Shares in the UK’s largest third-party logistics firm Wincanton (WIN) jumped 10% to 199p after the company raised its full year earnings guidance thanks to strong trading since its July general meeting.
In an unscheduled announcement, the group said it had seen ‘a continued improvement in profitability in July and August, with a particularly strong performance in Digital and eFulfilment.’
STRONGER GROWTH
Revenues in Digital and eFulfilment are ‘significantly ahead of pre-Covid levels’ thanks to continued strong demand for online retail. The firm said volumes in its two-person home delivery business - for items such as furniture and white goods - have remained high throughout the summer.
EFulfilment growth was helped by the opening of a new facility in Nuneaton at the end of July for customers such as home furnishings brand Loaf and beauty company Neal’s Yard Remedies.
HIGHER MARGINS
In addition, operational efficiencies thanks to a reduction in its cost base at the start of the pandemic and improved cash collection have led to a ‘robust’ working capital position.
This combination of higher revenues, lower costs, better margins and better cash generation means the board now sees results for the current year ‘materially ahead of market expectations’, assuming there is no further impact from Covid on its business.
EARNINGS UPGRADES
Numis analyst Steve Woolf upgraded his earnings forecasts for the second time in two months, commenting: ‘Improved demand in eFulfilment and group-wide operational efficiencies have driven an 11% increase in our earnings forecasts.
‘Wincanton's activity in supporting on-line retail is increasing, and we believe the potential to access higher growth from this area is not yet factored into the share price. We reiterate our Buy rating’.
