Wincanton H1 pretax profit up 6.3 pct; targets more acquisitions

Wincanton PLC, the pan-European logistics group, has reported a 6.3 pct rise in first-half underlying pretax profit, with a robust performance from its UK and Ireland business offsetting a weaker outturn in mainland Europe.

The Wiltshire-based group also revealed it is targeting more acquisitions.

'We constantly look to build the core markets that we operate in so in-fill acquisitions will always be on the agenda, underpinned by strong organic growth,' chief executive Graeme McFaull told AFX News.

'We will look for larger acquisitions, more structual acquisitions. I wouldn't rule them out but they're not on the immediate horizon.'

Analysts regard Wincanton as a prime target in a consolidating logistics market.

In the UK it is the second-largest player after Exel, which was acquired for 5.5 bln eur by Deutsche Post AG last year. Christian Salvesen PLC and TDG PLC are the UK's third- and fourth-largest players respectively.

For the six months to Sept 30, Wincanton made an underlying profit before tax of 17.0 mln stg, broadly in line with analysts' expectations and up from 16.0 mln stg last time, on revenue that was up 5.9 pct to 931.8 mln stg. Pretax profit was flat at 15.1 mln stg versus 15.2 mln stg.

Underlying operating profit rose 7 pct to 21.4 mln stg. Operating profit in the UK and Ireland rose 10 pct to 20.0 mln stg, with the division benefiting from contract wins and renewals.

In September, Somerfield, the supermarket group, extended its logistics provider contract with Wincanton for five years. Wincanton reckons the contract will generate turnover of some 900 mln stg.

It expects the momentum of the UK and Ireland business to continue into the second half, supplemented by contributions from its recent acquisitions — RDL Holdings Ltd and Lane PLC, purchased in October for up to 35 mln stg.

'We've got reasonably good visibility of the second half and indeed into next year,' said the CEO.

'We feel that there's reasonably good momentum there and business continues to be relatively healthy in the UK, particularly on the retail front.'

However, first-half operating profit fell 22 pct to 1.4 mln stg in mainland Europe, where margins were hit by a shortage of sub-contractor capacity. Wincanton said these cost increases are progressively being recovered from customers and a better second half is anticipated, particularly in road transport.

'We'd be happy to recover sufficiently the shortfall in the first half to come up with numbers that are broadly equivalent in continental Europe to the numbers we reported last year (4.2 mln stg),' said finance director Gerard Connell.

Although the focus in mainland Europe will remain on the three core markets of France, Germany and Poland, new countries are being examined.

'We're looking at new territories and there are opportunities further east in Europe, whether it be Romania, Russia or Belarus,' said McFaull.

'But I think it's important for us to get those anchor markets working properly and really delivering their full potential before we stray too far.'

The interim dividend was raised 8.1 pct to 4.26 pence, payable Jan 10, 2007, from basic earnings per share of 8.8 pence versus 9.1 pence.

Analysts at Panmure Gordon reiterated their 'buy' stance and raised their year to end-March 2007 pretax profit forecast by 0.5 mln stg to 34.9 mln stg from and their forecast for the following year by 1.0 mln stg to 40.1 mln stg.

At 11.17 am, shares in Wincanton were down 1.5 pence at 342 pence, valuing the business at 409 mln stg.