Wincanton – a logical buy for value and yield

Mark Watson-Mitchell is bullish on logistics operator Wincanton ahead of its full-year results due on Thursday 16th May. 

I am looking forward to Wincanton (LON:WIN), the UK’s largest third-party logistics company, announcing its latest results on Thursday 16^th May. The figures for the year to end March 2019 (other company bosses please note how rapidly full-year accounts can be prepared and then announced) may well show revenue down over the year at some £1.1bn. However, pre-tax profits at around £50m will have risen over 30% in the period.

Without doubt you will have seen the company’s lorries hauling goods from one side of the country to the other, not always blazing its own name but instead those of its client companies. Operating from more than 200 sites across Britain and employing over 18,000 people, the group boasts a fleet of some 3,600 vehicles. The spread of its clients ranges across numerous sectors, including home & DIY, grocery, construction, defence, energy, general merchandise, and consumer goods.

Clients include, amongst so many others, companies such as Wilko, IKEA, Screwfix, Roper Rhodes, Halfords, Loaf.com, Micheldever Tyre, Heinz, British Sugar, Lucozade Ribena Suntory, B&Q, Asda, the Co-op, Valero, Marley, Sainsburys, EDF Energy, Hapag-Lloyd, Ibstock, AvantiGas, Thales, Aggregate Industries and Mediterranean Shipping. The impressive list is almost endless.

But it is not just about the Wincanton lorries that are on the road. Instead, the group’s logistics services are even wider. On behalf of its customers, it designs and implements services that range from setting up and operating distribution networks through to bonded warehouses, technology hosting, container transport and storage. The group operates, for both its clients and its own use, some 7.6m sq. ft. of warehousing space across the UK.

In today’s fast-moving world, Wincanton provides answers to its clients. Supply chains have needed to become more sophisticated as customers push for smaller, more frequent deliveries to match consumer demand and meet the needs of ‘just in time’ production schedules. Its efficient and collaborative transport models help Wincanton’s customers to control costs, optimise service assets and improve service levels.

Road transport, containers, specialist transport, tankers, fleet management, vehicle maintenance, home delivery, and even flatbed and curtain side trailers – Wincanton offers the transport solutions. From scalable transport solutions to innovative warehousing, the company provides the flexibility required in the supply chain for sectors that are facing needs for continuous innovation and reacting to shifts in buying behaviour.

On behalf of its clients, the group’s warehouse storage solutions cover eFulfilment, supplier to customer, carrier management solutions, managed returns solutions, co-packing, shared-user storage, warehouse automation, bonded facility solutions, off-quay container storage, high-performance packaging, and even recycling solutions for waste management.


So, effectively Wincanton has the answers. And that is probably why so many of its customers have been operating with the company for over 20 years. No doubt that is why the group’s equity has such a good institutional shareholders list: Aberforth Partners (with 16.99%); Columbia Threadneedle Investments (15.89%); Schroder Investment Management (8.20%); Unicorn Asset Management (4.32%); Tellworth Investments (4.13%); M&G Investment Management (3.80%); and Polar Capital (with 3.78%). And that is just the professional holdings above the 3% declared level, making some 57% of the 124,543,670 shares in issue.

The recently announced trading update stated that the group has again delivered a strong operating performance in the second half of the year, especially during Christmas peak trading in the Retail & Consumer sector. The group has secured substantial new business wins in the final six months of the year, adding new customers including HMRC and Weetabix, as well as additional contract wins with existing customers such as Aggregate Industries and The Co-op.

Recent contract wins include a five-year agreement with HMRC in providing logistic services to support air and sea freight inspections; and two five-year contracts with Weetabix. The impact of casting off lower margin contracts during 2018, coupled with delayed timing of contract awards, had its effects on overall revenue in the last trading year.

So, what is in store for this year and next? Well, broker estimates suggest that £1.2bn of revenue could take pre-tax profits up to £50.73m for this current year, worth 33.56p per share in earnings and easily covering the 11.52p of dividend. For next year a £1.25bn turnover could help pre-tax profits to rise to £52.27m, giving 34.67p of earnings and 12.36p of dividend per share.

At the current price of 247p, that values the group at just over £300m, making the shares an exceptionally attractive investment, trading on a mere 7 times earnings and yielding almost 5%. When there is so much massively over-priced crap out there in the market why look anywhere else for really good value logistics?

Over the next year or so I reckon 350p is not an unreasonable target price for the shares of Wincanton.