Wincanton reckons there might grounds for cautious optimism in the UK and Ireland after reporting a 13.5 per cent rise in underlying operating profit to £59.5m for the year to 31 March.
“In the UK & Ireland, some 90 per cent of our revenue for next year is already contracted, and there are some signs of volume weakness bottoming out in those limited number of areas in which we have been affected. If the recent initial signs of stabilisation are confirmed, and given the good new business wins that we have been continuing to record, there may be grounds for cautious optimism in the UK & Ireland,” it said.
The company said it had taken rapid action to reduce costs in the face of the market downturn. This had led to an increase in exceptional restructuring charges but it would result in an annual profit improvement of at least £10m.
Provisions included exceptional restructuring and other costs of £23.1m (2008: £4.5m), exceptional property profits of £5.2m (2008: £0.8m), partial settlement of the PGN Logistics Ltd arbitration case £5.6m (2008: £4.1) and amortisation of acquired intangibles of £9.0m (2008: £5.5m). Profit before tax, including these items, amounted to £20.0m (2008: £36.7m) down 45.5 per cent. Sales were up 9.1 per cent to £2.36 billion.
Chief executive Graeme McFaull said: “Wincanton has a portfolio of businesses which offer both shorter-term resilience and attractive growth potential. By working even more closely with our customers in these challenging times, we strengthen our relationships, enhance our industry reputation and reinforce our market leading position”.
The group said that its second half performance had clearly been adversely affected by the economic downturn.
“The UK & Ireland businesses, which account for a little under 90 per cent of the Group’s consolidated underlying operating profit, are mainly contractually-backed and defensive by nature. It is the combination of the stability of this core, and the rapid action taken to reduce costs across the group, which have enabled us to deliver a creditable performance in extremely challenging markets. Operational and functional overhead costs have been reduced by more than £10m on an annualised basis.
“The 13.5 per cent growth in operating profit being reported, of which 9.4 per cent was contributed by acquisitions made in the year, generates only a 1.6 per cent increase in underlying earnings per share as a result of the higher interest costs incurred due to acquisitions. In circumstances which have seen so many of our competitors report very significant declines in performance, however, this modest increase is indicative of the comparative quality and resilience of our business model.”
On the Continent, it said that activities began to suffer from the effects of economic slowdown several months after the UK & Ireland operations were first affected and it was still too early to be anything other than cautious about the outlook for these economies.
“Cost reduction measures already implemented will, however, deliver a full year of benefit in the year to 31 March 2010. The need for further cost reduction measures remains under close review. In Mainland Europe, as in the UK & Ireland, we also continue to record good new business wins. However, restoring our previous growth momentum in Mainland Europe will undoubtedly be a challenge for us in the short term.