Annual Report and Accounts 2014
Focusing on
our customers
This has been another year of progress
for Wincanton.
We have delivered revenue and profit
growth in the year, reduced net debt
and executed against our strategy.
We remain committed to innovative
solutions that maximise our efficiency
and create greater value for all
our customers.
Strategic report
Governance
34
Board of Directors
Corporate governance report
36
Directors’ remuneration report 42
Remuneration policy
43
Annual report on remuneration 48
56
Directors’ report
58
Independent auditor’s report
Accounts
Accounts
Additional information
Shareholder information
60
95
96
Highlights of the year
Marketplace
Our business
Business model
Strategy
KPIs
Chairman’s review
Chief Executive’s statement
Case study: Keeping home
delivery vehicles on the road
Case study: Leading the
convenience sector
Case study: Supporting a new
market entrant
Case study: Enabling
dynamic growth
Corporate responsibility
Financial review
Risk
1
2
4
6
8
9
10
11
14
16
18
20
22
26
32
Find out more: www.wincanton.co.uk
Strategic report
Governance
Accounts
1
Highlights of the year
Another year of
progress
Financial highlights
Revenue
£1.1bn
+1.1%
Underlying EBITDA
Underlying operating profit
£63.4m
+1.4%
£48.0m
+6.0%
Underlying profit before tax
Underlying EPS
Net debt
£25.6m
+20.2%
16.6p
+24.8%
£64.9m
−39.7%
Operational highlights
> Winning new business We have again won important
new contracts in several markets, including the rapidly-
growing retail convenience sector where we are logistics
partner of choice for Morrisons as they continue their
M Local convenience store roll out.
> Renewing existing contracts Our relentless focus
on adding value has seen us renew contracts across all
sectors, taking our relationship with WHSmith to over
20 years and extending our co-packing and container
operations for Procter & Gamble.
> Creating new partnerships Retail is a key market sector,
and one where we continue to gain new customers
including Williams-Sonoma, Inc, the leading US furniture
retailer. We are providing solutions as their logistics partner
for their entry into the UK market.
> Building on our construction strengths We offer
construction customers an unparalleled service and
during 2013/14 won new work from existing customers
including Marley Eternit and CEMEX.
> Taking market leadership The UK’s largest independent
provider of repair and maintenance services for
commercial vehicles, Pullman is now the established
market leader in home delivery vehicle maintenance.
> Broadening our relationships with key customers
The year saw us continue to enhance and extend
relationships with established customers such as
Asda and Argos.
> Establishing broader solutions While traditional
fuel services focus on delivery only, we have created
a customer service team for Valero which also takes
responsibility for all planning and scheduling activities.
> Improving efficiency We have continued to enhance
the efficiency of our operating model across our three
main asset pools: people, property and fleet.
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Wincanton plc Annual Report and Accounts 2014
Strategic report
Marketplace
Realising potential
in a dynamic environment
Washing machines and wallpaper, bread and jeans, laptops and
diesel... almost everything you buy for your home and workplace
passes along a complex supply chain. In many cases that supply
chain is operated and managed by Wincanton.
Drivers of outsourcing:
> Allows companies to focus on their core
areas of expertise
> Delivers efficiencies, better productivity
and reduced costs through the use of
specialist providers
> Enables customers to offer new, faster and
improved levels of service
> Provides access to a wide range of specialist
expertise not available in-house
A stable market
£1.1bn
Wincanton 2013/14 revenue
£36bn
Total supply chain logistics
expenditure in the UK
50%
50% of supply chain activity
is outsourced (£18bn)
UK economic growth
Logistics will have a key role to play in supporting
the UK economy as it returns to growth
1.7%
2013
Wincanton market share
2.4%
2014
2.6%
2015
Wincanton is one of three supply chain logistic
providers recording >£1bn in revenue in the UK
Wincanton £1.1bn revenue
Other two providers with >£1bn
Other companies/in-house
Strategic report
Marketplace
Governance
Accounts
3
Creativity happens every day in supply chain
– be it around sourcing, logistics, warehousing
or technology.
Retail Week’s Supply Chain report
A stable market
The supply chain logistics market in the UK is estimated at £36bn of
expenditure. It is a recognised barometer for the UK economy due to the
key role it plays in feeding and transporting manufacturing output and
supporting the retail market in the UK. The UK recovery is gathering pace,
with ONS data showing that the UK economy grew 1.7% in 2013 and while
we are clearly in the early stages of a recovery, the CBI forecasts continued
growth of 2.4% in 2014 and 2.6% in 2015.
Activity in most sectors of the logistics market is intertwined with the
consumption of materials and products which is closely correlated to
macro-economic trends, and is therefore expected to grow broadly in line
with GDP. Approximately 50% of supply chain activities are outsourced, and
this overall proportion has been relatively stable in recent years. Within the
UK outsourced logistics market only three supply chain providers record
annual revenue in excess of £1bn. One of these is Wincanton.
Against the backdrop of a subdued UK economy, logistic providers
played a key role in helping customers redefine their supply chain;
delivering innovation and cost efficiency improvement programmes
becomes business as usual in retaining customers.
There are positive indicators that the manufacturing sector is showing
growth while the construction sector, one of the hardest hit by the
economic downturn, is looking to recover to pre-financial crisis levels
in 2014. Construction is growing at its fastest rate for six years, led by an
increase in domestic house building, an area of strength for Wincanton.
