Shares in distribution firm Wincanton (WIN), which had drifted as low as 330p yesterday from over 460p as recently as July, accelerated 8% to 357p following its latest positive trading update and confirmation of its full year earnings guidance.
The group is currently enjoying strong revenue growth from its existing customer base, in particular from its retail partners, as well as adding new customers as it expands.
GROWTH CHANNELS
Wincanton recently won a five-year extension to its contract with leading aerospace and defence customer BAE Systems (BA.) for transport, warehousing, material management and other services, as well as an expansion to its contract with supermarket chain Asda.
Last month, the firm acquired specialist ecommerce and efulfilment provider Cygnia Logistics for £23.9 million, adding high-profile customers such as BrewDog, Molton Brown, Moonpig (MOON) and Revolution Beauty (REVB:AIM). In the year to March, Cygnia and generated around £45 million in turnover.
The deal was financed from existing resources and debt, with no need to tap shareholders for funds, demonstrating the company’s strong cash-flow generation capacity.
TARGET CONFIRMED
While the firm is very much at the sharp end of challenges to the supply chain, the majority of its contracts are ‘open book’ which means it can pass on cost increases to its customers.
Even on its closed book contracts, the company has ‘made good progress in agreeing rate changes to optimise service levels’ to its customers, who ultimately rely on it to keep their businesses going.
Most importantly, the firm said it was ‘on track’ to deliver full year profits in line with market expectations thanks to strong retail volumes and rate changes in its closed book contracts. The current analyst consensus is for revenues to hit £1.3 billion against £1.2 billion last year and pre-tax profits to reach £54 million against £47 million.
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