Wincanton : Financial Document

For immediate release

19 November 2021

WINCANTON plc

Half Year results for the six months to 30 September 2021 (unaudited)

Wincanton delivers strong growth and continued strategic progress

Wincanton plc ("Wincanton" or "the Group"), a leading supply chain partner for UK business, today announces its half year results for the six months ended 30 September 2021.

Key financial measures
	H1 21/22	H1 20/21	Change
Revenue (£m)	690.3	578.7	19.3%
Underlying EBITDA (£m) 1	50.8	43.2	17.6%
Underlying profit before tax (£m) 1	27.3	19.1	42.9%
Underlying basic EPS (p) 1	18.2	12.9	41.1%
Dividend per share - interim (p)	4.00	2.85	40.4%
Free cash flow (£m) 2	17.9	76.4
Net (debt) / cash (£m) 3	(16.4)	63.3
Statutory results
Profit before tax (£m)	25.1	19.1	31.4%
Basic EPS (p)	16.9	12.9	31.0%

Financial highlights

• Revenue growth of 28.6% in H1, excluding businesses disposed of during FY 20/21
• Underlying profit before tax of £27.3m up 42.9% from prior year, back ahead of pre-pandemic profit levels (H1 19/20: £26.2m)
• Driver cost headwinds mitigated by business model; less than 20% of Group revenue is closed book transport of which price increases or exits have been agreed on c.90%
• Free cash flow generation of £17.9m in H1, prior year cash position benefitted from significant temporary Covid-19 deferred payments, acquisition funded through cash reserves
• Interim dividend of 4.00p (H1 20/21: 2.85p), up 40.4% in line with underlying earnings

Positive progress against strategy

• Acquisition of Cygnia Logistics (Cygnia), a specialist eCommerce and multichannel eFulfilment provider, strengthens capabilities and accelerates growth prospects
• Continued organic investment in eCommerce, operations commenced at the Group's automated facility in Rockingham, further investment in robotics in other locations
• Both short and medium-term actions taken to secure a sustainable and diverse workforce with, for example, our Wincanton Future Drivers programme, dedicated recruitment functions and representations to Government
• On track to achieve net-zero emission target for our premium home delivery service by end of the year; new targets introduced of net-zero for Wincanton owned transport by 2026
• Year to date contract wins include new customers such as Primark, MGA Entertainment, Lakeland, Snug Sofa and Saint-Gobain
• Notable contract renewals and extensions with Asda, IKEA, Roper Rhodes, HMRC, BAE Systems and the Department for Transport (DfT) demonstrate success across all parts of the business
• Pipeline of further opportunities continues to grow with a number in negotiation for implementation in FY23

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James Wroath, Chief Executive Officer of Wincanton commented:

"We have delivered a strong set of results in the first half of the year with record levels of growth and positive contributions from all parts of the business. Importantly, we have also made meaningful progress against our strategic priorities. We completed the acquisition of Cygnia and commenced operations at our automated facility in Rockingham, and this significantly strengthens our eCommerce proposition. I am particularly pleased that we have delivered this performance notwithstanding the well-documented challenges across the supply chain. We are taking steps to address shortages of labour and we are well positioned to deal with the cost pressures we are seeing across our markets.

So far this year, we have secured a healthy level of new customer contracts, renewed agreements with businesses we are proud to have supported for many years and have a strong pipeline of new opportunities ahead of us. We are continuing to strengthen our offer to customers through investments in digital and robotic innovation and a culture of continuous improvement in our services. All of this positions us well to benefit from the changes we are seeing in our markets."