With the UK recovery gathering pace, there is a strong emphasis on
innovation and creativity to deliver future growth. This view is further
supported by the Freight Transport Association’s (FTA) annual Logistics
Report, which identifies four trends currently impacting customers:
(cid:116) managing the profitability of the total supply chain;
(cid:116) reducing overall supply chain costs;
(cid:116) meeting increasing customer requirements; and
(cid:116) preparing supply chains for handling volume flexibility both up and down.
These areas are top priorities for logistics providers; no longer is the supply
chain a simple back office function, it is increasingly seen as an area of
differentiation, a view supported by Retail Week’s Supply Chain report
“Creativity happens every day in supply chain – be it around sourcing,
logistics, warehousing or technology.” As a logistic provider’s people and
capabilities are highly visible representatives of the customer’s brand,
in many cases their attitude and performance create important points
of difference. In the ever-growing home delivery sector, high levels of
reliability, professionalism and customer service are the foundations
for success.
While the outsourced proportion of the addressable market has been
relatively stable, the range and nature of services expected by our
customers is evolving at speed. The e-tail revolution fuelled by the change
in consumer behaviours continues to drive growth and present challenges
to suppliers, retailers and logistics providers alike, as companies look to
develop multichannel operations to deal with the rapid growth of mobile-
commerce sales. This provides a range of opportunities for companies
such as Wincanton to provide rapid response supply chain solutions with
longer term value add to meet changing consumer requirements.
The change in consumer behaviour is affecting other areas of the retail
sector too. As customers looked to control their finances and reduce waste
during the economic downturn, adopting a ‘little and often’ approach,
grocery shopping habits have been transformed. This has seen the
dramatic growth of convenience-store formats as consumers’ perception
of value changes and is no longer focused solely on cost. With the overall
convenience channel set to grow by 30% over the next five years, retailers
are continually looking how to differentiate themselves through the
provision of additional services, food-to-go and a greater community focus.
Trends, challenges and opportunities
During the year, the bi-annual UK Logistics Conference Index* identified
a number of trends, challenges and opportunities for our sector,
many of which are closely aligned with our strengths and strategy.
Confidence across the logistics industry continues to rise, with around
80% of respondents anticipating that both revenue and profitability
will improve in 2014. Increases in government and consumer spending
are regarded as the actions most likely to further boost the sector.
Government support and investment is likely to drive momentum in
construction, a key sector for Wincanton, with increased consumer
spending generating greater activity across the retail sector.
Over half of those surveyed see winning customers from competitors
as the most likely source of new business, while a third expect to grow
via new business from existing customers. Our investment in increased
marketing activity has already led to new customer contracts. At the same
time, we have an excellent track record for both retaining contracts and
extending the services we provide to existing customers. Efficiency gains
remain an important focus for many, with over a quarter citing the greater
use of technology as a potential platform for cost savings. Again, this
trend reflects our own strengths: we provide in-house technology and
systems platforms that minimise capital costs and risk for customers while
maximising efficiency.
The index found that the greatest sector opportunities lie in increased
collaboration with customers (27.9%), underlining the importance of our
focus on building and maintaining long term relationships across all our
sectors. Respondents also identified opportunities for growth by providing
more value-added services (18.6%), with winning new customers and
consolidation each measured at 16.3%.
As the nature of supply chain management evolves, one factor remains
constant: our commitment to building long term customer relationships
based on trust, innovation and proven performance.
Sources:
Analytica, CBI, FTA and ONS
* Barclays Logistics Confidence Index/Analytica March 2014
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Wincanton plc Annual Report and Accounts 2014
Strategic report
Our business
Organised
to serve our markets
The logistics market is increasingly complex and sophisticated, driven
by innovation and outstanding service. Our customers depend on
our experience and expertise to provide best-in-class solutions in two
distinct operating segments: Contract logistics and Specialist businesses.
Contract logistics
We provide contract logistics solutions to customers across a wide range of sectors and have
leading positions in the retail, construction and defence markets. Our services extend from
setting up and operating distribution services and networks to bonded warehouses and
technology hosting.
£0.9bn
Revenue
£38.3m
Underlying operating profit
Services
> Bonded warehousing
> Change management
> Co-packing
> Dedicated and shared user warehousing
> Home delivery solutions
> Multichannel fulfilment solutions
> Operational start-up services
> Returns management
> Road transport
> Supply chain consulting and system design
> Supply chain technology implementation
and hosting
15,500
Employees
200+
Locations
Strategic report
Our business
Governance
Accounts
5
Customer base includes:
> AgustaWestland
> Asda
> BAE Systems
> CEMEX
> Dairy Crest
> GlaxoSmithKline
> H J Heinz
> Home Retail Group
> Kiddicare
> Kingfisher Group
> Lafarge
> Marks & Spencer
> Morrisons
> The NHS
> Premier Foods
> Procter & Gamble
> Rolls-Royce
> Sainsbury’s
> Tesco
> Waitrose
Market sectors
> Construction
> Defence
> FMCG
> Fuels and energy
> Milk
> Retail:
– General merchandise
– Grocery
– Household and home
Specialist businesses
We have three specialist businesses which add
depth and expertise to our supply chain capability,
enabling us to support customers across the
breadth of their operations.
