ireland also includes data recordsmanagement activities in London, the Midlands and Dublin, and Pullman FleetServices, which offers vehicle maintenance and engineering services through thelargest independent national network of workshops and road-side supportactivities. Pullman Fleet Services produced another strong performance, reporting goodincreases in turnover, operating profit and margin in the year. Geographiccoverage was further strengthened through the acquisition of a business basednear Warrington which has since been successfully integrated. Pullman works forWincanton, Wincanton's customers and competitors, and third parties. We areconfident that its operations offer scope for further growth. The data records management operations grew turnover, operating profit andmargin in the year. Expansion of space in London and Dublin is planned for nextyear, including a large new purpose-built facility within easy reach of theCity. We intend, over time, to give this business national coverage and theextension of the operation to a facility in the Midlands represents a first stepin this direction. We believe that this market offers good potential forfurther growth. Continental Europe: Performance Highlights A year of further change and restructuring saw our Continental Europeanoperations report both turnover and operating profit in line with last year.2004/05 operating profit of £7.1m, on turnover of £628.1m, represented a marginof 1.1 per cent. Good new business wins were achieved, offset by contractlosses and pricing pressure on renewals in competitive markets. The German businesses were again profitable in the year. Our intermodal freightforwarding operations on the Rhine benefited from higher volumes and grew profitduring the year. Business wins included a new intermodal solution for Lafargefor the supply of raw materials into its roof tile production facilities. Theenvironmentally friendly solution meets Lafarge's stringent productionscheduling requirements and also takes a quarter of a million tons of freight ayear off the road. Market conditions within the German road network remained competitive. Bothpricing pressure on retained business and lower volumes, particularly in theautomotive industry, had a negative effect upon financial performance. Theintroduction of motorway tolls had no material short-term effect uponperformance. We remain committed to the road network, which guaranteesovernight distribution across Germany from 41 depots, and its important rolewithin our German service offering. Further investment is planned next year toexpand the capacity of our key hub location in Eisenach. Good contract logistics wins with customers such as Goodyear-Dunlop, Honeywell,Ford, Volvo and Johnson Diversey give grounds for encouragement that oursignificant infrastructure in Germany is also beginning to generateopportunities for higher value-added services. The project for Honeywell'sEnvironmental and Combustion Controls business, for example, at a new facilityin Heilbronn, includes warehouse management and the management of inboundtraffic flows from production sites in Germany, Hungary, the Netherlands and theCzech Republic. The project is part of Honeywell's strategy to serve theEuropean market via a reduced number of regional warehouses. For Ford,Wincanton has taken on inbound transportation for production, collectingcomponents from around 40 suppliers across Germany via our road network,consolidating these deliveries into truckloads at our logistics terminals inEisenach and Chemnitz and scheduling nightly services into Ford's originaldistribution centre in Cologne. We expanded our German operations in the year with the acquisition of midiData,giving us market leadership in the hi-tech sector. The integration of thisbusiness into our existing network is progressing well. Our operations in Central Europe remained highly active in terms of new businessdevelopment, but financial performance was held back by lower volumes with amajor electronics company and the subsequent loss of this contract. Successesin the year included a new warehousing and distribution operation for a majorpetroleum company building on existing business with this customer in Germany,contract gains with Numico in Poland and the Czech Republic, renewal of ournational distribution operation for BAT in Hungary and the delivery of aregional warehousing operation for a leading baby food manufacturer.Wincanton's Budapest warehouse now acts as an inbound centre