For further enquiries please contact:
Wincanton plc
Tim Lawlor, Chief Financial Officer	Tel: [phone]
Headland
Susanna Voyle	Tel: [phone]
Henry Wallers

Analyst presentation and conference call:

A presentation for analysts will be held today, Friday 19 November 2021, commencing at 10.30am. The presentation will be followed by a Q&A session with the management team. The webcast can be found at:

https://webcasting.brrmedia.co.uk/broadcast/5f8ed8b5c4d0076f2b942cc1

For those wishing to ask a question in the Q&A, please dial into the call using the following details:

Telephone: [phone]

Confirmation code: 3842724

The presentation and Q&A will be made available to watch on demand shortly after it finishes. This will be hosted on Wincanton's website: https://www.wincanton.co.uk/investors/results-reports-and-presentations/

Notes

1. The section on Alternative Performance Measures (APMs) below provides further information on these measures, including definitions and a reconciliation of APMs to statutory measures.
2. Free cash flow is defined as net cash inflow/(outflow) before the movement in debt, pension payments, dividends, net outflow on acquisition of subsidiary undertakings and the acquisition of own shares.
3. Net (debt) / cash is the sum of cash and bank balances, bank loans and overdrafts and other financial liabilities excluding lease liabilities. Note 12 to the consolidated half year financial statements provides a breakdown of net (debt) / cash for the current and prior periods.

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Half Year Review

for the six months to 30 September 2021

Summary

Momentum maintained and significant growth delivered

The momentum from the second half of last year has been maintained to deliver significant growth, with revenue of £690.3m up 28.6% from prior year, excluding disposed businesses. The growth of eCommerce activity, including the start-up of the dark store operation for Waitrose, has led to revenue growth of over 50% in the Digital & eFulfilment sector. Buoyant Grocery and General Merchandise markets, and a positive post- Covid-19 recovery within Public & Industrial, supported by public sector growth, has resulted in revenue growth of over 15% in all sectors.

Underlying profit before tax increased by 42.9% to £27.3m (H1 20/21: £19.1m), with the Group's underlying

profit before tax margin increasing to 4.0% (H1 20/21: 3.3%). Group profits have recovered well from the impact of the pandemic in FY20/21 and exceeded FY 19/20 levels, despite the headwinds of driver shortages and other national supply chain issues.

Underlying EPS increased by 41.1% to 18.2p per share (H1 20/21: 12.9p per share) reflecting the increase in profits.

Net debt at the end of H1 21/22 was £16.4m (H1 20/21: net cash of £63.3m, 31 March 2021: net cash of £11.9m). Free cash flow at H1 21/22 was £17.9m and the return to net debt reflects the acquisition of Cygnia during the period. The prior year cash position included the benefit of significant temporary cash protection measures including the deferral of VAT, corporation tax and pension recovery payments and the Coronavirus Job Retention Scheme (CJRS), that were repaid during the second half of FY20/21.

eCommerce offer bolstered by Cygnia and Rockingham

The Group's capabilities and market positioning in eCommerce have been further strengthened by the acquisition of Cygnia, a speciality mid-market, multichannel eFulfilment provider, enabling us to better access mid-market customers. The acquisition, announced in September 2021, is aligned with our strategy to capitalise on the opportunities presented by online retail and will position us well to benefit from many of the changes we are seeing in the broader logistics sector. Wincanton has long been a leader in supporting many of the UK's biggest brands and now, together with Cygnia, we will be able to further extend our reach to fast- growing, mid-market eCommerce customers.

Following a successful start-up, Wincanton's new Customer Fulfilment Centre (CFC) for Waitrose is now fully operational with over 13,000 online orders being processed each week, which is growing as we head into the peak trading period. This 'dark store' operation is the first outsourced facility of its kind operating in the UK, providing warehouse eFulfilment and seven day timed-delivery solutions across West London.

In addition to the successful launch of the Nuneaton eFulfilment centre opened last year, the Group has opened a second facility at Rockingham, which has been branded as The WEB (Wincanton eFulfilment Base). The Group acquired this state-of-the-art automated facility in April 2021 to extend its eCommerce proposition. The new facility has resulted in the addition of new business with B&Q, Snug and Saint-Gobain. Our investment in cloud-based technology, including carrier management and returns, underpins our shared fulfilment offering.