£0.2bn
Revenue
£9.7m
Underlying operating profit
Pullman
The UK’s leading independent commercial vehicle
repair and maintenance specialist, Pullman provides
the expertise that keeps many of the country’s
most high profile fleets on the road. It offers a 24/7
mobile service delivered by a UK-wide network of
experienced professionals.
Wincanton Records Management (WRM)
WRM is one of the UK’s most respected records
management companies. It provides a blue chip
customer base with services including secure
document and data storage, scanning, imaging
and shredding.
Containers
Our containers business includes transport and
storage as well as specialist capabilities such as tail lift
skeletal lifts that enable us to fill the containers on their
return journeys to port. We work closely with shipping
lines, freight forwarders, retailers and manufacturers,
using our logistics expertise to maximise the potential
of intermodal transport.
3,600
Operating responsibilities
for vehicles
13million
Square feet of warehousing space
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Wincanton plc Annual Report and Accounts 2014
Strategic report
Business model
Creating value
across the business
We manage sophisticated supply chain solutions, and provide excellent service levels
to blue chip organisations in the UK and Ireland. Our stable client base provides strong
forward revenue visibility typically through contracts of three to five years, with many
of our customer relationships extending to over 20 years.
Sophisticated supply chain solutions
Wincanton competitive advantage: innovation, people and assets
Almost everything
you buy for your
home or workplace
Skilled knowledge
and expertise of
our people
Proven
technology and
logistics systems
Sophisticated
warehousing
facilities, both
dedicated
and shared
Innovation
Our business is characterised by exclusive features that we have honed into
highly marketable competitive advantages.
We are the only provider with a UK-wide network of construction vehicles
with specially trained drivers. We are also the only one that can offer a
UK-wide network of fully trained technicians who work 24/7 to repair and
maintain commercial vehicles. At all times, in all operations, our objective is
to deliver benefits to our customers. For example, our bonded warehouse
facilities enable customers to store goods under duty suspension, with all
duties deferred until the point of despatch. In addition, we have created
start-up multichannel supply chain solutions that can be delivered in as
little as 12 weeks, as well as warehouse management systems that reduce
risk and capital outlay for customers.
However, we also demonstrate our commitment to innovation and
breaking new ground for our customers in many other ways. During the
year, we helped fund the new Centre for Sustainable Road Freight in
partnership with leading academic institutions including Cambridge
University to discover how innovation can reduce costs, carbon and
congestion by using fewer, larger and more efficient vehicles. In Northern
Ireland, larger vehicles became legal during 2013 and we were the first
company to be granted licences to use the new 14.6m and 15.65m
semi trailers.
In September our container business demonstrated its innovative
approach to customer service by rapidly changing supply routes when a
10,000teu ship deviated from its scheduled call to berth at the new London
Gateway port.
At WRM, we invested in a new mobile shredding vehicle in 2013 enabling
our customers to witness documents being destroyed on-site, providing
even greater data protection.
Our initiatives are frequently recognised in industry award schemes.
In 2013/14, we won the Supply Chain Project of the Year at Retail Week’s
Supply Chain awards for helping Kiddicare move from an online brand
into a true multichannel retailer with a major store presence around the UK
in just 16 weeks. We were also proud to receive a major industry honour
at the Motor Transport Awards for our Marks and Spencer home delivery
service. This service offers a two-hour customer delivery window and has
achieved a 98% customer satisfaction rating.
Strategic report
Business model
Governance
Accounts
7
59%
Open book operations
In open book contracts, we typically receive a management fee plus operating
costs for providing outsourced supply chain activities with the ability to earn
additional performance fees for meeting certain operational or financial targets.
We usually operate properties and vehicles for customers on their behalf.
Alternatively, we may take on these properties and vehicles, provided there is no
risk exposure at the end of the agreement. In the same way, we aim to transfer
on any employee-related liabilities at the end of a contract. This means that while
open book contracts provide relatively modest margins, they do not involve
substantial risk.
41%
Closed book operations
Closed book operations see us retaining the principal financial opportunity as well
as the risk. We seek to maintain higher margins across our closed book operations,
within the limits of a competitive market.
Owned and
managed vehicles
equipped with
latest technology
Multimodal
transport solutions
incorporating road
and rail
24/7 repair
and maintenance
Customer-
focused delivery
Delivered to home
Delivered to workplace
– Construction site
– Distribution centre
– Forecourt
– Hospital
– Office
– Retailer
– Theatre of operation
Maximising assets
Property and fleets are major investments. Through proactive
management, we work hard to enhance the value of our property portfolio
and therefore create competitive advantage, for us and our customers.
At the same time, we maximise the efficiency of our customers’ and our
own fleets by collaborating across sectors and customers. We also use our
nationwide network of distribution centres to enable new entrants to the
retail sector to reduce costs by sharing facilities.
People
We work hard to attract, develop and retain the best employees in our
industry. We recognise that perceptions of logistics do not reflect the
dynamic and technologically advanced nature of our work – and we invest
significant resources in repositioning our industry and raising its profile in
the UK and Ireland talent pool.
Customer service is at the centre of our proposition. We immerse our
people in our customers’ businesses, helping them to meet the highest
service expectations and to professionally represent our customers’ brands.
We transfer best practice across sectors, enabling emerging areas such as
online and convenience to benefit from experience gained in the more
mature outsourcing sectors.
