Wincanton is to sell some of its continental operations after reporting an operating loss of £7.3 million after exceptionals for the year to 31st March.
Raben Group is buying Wincanton’s road business in Germany as well as businesses in central and eastern Europe in a deal that values the businesses at 36 million euros (£32m).
And the logistics business in the Netherlands is to be sold to JCL Transport und Logistik in a deal worth 10.5m euros (£9.4m).
Wincanton said that for the year to 31 March these activities generated sales of some 446m euros and operating losses of some 600,000 euros.
The sales are part of Wincanton’s plan to cut debt and focus on areas with the best growth potential.
The businesses are among a group of five identified by new chief executive Eric Born as sub-scale or under-performing. Other businesses in this group include Foodservice and France. In total they account for 25 per cent of group sales and the aim is either to turn them around or exit.
Announcing its annual results, Wincanton produced an underlying operating profit of £53m in the year to 31st March but this turned into a loss of £7.3m after exception items such as restructuring costs and impairment of goodwill.
As a result the group reported a loss for the year of £24.9m against a profit of £2.5m the year before. Sales were static at £2.18 billion. As a result, thr group has suspended its dividend for the year.
Chairman David Edmonds, who announced that he will be stepping down, said: “The principal objective is to drive costs out of the business, by recognising that our customers’ demands are changing and that we need to adapt our business model to achieve a stable level of profits from these long-standing relationships.
“In addition, we need to address the sub-scale and underperforming businesses and reduce the group’s borrowings. Over the past decade, the group has made a series of acquisitions, which has increased debt to a level which now constrains the group’s ability to invest in the higher growth and more profitable parts of the business. In time the improved profitability will drive a more positive cash flow, but in the short term the cash flow will be assisted by business disposals.”
As well as identifying under-performing businesses, Wincanton has categorised its other market sectors in three groups.
1. Growth markets – targeting ten per cent annual profit growth: 11 per cent of sales.
Defence and Aerospace
2. Performing businesses – profit growth conditional on net contract wins: 55 per cent of sales.
Retail (includes Home Delivery)
Pullman Fleet Services
German contract logistics
3. Mature business segments – maintain market share and profits: 9 per cent of sales.
Milk / bulk foods
Wincanton’s average debt levels remained broadly flat year-on-year at some £270m, buth cash interest charge increased from £11.5m to £14.8m, principally as a result of the full year impact of higher margins and commitment fees.
Born said: “The first challenge is to drive sustainable profit growth by focusing on leveraging existing assets, accelerating the growth of our higher margin services and markets as well as progressively lowering our cost base by applying Lean Six Sigma principles.
“Secondly, we need to finalise strategies for areas of the business that are either sub-scale or underperforming. In some cases that will mean selling businesses but in others it is getting an acceptable return through operational improvement.
“Thirdly, we need to reduce our existing level of debt which will assist the Group to secure its refinancing in 2012. This would reduce overall gearing and therefore provide us with the flexibility to invest more into future growth areas.”