Innovation driving operational improvement

The WEB also houses the Group's new innovation centre which will act as a hub to host and inspire customers, partners and community stakeholders. The innovation centre demonstrates Wincanton's deployments of robotics, wearable technology and artificial intelligence as well as a 'City of the Future' that brings to life the virtual customer experience. In Nuneaton, we deployed our first Autonomous Mobile Robots (AMR's) in combination with glove technology to improve speed, accuracy and safety for Neal's Yard Remedies. Further deployment of AMR's in our eFulfilment and warehousing businesses is ongoing. The Group continues to invest in supply chain innovation enabled by our W2 Labs programme; digital solutions to support people recruitment, asset tracking and warehouse performance management are all in extended pilots.

Positive contributions across all our sectors

We continue to support our established partners in the General Merchandise and Grocery & Consumer sectors, maintaining good service levels during unprecedented levels of demand and intense competition for

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labour. General Merchandise saw growth of approximately 30% on both last year and pre-pandemic levels, driven by high volumes at our retail customers. Grocery & Consumer expanded its relationship with Asda, which sees the Group take on collection services at Asda's Lutterworth facility. Higher volumes across customers such as Sainsbury's, Morrisons and Heinz contributed to higher revenues, up over 15% from the prior year and up over 20% from pre-pandemic levels.

Public sector growth has been delivered through new business with HMRC and DfT which commenced in early 2021. Additionally, we are 10 months into a contract with DHSC to provide storage, order fulfilment and delivery of Covid-19 testing kits. The Group successfully delivered its billionth testing unit in September. The start-up of Inland Border facilities across the country and our partnerships in Public sector, continue to open more opportunities for growth.

We are also building on our partnerships in the infrastructure market, supporting the construction of Hinkley Point C as the official storage, warehousing and logistics provider. This is underpinned by our investment in market leading technology. Our extended supply chain visibility and data management tool meets the emerging marketplace need for technology solutions to solve complex supply chain problems. Winsight-Supply Chain Integrator (WSCI) is deployed for EDF at Hinkley Point and creates transparency to better manage the flow of materials for this substantial project. Our pivotal role in ensuring surety of supply across the many thousands of product lines has been recognised and the team have been shortlisted in two categories for the HPC Excellence Awards. We are translating this capability to deliver sustainable supply chain value in other large- scale infrastructure projects.

Proactive steps taken to tackle labour shortages

Driver shortages and labour cost pressures continue to have an impact on business operations and there remains uncertainty regarding the supply of labour, particularly drivers. The Group's contractual arrangements, however, provide a good degree of commercial protection. The Group is taking steps to attract and retain drivers, including extending its dedicated driver recruitment and training functions, developing its Wincanton Future Drivers programme and funding the cost of training for new applicants. Wincanton is working alongside industry bodies and is making representations to Government regarding measures that would increase the pool of drivers in both the short and medium term. In the short term, Wincanton is active in initiatives to make driving a more inclusive, flexible and rewarding profession.

The Group has been tackling the issues together with its customers and working collaboratively to mitigate further risk and optimise service levels. Over 70% of the Group's revenue is derived from open-book contracts which provides the Group with significant direct protection against cost pressures. We have secured initial price increases or exits on approximately 90% of our closed book transport revenue and we expect further increases will be required in the second half of the year in some contracts. Where customers have been unwilling to agree price increases, we exited contracts as they are no longer viable and so divert resources to more profitable contracts.

Progress made against ESG goals

We remain committed to achieve net-zero emissions by 2040. We are working with an implementation partner for our Wincanton Woodland offset programme and remain on track to achieve net-zero operating emissions for our premium home delivery service this year. We have been investing in the most fuel-efficient diesel vehicles whilst building strong relationships with innovation consortia working on future fuels and infrastructure. The implementation of our advanced Transport Management System continues to drive improved planning and routing efficiency, reducing the use of fuel and emissions. We continue to electrify our company car fleet and are beginning to see a reduction in our mean rated emissions. During this half year, our recycling percentage from residual waste has increased by 13%.