Our Company is steeped in supply chain knowledge. However, we also
have teams of experts dedicated to each industry sector. From retail
and construction to defence, FMCG, fuels and the public sector, we
understand the challenges our customers face and shape our services
accordingly. Ensuring we optimise operational performance, and
continuous improvement, Lean Sigma techniques are utilised across the
business. All members of our senior team, including our Chief Executive,
are readily accessible to customers. Wincanton employees are regularly
acknowledged externally as among the best in the industry. In 2013, two
of our female employees won prestigious everywoman in Transport &
Logistics awards, including Director of the Year, while a Wincanton team
member was named The Road Transport Industry Training Board’s, Fork Lift
Operator of the Year.
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Wincanton plc Annual Report and Accounts 2014
Strategic report
Strategy
Delivering
our strategy
The Wincanton strategy is now well established
and we continued to make good progress
throughout 2013/14. We have also maintained
our reputation for operational excellence and
service delivery, while working hard to reduce
our impact on the environment. For more
details on how our strategy unfolded during
the year, please see the Chief Executive’s
statement on page 11.
Key contract wins and renewals
The year featured a number of significant contract wins and renewals,
including:
> American speciality retailer Williams-Sonoma, Inc chose Wincanton
to provide warehousing, store delivery and furniture home delivery
services for its first ever move into the UK market
> Construction materials supplier Marley Eternit appointed us to
distribute its cladding solutions, underlining our position as the
client’s sole distribution partner in the UK
> Building on a partnership that now goes back 15 years, Phillips 66
contracted us to deliver more than a billion litres of fuel and liquid
petroleum gas (LPG) per year
> Loaf.com, the UK’s fastest-growing homeware company, awarded
us a multichannel contract for nationwide warehouse and
distribution services
Our strategy is based on three pillars:
1
Continuing our operational focus on the UK and
Ireland, seeking to develop our existing service
propositions for customers across current and
new market segments
> Winning new customers and market share in existing sectors
> Concentrating on our core strengths and margin improvements
> Driving contract renewals
2
Establishing broader ‘supply chain solutions’
to unlock our customers’ potential and leverage
our strong capabilities in operations, systems
and processes
> Leveraging our strong capabilities in operations, systems and processes
to develop higher margin revenue streams
> Delivering operational excellence and great service
> Continually seeking to use innovation to minimise costs, carbon and
congestion, supported by partnerships with academia
3
Driving ongoing cost reductions and cash generation
> Continuing to reduce operating costs across the organisation
> Reducing the average level of net debt
Strategic report
Governance
Accounts
9
KPIs
Measuring our success
KPIs
The success of our strategy is measured by our performance
and demonstrated through the KPIs on this page.
Revenue
Underlying EBITDA
Underlying operating profit
£1,098.3m
1.1%
£63.4m
1.4%
£48.0m
14
13
12
£1,098.3m
£1,086.8m
14
13
£1,202.8m
12
£63.4m
£62.5m
£59.7m
14
13
12
6.0%
£48.0m
£45.3m
£42.6m
Underlying operating
profit margin
Underlying EPS
Net debt
4.4%
20bps
16.6p
24.8%
£64.9m
-39.7%
14
13
121
4.4%
4.2%
14
13
12
3.5%
13.3p
9.8p
16.6p
14
13
12
£64.9m
£107.6m
£114.5m
1 Where applicable, amounts relate to continuing operations only and have been restated to exclude the results of Culina Logistics Limited which
was sold in March 2012 and to reflect the impact of IAS 19 Employee Benefits (Revised)
10 Wincanton plc Annual Report and Accounts 2014
Strategic report
Chairman’s review
A solid
performance
Steve Marshall
Chairman
Wincanton has delivered another
solid trading performance in the
year. Strong levels of renewals,
a good stream of new business,
and a continued emphasis on cost
efficiency have all contributed to
a good operational performance.
Economic conditions in the UK and Ireland started to
improve during the year, most notably for the Group
in the construction sector. Other industry areas that
Wincanton serves, such as retail, have shown more
muted improvement and customers continue to remain
extremely focused on costs. We have shown an ability to
deliver against these cost challenges to provide excellent
value and important solutions for our customers as well
as improving the financial performance of the Group.
Results
Revenues of £1,098.3m represents a 1.1 per cent
improvement compared to 2012/13 revenues of
£1,086.8m. This has been underpinned by a strong
focus on securing key renewals in the year. The Group’s
continued attention to cost efficiency and value has
resulted in an increase in underlying operating profit
of 6.0 per cent from £45.3m to £48.0m. The result after
tax improved by 171 per cent from a profit of £10.1m to
a profit of £27.4m also benefiting from lower interest
charges in the year due to lower net debt levels as well
as the net pension gain of £15.8m, principally from the
closure of the defined benefit sections of the Group’s
pension arrangements to future accrual.
The Group continues to focus on reducing net debt and
improving its balance sheet position. Closing net debt
was reduced to £64.9m from £107.6m at the end of the
previous year. During the year the Group also closed the
defined benefit sections of its pension scheme to future
accrual in order to provide greater balance sheet stability,
to restrict future deficit volatility and to ensure the Group
remains competitive in its marketplace. The pension
scheme deficit at the year end stood at £110.9m
(2012/13: £148.7m) on an IAS 19 basis. The Board believes
that the focus should continue to remain on reducing
the debt level of the Group and has therefore concluded
that it is not appropriate to consider a dividend payment
at this time.
