Shares in third-party logistics firm Wincanton (WIN) leapt 10% to 189p after the company revealed that underlying pre-tax profits for the year to March 2021 would be ‘significantly ahead of current market forecasts and not less than £30 million’ assuming no further impact on business volumes from Covid-19.
According to Reuters, the current consensus forecast for next March is for pre-tax profits to reach £28 million compared with £52.9 million in the year just ended.
A ‘steady recovery in trading’ since last month’s preliminary results were announced and strong new business performance, together with swift action to reduce structural costs, lie behind the raised guidance.
NEW BUSINESS
As well as experiencing higher levels of demand in home delivery and eFulfilment for supermarkets, Wincanton has won several big contracts in the last six months.
Screwfix, owned by DIY giant Kingfisher (KGF), awarded the firm a contract to operate a fifth distribution centre, while supermarket group Asda extended its warehousing and transport contract for four sites in the Midlands for another two years.
With the pandemic having exposed the fragility of many supply chains, having a dependable third-party logistics supplier is ‘more important than ever’ according to Asda’s logistics director Chris Hall.
Even more significant are new contract wins with Wm Morrison (MRW) and Waitrose. The Morrisons deal will see Wincanton take over the management of the supermarket chain’s Bridgewater distribution centre and co-manage logistics services to stores.
However the deal to create a customer fulfilment centre (CFC) for Waitrose’s online grocery home deliveries could be genuinely transformational as it represents new territory for the firm.
As part of a five-year plan, the CFC in West London will be up and running this financial year and is expected to handle 25,000 orders per week. As shown by results from Ocado (OCDO), which previously provided home delivery for Waitrose, the online grocery market is growing at an exponential rate.
The Waitrose deal is a ‘fantastic opportunity’ for Wincanton to expand into this fast-growing market, to quote chief executive James Wroath.
Assuming there are no hitches, it could lead to Wincanton setting up more CFCs for Waitrose and to other supermarkets hiring the firm to manage their online operations.