Wincanton is also participating in a study led by the DfT and Innovate UK to assess the economic and technical potential of the UK's first 'eHighway'. We will provide information regarding our operations and movements along the M18 and M180 as part of the UK's first ever study on the electrification of long-range trucks with dynamic charging, which uses overhead wires on motorways.

We are introducing new targets to support our commitment to the social aspects of our ESG activity.

People are fundamental to our success and the Group is striving to build a diverse and inclusive organisation. Structural changes are needed in workforces across the supply chain to meet future demand. We recognise the need for more diversity, especially with regard to greater female representation. This will require creativity and flexibility around shift patterns and investment in facilities and amenities.

For National Inclusion week, in partnership with the Co-op, the Group held a successful conference to show support and raise awareness on how to build an inclusive environment. Our credentials as a Diversity and

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Inclusion leader continue to grow and we are proud that two of our Wincanton leaders were winners at the 2021 Amazon Everywoman in Transport and Logistics Awards. In addition, our all-female transport team for Roper Rhodes were finalists for a 2021 Supply Chain Excellence Award and are current finalists for two 2021 Logistics UK Awards, due to be announced in December.

Systems investment

We have successfully implemented a new enterprise-wide finance and HR system, Oracle Cloud, across the business, on time and on budget. The new system, together with the standardised processes and controls to support it, are being embedded across the business. We are moving into the second phase of the project, which is to rationalise and insource payroll operations across the business and will be completed in 2022. Following new accounting guidance (an IFRIC Interpretation Committee agenda decision), the costs of this project can no longer be capitalised and costs incurred in the period have been expensed as a non-underlying charge of £3.2m. A further cost of approximately £4-5m is expected to be charged to non-underlying items relating to the completion of the project over the next twelve months.

People

As recently announced, Tim Lawlor, Chief Financial Officer (CFO), has resigned in order to take up the role of Chief Financial Officer at Countryside Properties PLC. The Board of Wincanton wishes to thank Tim for his hard work, commitment and outstanding contribution to the Group over the last six years and wish him every success for the future. Tim will be leaving the business during March 2022 and the Board is commencing a search for his successor.

The Group would also like to announce the appointment of Carl Moore who will take up the role of MD of Digital

• eFulfilment from January 2022. Carl has spent the last 13 years in a range of senior roles including, most recently, Chief Commercial Officer at Clipper Logistics.

Dividend

The Board is declaring an interim dividend of 4.00p per Ordinary Share (2020: 2.85p per share) in line with its established policy of increasing the dividend broadly in line with underlying earnings movements. The Group's policy is for the interim dividend to be approximately one third of the expected full year dividends.

Key priorities and outlook

The Group continues to execute the strategy launched in FY 20/21 and is committed to driving growth through delivering sustainable supply chain value. The strong volume of activity seen in H1 21/22 has continued into the second half to date and the Group is positive around future opportunities following a period of heightened national interest in supply chain and logistics.

We continue to build on our partnerships with customers in our primary markets. Recent contract renewals and additional new business with Asda, BAE Systems, IKEA and Roper Rhodes is evidence that the Group's existing relationships are strong and continue to grow. The Group has delivered new wins this year with Primark, MGA Entertainment, Snug Sofa and Saint-Gobain. We continue to have a strong pipeline of sales opportunities to build on the momentum from the first half of the year.

Our high growth markets remain eCommerce, public sector and infrastructure and our activities, propositions and pipelines have all developed further during the first half of the year. The acquisition of Cygnia towards the end of the first half provides a platform from which to drive a step change in mid-market eFulfilment customers, expanding the target market within which we operate and extending the reputation and reach of the Group.

The Group remains on track to deliver full year profits consistent with market expectations and the Board is encouraged by the sales pipeline and remains confident in the Group's future growth opportunities.

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