for this customer'sproduction facilities in Europe for distribution onwards into markets in CentralEastern Europe, South Eastern Europe and the Far East. Our activities in France, Spain and the Benelux countries had a year of mixedfortunes. In France we continued to make good progress in developing ourwarehousing and distribution operations in Strasbourg but closed a site nearParis operating principally in international groupage. Our Strasbourgoperations have been consistently profitable since acquisition and continue togrow. A new European central warehouse was opened in Strasbourg in the year forViking, an Austrian manufacturer of gardening tools which is a member of theStihl Group. Already handling direct deliveries throughout Germany, France andAustria it is intended that the facility will ultimately manage directdeliveries into 15 different countries. There was also restructuring in theyear in Spain to reduce the scale of our international groupage activities thereand create a more focussed operation as a platform for profitable development.We closed one of our four sites and re-located our administrative functions toBarcelona. We expect to see increased opportunities in Spain in the future.Our Dutch operations reported an improved profit performance and good new winswith customers such as Mitsubishi Motors and Nedcar. We expect material profitimprovement in this group of countries next year, not least as a result of thesite closures in France and Spain. Recent events at PGN, the jointly-owned entity whose results are reported withinour Continental European operations, are summarised in the Chairman's statement. We believe that the restructuring of our operations in Continental Europe issubstantially complete. Accelerating new business win momentum is now our keyarea of focus and investment is being increased in both business development andmarketing. Our geographic presence compares favourably to our competitors, ourname is becoming better-established and we are beginning to see customerrelationships in one country being successfully expanded across nationalborders. An improvement in underlying levels of economic activity will bring fasterprogress in due course, but our programme of significant and rapid change hasalready delivered tangible financial and operational benefits and given us astronger platform on which we can continue to build with confidence for thefuture. Wincanton Group: Consolidated Results Consolidated Group turnover of £1,725.9m was marginally higher than in 2003/04.Adjusted operating profit increased by 3.0 per cent to £44.5m and margin onturnover remained at approximately 2.6 per cent. Our businesses in the UK andIreland represented 64 per cent of Group turnover and 84 per cent of Groupadjusted operating profit. Annualised turnover from new business wins and contract renewals totalled £209min the UK & Ireland and £41m in Continental Europe, giving a Group total of£250m, compared to last year's £194m. Approximately 85 per cent of the annualised turnover from new wins in the periodcame from existing customers. This compares to last year's 65 per cent, andconfirms again the importance of strong customer relationships and a diversifiedsector portfolio to both Wincanton's current performance and its future growthpotential. Interest Costs The interest charge of £9.5m, £3.1m less than the 2003/04 charge of £12.6m,reflects a lower level of average debt and a reduction in our borrowing ratefollowing a re-negotiation of certain aspects of our banking facilities. Theinterest rate payable on that part of the Group's borrowings at 31 March 2005was 0.65 per cent over LIBOR. Interest cover in the year (calculated including pension credit in accordancewith our banking covenants) was 5.1 times. Exceptional Items Net exceptional items totalled £1.8m in the year, consisting of £9.4m ofexceptional costs and an off-setting £7.6m gain. The exceptional gain of £7.6mwas generated by the sale and leaseback of certain trailer assets. Exceptional costs totalling £9.4m related to further restructuring of certainoperations in the UK & Ireland and Continental Europe. In the UK & Ireland, £1.7m of costs were incurred in respect of the closure ofthe Milton Keynes site within our chilled consolidation network, and £2.6m ofcosts related principally to the move to our new head office location inChippenham. We expect further costs in relation to the head office move in 2005/06. In Continental Europe the costs of closing two