Shares in logistics group Wincanton (WIN) jumped 5% to 390p, their highest level in over a decade, after the company increased its forecast for profits for the year to March and painted an optimistic picture for the coming year.
The firm had already raised its earnings forecast in January after strong trading in the third quarter to December, saying profits would be ‘materially ahead of market expectations’ assuming there wasn’t a slowdown in the fourth quarter.
HIGHER GROWTH
In fact, the fourth quarter turned out to be stronger than the firm had anticipated, with overall revenues up 15% driven by a 40% increase in Digital and eFulfilment turnover.
As well as high demand for its existing operations, the business was bolstered by the start-up of new agreements with garden centre chain Dobbies and furniture company Dwell.
Further impetus came from the new supply agreement with Waitrose through the new west London customer fulfilment centre, which has only been running for three weeks and has already dispatched nearly 20,000 orders.
Grocery and consumer revenues are expected to be up slightly on the same quarter last year, which is impressive as last quarter lapped the period that saw the start of panic buying, while the firm also secured a two-year contract with global drinks giant Heineken to handle delivery of products to retail outlets throughout England and Wales.
General merchandise revenues were up close to 30% last quarter thanks to strong demand for DIY products, and alongside Dobbies the firm has taken on a three-year contract to transport garden landscape products for manufacturer Kelkay.
INCREASED CAPACITY
As part of the drive to expand its eFulfilment services, Wincanton has leased a state of the art 528,000 square foot warehouse facility in Rockingham. This facility is even larger than the Nuneaton site acquired last year and has already helped secure more business from existing customers such as DIY retailer B&Q, part of Kingfisher (KGF).
Rockingham will enable customers to rapidly expand the number of products they can distribute and will allow Wincanton to reduce unit costs and shorten lead times.
Chief executive James Wroath was upbeat about the outlook: ‘We are delighted to have expanded our eFulfilment capabilities and capacity further with our new site. This serves as a marker of our ambitions to capitalise on the growth opportunities presented by the increasing prominence of online retail.’
Analyst Steve Woolf at Liberum reiterated his buy recommendation and 480p price target, commenting: ‘The new facility, backed by contract wins, highlights Wincanton’s growing expertise and execution in this area of the logistics market. In our view, the valuation does not yet reflect the momentum and potential of the business.’