People and Board
Our people are the key to the excellent reputation
for operational delivery that Wincanton holds with its
customers. Throughout the year they have continued to
provide high levels of service and value to our customers
through their dedication, focus and innovation. I wish
to thank all of our employees for their commitment,
both to the business and to our customers, which is a
fundamental strength of our business.
Richard Adam joined the Board as a non-executive
Director with effect from 1 June 2014. Richard is Group
Finance Director at Carillion plc, a position he has
held since 2007 and was previously a non-executive
Director and Chairman of the Audit Committee of
SSL International plc. Richard is an experienced Group
Finance Director and Audit Committee chair. He also
has hands on experience of the competitive business
services and contracting environment of the type in
which Wincanton operates. From appointment, Richard
has joined the Audit, Remuneration and Nomination
Committees. It is envisaged that Richard will chair the
Audit Committee in due course.
After nearly nine years as a non-executive Director,
Jonson Cox stood down from the Board with effect
from 31 May 2014. Jonson leaves with the Board’s best
wishes for the future and with thanks for the personal
commitment he has shown and valued contribution he
has made to Wincanton during his time on the Board.
Outlook
In the coming year the Group’s strategy will remain
unchanged as it continues to focus on delivering high
levels of service and performance for its customers
and developing value added solutions to facilitate their
aspirations in a recovering economy. Together with
an ongoing focus on maximising the efficiency of
our assets we believe the Group will show continued
progress in the coming year. The Board remains fully
focused on cash generation in order to both manage
down the level of average net debt in the business
and to continue to meet our pension obligations.
Strategic report
Governance
Accounts
11
Chief Executive’s statement
Delivering
against our strategy
Eric Born
Chief Executive
This year has seen further good progress against our strategy.
We have continued to deliver profit growth with a second year
of clean trading results and have also substantially reduced net
debt levels.
The Group has delivered a strong stream of important
renewals in the year and has a valued and stable
portfolio of customer contracts underpinned by our
delivery of operational excellence in supply chain
logistics in the UK and Ireland. Our focus on managing
the risks in our balance sheet continued, with the
closure of the defined benefit sections of the Group’s
pension scheme to future accrual at the end of the
year and the transfer of the majority of active members
of this section into the Group’s defined contribution
pension arrangements.
Financial performance
Group revenue grew by 1.1 per cent to £1,098.3m in
2013/14 from £1,086.8m in 2012/13. The continued
focus on asset efficiency and cost control have
contributed to the 6.0 per cent underlying operating
profit improvement in the year from £45.3m to £48.0m
and the improvement in our underlying operating
profit margin from 4.2 per cent to 4.4 per cent.
Delivering against our strategy
Our strategy has remained unchanged and progress
against the strategic pillars is described below.
Continue to drive improvements in our existing
operations and service propositions
During the year the Group delivered a very strong
performance in renewing contracts with long-standing
customers. The Group’s success in renewals this year was
evidenced across all sectors. In our energy and tankers
business we successfully extended our partnership
with Valero for a further five years. This contract saw
us expand our responsibilities and scope by taking
over the scheduling and planning of their deliveries,
including taking and managing customer orders.
12 Wincanton plc Annual Report and Accounts 2014
Strategic report
Chief Executive’s statement continued
Establish broader supply chain solutions
We continue to leverage our expertise, systems and
infrastructure to add real value to our customers’
operations. During the year the Group had particular
success in delivering, often against tight deadlines,
start-up operations and major change projects for
our customers incorporating Wincanton project
management, process and systems design.
These solutions and consulting services enable
Wincanton to provide value enhancing services
to our customers and to generate improved
returns for the Group.
Building on our partnership with Morrisons we
successfully opened the second convenience store
distribution centre utilising our systems solution to
service their growing convenience store offering.
Similar to the first convenience store distribution centre,
we also provided significant project management
expertise to ensure the warehouse start-up and
systems infrastructure was brought on stream in time
for the launch of the service. Having set up, and now
running, four convenience store distribution centres
we have established ourselves as a leading logistics
partner for the convenience store format in the UK.
Our reputation for delivery of start-up operations
against tight deadlines and high quality operations
once open is a key service requirement in a major
target market for grocery retail customers.
An area of stronger performance in the UK economy
during the year has been in higher value household
and home merchandising. We were delighted that
our strong partnership with Marks and Spencer was
recognised when our home delivery team won the
award for Customer Care at the Motor Transport
Awards. Building on this successful offering of two
man home delivery we have also attracted and won
business from new and growing participants into this
market including Williams-Sonoma, Inc and Loaf.com.
Wincanton’s home delivery platform and scale enable
us to deliver speed, assurance and quality service
for multiple customers by leveraging the substantial
infrastructure that a Group such as ours can access.
This enables both Wincanton and our customers to
benefit from a lower cost to serve through shared use
of fleet, flexible warehousing and systems technology.
Fuelling ambition
We have expanded our partnership with petroleum refiner Valero.
Through a new, five year contract, we have now taken over the
scheduling and planning of fuel deliveries including receiving and
managing customer orders
This renewal will take our working partnership with
Valero to nearly twenty five years and represents clear
evidence of continued operational excellence for our
customers over a sustained period.
The Group also delivered a stream of new contract
wins across all sectors including new customers such
as US furniture retailer Williams-Sonoma, Inc and
Paul’s Boutique and new areas of work with existing
customers such as Morrisons.