operations, one outside Paris,the other near Valencia, came to £3.1m and a £2.0m charge was incurred forpost-acquisition integration of the midiData business. Taxation A pre-exceptional tax charge of £12.7m gives an accounting rate of tax for theyear of 34.3 per cent. The post-exceptional tax rate was 30.3 per cent. Wincanton operates in jurisdictions across Europe, with corporate tax rates thatrange from 12.5% to 40.0%. Brought forward trading losses in certain countriesmay lead in due course to a further reduction in the Group's accounting rate oftax. Minority Interests, Earnings and Dividends The minority interest charge of £3.5m consists of the profit attributable tovarious partners who share ownership of certain of our activities. Theprincipal such entity, PGN, is referred to in the Chairman's statement. Otherminority interests include a 25.8 per cent holding in Rhinecontainer, twopartner companies which manage 6 of the 41 sites in our German road network andanother partner in one of our German intermodal sites at Worms. Adjusted earnings per share of 17.5p represent a 9.4 per cent increase on lastyear's 16.0p. The Board proposes a final dividend of 7.74p which, together with the interimdividend announced at the half year, gives a total dividend for 2004/05 of11.40p per share. 11.40p per share represents an 8.0 per cent increase on thefull year dividend for 2003/04. The dividend, with earnings calculated on the same basis as interest coverabove, is covered 1.8 times. Cashflow and Net Debt Adjusted EBITDA (being adjusted operating profit plus depreciation) totalled£79.5m in the year. This inflow, less the movement in working capital of £(1.1)m and adjustments of £(5.4)m for pension credit and exceptional items, gave riseto a net cash inflow from operating activities of £73.0m. The effect of PGN on the movement in working capital is a £10.2m year-on-yearoutflow due to unpaid trade debtors at 31 March 2005. Gross capital expenditure of £34.4m was higher than in recent years, atapproximately 98 per cent of the £35.0m charge for depreciation. The principalitems giving rise to this higher level of capital expenditure were the firstphase of investment in the new automated facility for GlaxoSmithKline and £9.5min respect of our new head office building. This investment is being held onthe balance sheet pending review of alternative financing options. Gross capital expenditure was offset by £20.0m of asset sales in the year. Anexercise to re-finance some 660 trailers from our total UK fleet ofapproximately 1,700 trailers generated £13.3m of the total. Other cash movements in the year included the £7.8m purchase of midiData inJanuary, the receipt of £7.8m relating to the settlement of completion accountsdiscussions in respect of our December 2002 acquisition of Trans European and anoutlay of £8.5m to purchase 3.5 million shares for our Employee Benefit Trust. The net effect of these and other cashflow movements was a reduction in ouryear-end net debt from £75.3m at 31 March 2004 to £53.0m at 31 March 2005. The31 March 2005 position is net of £33.5m of cash held within our captiveinsurance company to fund future potential insurance claims (£31.7m at 31 March2004). The Group has available, at 31 March 2005, £200m of committed bank facilities.£85m of this total is available as an amortising term loan with final repaymentdue in December 2007. The £115m balance of the total facility is available as arevolving credit facility with a final maturity of December 2009. In additionto these committed facilities the Group has available a range of overdraft andleasing facilities. Through the year these borrowings are drawn approximatelyhalf in sterling and half in euros. Swaps, with a remaining maturity of 11months have been entered into to fix the base rate in respect of £30m and €74mof these borrowings. The interest rate and foreign exchange positions of the Group are subject toregular review. No speculative trading is entered into and all activities ofthe treasury function are designed to support the Group's commercial operations. Return on Capital Employed Capital employed at 31 March 2005 was £135.8m, of which 42 per cent related toour UK & Ireland operations and 58 per cent to Continental Europe. The returnon capital employed, at 32.8 per cent, represents an increase on last year's28.9 per cent. This rate of return continues to compare favourably with thereturns of our peer group. Goodwill Balance sheet goodwill of £42.2m consists principally