Wincanton – A Profitable Delivery?

This group, which is a trusted partner to many of the UK’s most recognisable brands and influential public bodies, issued a first-half Trading Update for the six months to end September early last month.

This company suffered with the pandemic but is now back on its growth track.

It is an important cog in the supply chain sector, so necessary as the UK continues to get back to normal, despite higher prices all around.

Ahead of the interim results being published on Tuesday of next week, the £442m capitalised group’s shares have been a steadily improving price mover in the last few weeks.

The Business

Wincanton (LON:WIN), which was set up nearly 100 years ago, is all about supply chain solutions for British business.

Operating from over 170 sites across the country, the group is responsible for some 8,500 vehicles, has 16.1m sq.ft of warehousing space, and it boasts around 20,300 employees, 5,380 of whom are drivers.

It provides business critical services including storage, handling and distribution; high volume e-fulfilment; retailer ‘dark stores’; two-person home delivery; fleet and transport management; and network optimisation for many of the UK’s best-known companies.

It is active across a range of markets including food and consumer goods; retail and manufacturing; eCommerce; the public sector; major infrastructure; building materials; fuel; and defence.

Its Customers

Amongst countless others, its customers include Nestle, Morrisons, Co-Op, Sainsburys, Weetabix, Muller, Asda, The White Company, Air Products, Lucozade Ribena Suntory, BP, British Sugar, Heinz, Dairy Crest, Waitrose, Texaco, Coca-Cola, Neals Yard, Britvic and Booths.

For its clients the company can provide an integrated supply chain approach that brings together a number of services, comprising supplier management, planning, purchase order management, primary and secondary logistics, on-site sequencing and end-of-life management.

It manages activity, creates visibility and drives efficiency throughout the customer’s supply chain with an emphasis on resilience and traceability. All inbound and outbound flows are fully controlled from supplier to point of consumption in a timely and effective manner across the entire supply chain.

Group Outlook

With sustained growth in its strategic markets, the group has stated that it expects to deliver a financial performance in line with market expectations for FY23.

The company has noted that it remains confident in its strategy, underpinned by a strong pipeline of new business across all sectors for FY23 and beyond.

It remains confident that the combination of a robust business model, new contract wins, disciplined pricing and a strong balance sheet, putting it on track to deliver full year results in line with current market expectations.

Equity holders

There are some 124.5m shares in issue.

Larger holders include Columbia Threadneedle Investments (15.93%), Aberforth Partners (12.71%), Schroder Investment Management (5.41%), JP Morgan Asset Management (5.22%), BlackRock (4.13%), Polar Capital (4.12%) and Coeli Asset Management (3.55%).

Brokers Views

Analyst Robin Byde at Zeus Capital has current year, to end March 2023, estimates for revenues of £1.47bn and adjusted pre-tax profits of £61.9m (£58.1m), earnings of 40.5p (40.3p) and a dividend of 13.4p (12.0p) per share.

For the coming year he is going for £1.53bn sales, £66.1m profits, 41.6p earnings and a dividend per share of 15.1p.

On a DCF-based valuation the shares come out at 430p, with Byde having reduced that figure from 480p recently.

The broker considers that the group’s shares are both defensive and that they have been oversold.

Over at Liberum Capital their analyst Gerald Khoo rates the shares as a Buy, with a price aim of 535p.

His estimates for this year are for £1.49bn revenues, £62.6m profits, 40.9p earnings and a 13.2p per share dividend.

For 2023/24 his figures are for £1.57bn sales, £69.8m profits, earnings of 42.2p and a dividend of 14.5p per share.

Against a tough comparative for the year, the first half showed a useful 8% revenue growth, with new business wins across the group’s four main sectors.

My View – ‘a real class act’

They closed last night at 355p after having been as low as 282p at the end of September. The upward advance in front of the results has been both steady and impressive.

Hopefully the first-half strength will be shown with the figures, together with a second-half positive pointer.

Will it be good enough to see the shares continue their climb?

Probably not enough to balance out against profit-taking at the 345p/360p levels.

A fall back to 325p or thereabouts could prove to be a very good price to be paying for more stock.

This really is a ‘class’ business and its shares could easily reflect that by trading at around the 400p leading into 2023.

(Profile 07.05.19 @ 247p set a Target Price of 350p*)

(Profile 06.05.22 @ 412p set a Target Price of 500p)

(Asterisks * denote that Target Prices have been achieved since Profile publication)