We have focused our teams on building strong
relationships with customers to ensure they understand
their needs and the opportunities where we can help
add value to their businesses. This was evidenced in the
year through our Pullman business as it won important
new business with existing Group customers including
Argos and Asda. Pullman’s market leading operational
performance for customers combined with the strong
relationships the Group has with customers such as
these enabled it to succeed in competitive bids.
Strategic report
Chief Executives statement
Governance
Accounts
13
In the coming year we will continue
to enhance our own efforts to build
pipeline, win market share and capture
customer opportunities.
Eric Born, Chief Executive
The Wincanton Academy is now in its second year.
During the year 50 aspiring and junior managers
participated in key development programmes to grow
their skills and expertise around customer excellence,
leadership and commercial finance. Additionally,
the Group’s Apprenticeship Programme is now well
established and has seen 230 recruits during the
year commence this programme to gain further
qualifications and to develop and nurture their talents.
Priorities for the coming year
We have seen the impact of improved conditions in
the UK economy in areas such as construction and
higher value household and home merchandise
and we expect this to continue this year. However,
in major areas of the economy such as grocery retail
and FMCG our customers rightly remain efficiency
and cost-focused and we will continue to create
high quality operational delivery and supply chain
improvement initiatives, to drive the efficiency of
their logistics operations.
In the coming year we will continue to enhance our
own efforts to build pipeline, win market share and
capture customer opportunities through the cross
selling of products and services via improved business
development structures. We will also continue to build
on the work undertaken this year to constantly improve
the efficiency of our operating model across our
three main asset pools of people, property and fleet.
Further enhancements from these areas and continued
attention to detail on all costs will support improved
performance going forward.
Drive ongoing cost reductions and
cash generation
We continue to drive ongoing cost reductions across
the organisation. These benefit both our customers
in terms of lowering their cost of operations in open
book contracts and in improving our margins in
closed book contracts. This was evidenced in the year
by the improvement in our underlying operating
margin from 4.2 per cent in 2012/13 to 4.4 per cent in
2013/14. Using the skills and experience we have in the
business enables us to continue to improve efficiency
of operations, which in turn also enhances our ability to
retain business with customers.
Year over year the Group has substantially reduced the
level of closing net debt to £64.9m (2013: £107.6m) and
the average level of net debt to £168m (2013: £201m) as
a result of the focus on cash generation and improved
working capital management.
Our people
Our people are at the centre of our business and on
a daily basis are delivering high quality operations,
improving and enhancing supply chains and
implementing start-up operations and change projects
for our customers. I would like to thank them for their
dedication and performance during the year. They are
also key to the future success of the Group and we
strive to ensure that their welfare is maintained and
that they have the opportunities and environment in
which to develop.
The health and safety of our colleagues is of the highest
importance and the Group has significantly reduced
the number of reported incidents that occurred in
operations during the last year. There has been a strong
focus on targeting specific areas of the business for
improvement and for sharing best practice across
the Group. An example of this is in the roll out of an
innovative new safety strap methodology to ensure
safer unloading procedures at customer sites, which
was developed internally by one site and has now
been rolled out across similar operations with different
customers of the Group.
14 Wincanton plc Annual Report and Accounts 2014
Strategic report
Keeping home delivery
vehicles on the road
As the UK’s leading independent commercial vehicle specialist, Pullman
has confirmed its market leadership in the repair and maintenance of home
delivery vehicles. Pullman has a long history of helping retailers keep their
home delivery fleets on the road, minimising the number of customer
orders cancelled because of vehicle-related issues.
During 2013/14, Pullman was appointed by Asda to look after around half
of its growing home shopping fleet of 1,800 vehicles. The contract is for a
comprehensive fleet management solution that includes dedicated 24/7,
365 days a year repair and maintenance cover for Asda’s fleet of 3.5 tonne
home delivery vehicles. The new contract followed a highly successful
two year period that has seen Pullman provide a nationwide defect
management programme for Asda’s UK fleet of large goods vehicles (LGVs).
Late in 2013, Argos, the UK’s largest high street retailer, also awarded
Pullman a three year repair and maintenance contract for its fleet of
heavy goods vehicles (HGVs).
24/7
365 days per year UK
wide operation
98%
of breakdowns
fixed at roadside
97%
first time MOT
pass rate
15
We were adamant that we required
a partner that could help us meet
our promise of saving our customers
money every day. Pullman already
provides a comprehensive and
successful defect management
programme to our nationwide fleet so
we were well aware of its capabilities.
Sean Clifton, National Fleet Manager,
Asda
16
Wincanton plc Annual Report and Accounts 2014
Strategic report
Wincanton has proved itself a trusted and
experienced partner in the convenience
market. We have a true partnership
relationship and Wincanton’s team takes
the lead when it comes to progressing
new ideas and initiatives that add real
value to our operations.
Jerome Saint-Marc, Development Director,
Morrisons
250,000sq ft
Sainsbury’s 250,000 sq ft facility at Thameside, supporting
up to 200 convenience stores from London to Brighton.
17
Leading
Leading
the convenience sector
the convenience sector
The convenience sector is big business for retailers, with several major names
launching or expanding their presence. We have valuable expertise in this market,
and in 2012 Morrisons appointed us to manage transport and warehousing at
its first-ever dedicated UK convenience distribution centre in London. The project
management skills and technical ability we demonstrated were key to our success
in winning a new contract from Morrisons during 2013/14, this time to support
the expansion of its ‘M Local’ format in the north of England.