of £32.2m in respect ofour Trans European acquisition, with the balance of the carrying value relatingto last year's acquisition of a majority shareholding in Rhinecontainer BV andthis year's acquisition of the midiData business. Pensions The Group continues to monitor closely the appropriateness of its pension policyand funding approach on the basis of actuarial advice. Both policy and fundingapproach will be reviewed in detail following the results of the triennialvaluation as at 31 March 2005. These results are expected towards the end ofthe calendar year. Note 24 to the accounts shows that the UK pension scheme accounting shortfall,calculated on an FRS 17 basis, was £52.1m at 31 March 2005 (£48.1m at 31 March2004), net of deferred tax. As in previous years, operating profit and earning figures are adjusted toexclude the £4m release to profit from our SSAP 24 balance sheet provision.This adjustment will no longer be required following adoption of IFRS in thefinancial year to 31 March 2006. International Financial Reporting Standards (IFRS) The Group's results for the year to 31 March 2006, including the interim resultsto 30 September 2005, will be presented in accordance with the new IFRSrequirements. The principal differences to our adjusted results as declared inaccordance with UK GAAP are expected to be in respect of the methods ofaccounting for items such as pensions, share options, joint ventures and certainproperty leases. These adjustments are not expected to affect operatingcashflow. IFRS implementation continues to be reviewed with the Group's auditors, but wecurrently estimate that the new requirements are likely to reduce our adjustedearnings for 2005/06, in comparison with our budget which has initially beenprepared in accordance with UK GAAP, by approximately 6 per cent. Consolidated profit and loss accountfor the year ended 31 March 2005 Before Exceptional exceptional items items (note 4) Total Total* 2005 2005 2005 2004 Note £m £m £m £m Turnover 2,3 1,725.9 - 1,725.9 1,680.5 Operating profit before pension creditand goodwill amortisation 2,3 44.5 (9.4) 35.1 33.2 Pension credit 4.0 - 4.0 4.0Goodwill amortisation (2.0) - (2.0) (2.2) Operating profit 46.5 (9.4) 37.1 35.0Profit on sale of trailer assets 4 - 7.6 7.6 - Profit on ordinary activities before 46.5 (1.8) 44.7 35.0interestNet interest payable and similar 6 (9.5) - (9.5) (12.6)charges Profit on ordinary activities before 5 37.0 (1.8) 35.2 22.4taxationTax on profit on ordinary activities 7 (12.7) 2.0 (10.7) (8.5) Profit on ordinary activities after 24.3 0.2 24.5 13.9taxationEquity minority interests (3.5) - (3.5) (2.8) Profit for the financial year 20.8 0.2 21.0 11.1Dividends 8 (12.9) - (12.9) (12.3) Retained profit/(loss) for the year 7.9 0.2 8.1 (1.2) Earnings per share 9 - basic 18.4p 9.6p - diluted 18.2p 9.6pEarnings per share before exceptionalitems and goodwill amortisation 9 - basic 19.9p 18.4p - diluted 19.7p 18.3pEarnings per share before exceptionalitems, goodwill amortisation andexcluding pension credit 9 - basic 17.5p 16.0p - diluted 17.3p 15.8p \* The operating profit before pension credit and goodwill amortisation for 2004of £33.2m is stated after charging £10.0m of operating exceptional items againstthe pre-exceptional operating profit of £43.2m, as set out in note 3. All operations in both years were continuing. Balance sheetsat 31 March 2005 Group Company 2005 2004 2005 2004 Note £m £m £m £m Fixed assetsIntangible assets 10 42.2 38.3 - -Tangible assets 241.5 247.3 - -Investments 0.5 0.6 56.5 11.5 284.2 286.2 56.5 11.5 Current assetsStocks 6.1 5.5 - -Debtors 302.3 258.1 104.3 134.5Cash at bank and in hand 63.1 55.5 0.2 1.5 371.5 319.1 104.5 136.0Creditors: amounts falling due within one (411.8) (372.5) (12.2) (23.8)year Net current (liabilities)/assets (40.3) (53.4) 92.3 112.2 Total assets less current liabilities 243.9 232.8 148.8 123.7Creditors: amounts falling due after more (115.3) (109.8) (102.9) (100.2) than one year Provisions for liabilities and charges (101.0) (97.4) - - Net assets 27.6 25.6 45.9 23.5 Capital and reservesCalled up share capital 11.7 11.6 11.7 11.6Share premium account 4.4 1.9 4.4 1.9Merger reserve 3.5 3.5 - -Profit and loss account 9.7 (0.8) 38.3 10.0Own shares held by employee benefit trust (8.5) - (8.5) - Equity shareholders' funds 20.8 16.2 45.9 23.5Equity minority interests 6.8 9.4 - - 27.6 25.6 45.9 23.5 Consolidated cash flow statementfor the year ended 31 March 2005 2005 2004 Note £m £m Cash inflow from operating activities 12 73.0 105.3Returns on investments and servicing of finance 13 (13.6) (10.5)Taxation (3.9) (9.1)Capital expenditure 13 (14.4) (4.1)Acquisition and disposal of businesses 13 1.1 (0.7)Equity dividends paid (12.3) (11.8) Cash inflow before use of liquid resources and financing 29.9 69.1Management of liquid resources 13 (1.8) (10.0)Financing 13 (23.3) (50.1) Increase in cash in year 4.8 9.0 Reconciliation of net cash flow to movement in net debtfor the year ended 31 March 2005 2005 2004 Note £m £m Increase in cash in year 4.8 9.0Decrease in debt and lease financing 17.4 51.8Increase in liquid resources 1.8 10.0 Change in net debt resulting from cash 24.0 70.8flowsNew finance leases - (0.2)Exchange movement (1.7) 1.8 Movement in net debt in year 22.3 72.4Net debt at beginning of year (75.3) (147.7) Net debt at end of year 14 (53.0) (75.3) Consolidated statement of total recognised gains and lossesfor the year ended 31 March 2005 2005 2004 £m £m Profit for the financial year 21.0 11.1Net exchange adjustments arising on foreign currency investments andrelated borrowings 2.4 (1.3) Total recognised gains and losses relating to the financial year 23.4 9.8 Reconciliation of movements in equity shareholders' fundsfor the year ended 31 March 2005 Group Company 2005 2004 2005 2004 £m £m £m £m Profit for the financial year 21.0 11.1 41.0 14.5Dividends (12.9) (12.3) (12.9) (12.3) Retained profit/(loss) for the year 8.1 (1.2) 28.1 2.2 Other recognised gains and losses 2.4 (1.3) 0.2 0.8Issue of share capital 2.6 1.7 2.6 1.7Own shares held by employee benefit trust (8.5) - (8.5) - Net movements in equity shareholders' funds 4.6 (0.8) 22.4 4.7Opening equity shareholders' funds 16.2 17.0 23.5 18.8 Closing equity shareholders' funds 20.8 16.2 45.9 23.5 Notes to the accounts 1 Accounting policies The financial information set out in this preliminary announcement does notconstitute Wincanton plc's statutory accounts for the years ended 31 March 2005and 31 March 2004. Statutory accounts for the year ended 31 March 2005 will bedelivered to the Registrar of Companies following the Company's Annual GeneralMeeting. Statutory accounts for the year ended 31 March 2004 have beendelivered to the Registrar of Companies. The Auditors have reported on thoseaccounts; their reports were unqualified and did not contain a statement undersection 237 (2) or (3) of the Companies Act 1985. Basis of preparation The financial information has been prepared in accordance with applicableaccounting standards and under the historical cost accounting rules. Basis of consolidation The consolidated financial information of the Group includes the financialinformation of the Company and its subsidiary undertakings made up to 31 March2005. Subsidiary undertakings include all entities over which dominant controlis exercised. When the Company acquired the Wincanton Group of companies upon demerger fromthe former parent in May 2001, the changes in Group structure were accounted forusing the principles of merger accounting. Businesses acquired or disposed ofsince then have been accounted for using acquisition accounting principles fromor up to the date control passed. Goodwill Purchased goodwill (representing the excess of the fair value of theconsideration and associated costs over the fair value of the separable netassets acquired) arising on consolidation in respect of acquisitions since 1April 1998 is capitalised and amortised to £nil by equal annual instalments overthe estimated useful life of 20 years. Purchased goodwill on acquisitions prior to 1 April 1998, previously written offto reserves is, on subsequent disposal of the acquired business, written backthrough the profit and loss account as part of the profit or loss on disposal. Investments in subsidiary undertakings are stated at cost less provision for anyimpairment in value. Notes to the accounts (continued) 2 Segmental information By geographical area of origin: Turnover Operating Profit 2005 2004 2005 2004 £m £m £m £m UK & Ireland 1,097.8 1,041.3 37.4 36.1Continental Europe 628.1 639.2 7.1 7.1 1,725.9 1,680.5 44.5 43.2 Pension credit 4.0 4.0Goodwill amortisation (2.0) (2.2) Operating profit before exceptional operating costs 46.5 45.0Exceptional operating costs (note 4) (9.4) (10.0) Operating profit 37.1 35.0 Profit on sale of trailer assets 7.6 - Profit on ordinary activities before interest 44.7 35.0 UK & Ireland 43.3 31.1Continental Europe 1.4 3.9 Turnover arises from the sole activity of supply