The year also saw the opening of a new £30 million Sainsbury’s distribution
centre, which is operated in partnership with Wincanton and supports the growth
of the supermarket’s convenience store network in London and the South East.
We now manage the logistics operation for most Sainsbury’s Local stores
across the capital, run four key distribution centres and are the sole providers
of Sainsbury’s port-to-distribution centre container movements in the UK.
18 Wincanton plc Annual Report and Accounts 2014
Strategic report
12 weeks
to deliver a risk-free start-up
for multichannel supply chain
Supporting
a new market entrant
Our proven track record was the deciding factor when US specialist retailer
Williams-Sonoma, Inc was seeking a logistics partner for its first move into the
UK market.
Known for its high quality furniture, rugs and cookware, Williams-Sonoma, Inc
wanted to work with a provider who could be trusted to protect its brand and
support an exceptional reputation for customer service. We helped the customer
achieve a risk-free start-up by identifying a suitable property, implementing our
multichannel IS solution, leveraging our people and fleet expertise. The result is a
sustainable and scalable multichannel supply chain solution created from scratch.
19
For our UK launch, we
needed a supply chain
partner that shares our
values and can be
trusted to deliver
operational excellence.
Dean Miller, Chief Supply Chain Officer,
Williams-Sonoma, Inc
20 Wincanton plc Annual Report and Accounts 2014
Strategic report
Wincanton has been an invaluable partner
on our journey to become one of the UK’s
leading trade retailers. Customer service is
a core differentiator for Screwfix, and
in Wincanton we have a logistics provider
with the expertise, experience and
commitment to help us continue to
deliver the highest standards of service.
Dave Lowther, Logistics and Supply Chain Director,
Screwfix
Strategic report
Overview
Strategic report
Review of strategy
Strategic report
Financial review
Strategic report
Working responsibly
Directors’ report
Accounts
239%
increase in
trade counters
11%
reduction in
transport costs
21
Enabling
dynamic growth
During the seven years of our value-added partnership, Screwfix has recorded
an outstanding financial performance based on consistent double-digit annual
growth. The number of trade counters has soared from 99 to 336, an increase
of 239%, while transport costs have reduced by 11%.
Customer service is Screwfix’s strength and key priority. The Company’s initial
vision was to be recognised as the best warehouse employer in Staffordshire
– and our efforts on Screwfix’s behalf were rewarded when the site won the
North of England Excellence Awards in 2011. Since then, while the workforce has
expanded to over 700, the challenge has been to attract and retain the high quality
employees who can drive further growth. Both warehouse sites we operate for
Screwfix have now achieved gold in Investors in People as well as ROSPA, and our
‘can do’ approach and commitment to service extends from drivers and warehouse
operatives to management.
22 Wincanton plc Annual Report and Accounts 2014
Strategic report
Corporate responsibility
Working
Responsibly
At Wincanton, our culture comes from a shared set of ideas,
beliefs and values as to what is important to us as a company,
and what drives value for our customers. For us, sustained
growth as a business is our primary objective, therefore we
focus on creating a sustainable future for Wincanton and
our stakeholders.
Number of employees
promoted through
management within the
Wincanton Academy
70%
Our people
People are the backbone of our business and we
strive to attract, develop and retain the best in the
industry. With the growth of online retailing, home
delivery services are assuming ever greater importance.
In many cases, the home delivery driver is the only
representative of the brand that the consumer will
meet, so it is increasingly vital that our employees have
a high level of personal skills as well as technical ability.
We have around 15,500 colleagues employed in the
UK and Ireland, with some 2,000 of these recruited
during 2013/14. Our people work in a wide range
of roles across the business, but are united in the
knowledge that common values will drive value for
our organisation and our customers. These values
are Integrity, Mutual respect, Passion, Accountability,
Commitment and Teamwork (IMPACT). We regularly
acknowledge the efforts of our people through
programmes such as ‘I made an IMPACT’ which
recognises those individuals who have made
outstanding contributions to the business.
Recruitment
We work hard to recruit the best people, from
seasoned professionals to graduates and school leavers.
We are a founding sponsor of the Novus Trust, a major
new initiative designed to encourage talented young
people to join the logistics sector. Novus is working
in partnership with the University of Huddersfield
to create a scheme in which students undertaking
a BSc degree in Supply Chain and Logistics will be
guaranteed a graduate job at the end of the course.
We also recognise the value that service personnel can
bring to our business in terms of reliability, commitment
and experience. During 2013/14, we continued to work
in a strategic partnership with the Career Transition
Partnership to enable people leaving the Ministry of
Defence to pursue new careers at Wincanton. Over the
coming months we will be attending various career
fairs for armed forces personnel, as well as conducting
site presentations at numerous garrisons to talk about
careers in Wincanton.
Learning and development
We provide a comprehensive range of training
opportunities, using internal resources as well as
external consultants, to help our people realise their
potential. For example, our BTEC apprenticeship
programme is now well established and at the end
of the financial year, over 200 people were working
towards our Improving Operational Performance
qualification. To date over 50 per cent of our workforce
has taken part in a vocational qualification in either a
transport or warehousing programme to level 2 or 3.
Supporting our managers
We employ talented, flexible individuals who have the
drive and potential to become our leaders of the future.