chain management and bydestination is not materially different than by origin. The pension credit adjusted in the analyses above is the variation credit to theregular cost arising under SSAP24 'Accounting for Pension Costs'. Operating profit after pension credit, goodwill amortisation and exceptionaloperating costs includes the Group's share of the operating results ofassociates of £0.2m (2004:£nil). Profit on ordinary activities before interest is split by geographical segmentafter charging £5.7m (2004:£3.2m) of goodwill amortisation and exceptionaloperating costs to Continental Europe and all of the other items above to UK &Ireland. Net Assets 2005 2004 £m £m UK & Ireland 57.0 73.1Continental Europe 78.8 76.3 Trading capital employed 135.8 149.4Non-operating net liabilities (108.2) (123.8) Net assets 27.6 25.6 Non-operating net liabilities comprise goodwill, net debt, taxation and dividendliabilities and pension and insurance provisions. Notes to the accounts (continued) 3 Operating profit The Group's results are analysed as follows: 2005 2004 Before Before operating Operating operating Operating exceptional exceptional exceptional exceptional items items Total items items Total £m £m £m £m £m £m Turnover 1,725.9 - 1,725.9 1,680.5 - 1,680.5Cost of sales (1,640.7) (6.7) (1,647.4) (1,603.0) (5.8) (1,608.8) Gross profit 85.2 (6.7) 78.5 77.5 (5.8) 71.7 Administrative expenses (38.7) (2.7) (41.4) (32.5) (4.2) (36.7) Operating profit 46.5 (9.4) 37.1 45.0 (10.0) 35.0 Pension credit (4.0) - (4.0) (4.0) - (4.0)Goodwill amortisation 2.0 - 2.0 2.2 - 2.2 Operating profit before pensioncredit and goodwill amortisation 44.5 (9.4) 35.1 43.2 (10.0) 33.2 4 Exceptional items 2005 2004 £m £mOperating exceptional itemsReorganisation of operating structure post acquisition (2.0) (10.0)Relocation of UK head office and UK rationalisation (2.6) -Closure of operations in Spain, France and UK (4.8) - (9.4) (10.0) Non-operating exceptional itemsProfit on sale of trailer assets 7.6 - (1.8) (10.0) The tax effect of the net exceptional items is a credit of £2.0m (2004 : £2.1m). Notes to the accounts (continued) 5 Profit on ordinary activities before taxation 2005 2004 £m £mProfit on ordinary activities before taxation is stated after charging:Auditors' remuneration: - Group fees for statutory audit services (including £0.1m re. the Company) 0.6 0.6 - fees paid to the Auditors and their associates for tax advisory services 0.2 0.3 - fees paid to the Auditors and their associates for other services 0.1 0.1 Depreciation and other amounts written off tangible assets: - owned 33.0 35.8 - leased 2.0 2.5 Amortisation of goodwill 2.0 2.2 Operating lease rentals - plant and machinery 41.2 36.4 - land and buildings 44.2 41.4 6 Net interest payable and similar charges 2005 2004 £m £m Interest receivable 2.6 1.4Interest payable on bank loans and overdrafts (9.8) (11.2)Finance charges payable in respect of finance leases (0.2) (0.2)Unwinding of discounted insurance, German pension and other provisions (2.5) (2.6) (9.9) (12.6) Less finance costs capitalised 0.4 - (9.5) (12.6) The interest receivable relates primarily to the cash deposits held by theGroup's captive insurance company. The finance costs capitalised weredetermined at the Group's applicable borrowing rate. Notes to the accounts (continued) 7 Taxation Pre-exceptional Exceptional items items 2005 2005 2005 2004 £m £m £m £mUK corporation taxCurrent tax on income for the year 7.6 (1.5) 6.1 0.7Adjustments in respect of prior years 1.0 - 1.0 (1.3) 8.6 (1.5) 7.1 (0.6)Foreign tax Current tax on income for the year 2.4 (0.5) 1.9 1.7Adjustments in respect of prior years - - - - 2.4 (0.5) 1.9 1.7 Total current tax 11.0 (2.0) 9.0 1.1 Deferred taxCurrent year 3.2 - 3.2 6.6Adjustments in respect of prior years (1.5) - (1.5) 0.8 1.7 - 1.7 7.4 Tax on profit on ordinary activities 12.7 (2.0) 10.7 8.5 The following table reconciles the tax charge at the UK standard rate to theactual tax charge : 2005 2004 £m £m Profit on ordinary activities before taxation 35.2 22.4 Tax charge at UK standard rate (30%) 10.6 6.7Permanent differences - overseas profits at higher rates 0.2 0.3 - overseas profits at lower rates (1.0) (0.4) - losses not utilised 2.6 2.2 - disallowable expenditure 1.1 0.2 - non-taxable proceeds (2.3) -Temporary differences - movement on accelerated capital allowances (0.6) (0.1) - other (2.6) (6.5)Adjustments in respect of prior years 1.0 (1.3)Related Shares:
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