Launched in 2012, the Wincanton Academy provides
a tailored and supportive approach to learning
and development for all levels of employees, from
those who are completely new to a role through to
leadership and executive development.
During 2013, three key programmes were launched
to drive the development of individuals and create a
robust talent pipeline to support our business priorities.
Two programmes focus on team leadership and
first line management with the third one – Aspiring
General Manager – designed specifically to identify and
develop future leaders. Within six months of launching
this latter programme, 70 per cent of our participants
have been promoted and we continue to recruit new
applicants from across our business.
Health and safety
Safety is a top priority for Wincanton. Our approach to
health and safety focuses on developing behaviours
which identify situations that could lead to accidents.
Since focusing on Lost Time Incidents (LTIs) we have
seen an 11 per cent decline in the number mainly
due to the start of ‘Project Opportunity’, a framework
that focuses on increased risk-based planning and
colleague engagement. As a result, every sector has
reduced its lost time incidents from the previous year.
We encourage safe driving at all times and our Driver
of the Year competition, which was held for the ninth
time during the year, is recognised as an excellent
showcase for the skills and professionalism of our
drivers. During 2013/14, we also established a group to
examine how our operations can impact vulnerable
road users. Drawing on our experiences on the road,
we have created resources including a toolkit, stickers
and a DVD to educate drivers on blind spots and make
vulnerable road users more aware of the dangers
posed by large vehicles.
Strategic report
Corporate responsibility
Governance
Accounts
23
Environmental principles
Wincanton uses its environmental principles to
guide the Group in identifying and managing
the impact of its operations on the environment.
These principles are set out below:
1 Integrate
We will integrate environmental considerations into
key business decisions.
2 Develop
We will develop progressive products and
services that help our customers improve their
environmental performance.
3 Management systems
We will ensure operational excellence and legal
compliance through the operation of environmental
management systems and the provision of training
for employees.
4 Measure
We will monitor, measure and continuously improve
our environmental performance.
5 Communicate
We will communicate our progress to our customers,
employees and investors.
6 Carbon emissions
We will minimise the consumptions of fossil fuels
and the associated emissions of carbon dioxide,
and other greenhouse gases.
7 Resources
We will minimise our consumption of non-
renewable and environmentally sensitive resources.
8 Waste
We will minimise the amount of waste produced
through prevention, reuse and recycling.
9 Pollution
We will prevent ground and water pollution and
minimise emissions of airborne pollutants.
10 Communities
We will minimise the negative impact of our
activities on local communities and engage
positively with the communities in which
we operate.
Decline in Lost Time
Incidents
11%
Wincanton’s work in the community
The Co-operative food distribution centre in St Helens
after their 25 hour road trip for charity
Communities
We are committed to playing our part in our industry.
At a corporate level, we have been active supporters
of the international Transaid charity for more than a
decade. Transaid tackles poverty and disadvantage in
Africa and the developing world by helping to build
transport expertise and knowledge. In 2013, one of our
directors raised funds for Transaid by cycling 335km
from London to Amsterdam. The money will benefit
Transaid’s Professional Driver Training Project, which
aims to improve driving safety standards in sub-
Saharan Africa. Road accidents in this region are the
third-highest cause of premature death after HIV/AIDS
and malaria.
Our people are also encouraged to support good
causes in their own communities. Over the last
12 months our sites have taken part in initiatives to
promote breast cancer awareness, Children in Need
and road safety. Around 45 staff from our team at the
Co-operative Food distribution centre in St Helens
took part in a 25-hour road trip to Gibraltar that raised
£10,000 for the Carers Trust.
Environment
In June 2013, the Group refreshed and re-launched
its environmental strategy to reflect the positive
progress made against its objectives. The updated
strategy is available on the Group’s website at
www.wincanton.co.uk/how-we-work/environment
and provides more details in relation to the Group’s
environmental strategy.
The Group’s goal is to be the first choice for customers,
employees and investors from an environmental
perspective. Building a reputation as a company
delivering environmentally sustainable logistics
through a focus on operational excellence and
innovative product leadership supports this goal.
For our customers, we know that a well managed
supply chain plays a key role in mitigating their impact
on the environment. The Group therefore has an
important part to play in helping customers achieve
their wider environmental goals. The Group supports
customers by identifying efficiencies, promoting
collaborative working and by offering significant
expertise and experience in managing environmentally
sustainable logistics.
24 Wincanton plc Annual Report and Accounts 2014
Strategic report
Corporate responsibility continued
REDUCING CO2
YYEAR ON YEAR
Emissions from managed supplies tonnes CO2e
CDP disclosure scores
77%
1 Transport (Scope 1)
2 Non-transport (Scope 1, 2) 23%
2
75%
13
12
11
1
75%
70%
56%
Greenhouse gas (carbon) emissions
The Group recognises that continuous improvement
and operational excellence will be enhanced through
robust environmental governance and management
systems. Responsibility for the overall management
of the environmental programme at a Group level lies
with the Group Environment Committee, chaired by
the Business Transformation Director who is a member
of the Executive Management Team.
The environmental management system operated
across the Group is certified to ISO14001 and we have
also been certified against the Carbon Trust Standard
since 2010.
The Group’s business segments have in place
measurable objectives and targets for improving
environmental performance, with environmental
reporting integrated into the Group’s reporting
systems. This integrated reporting enables business
segments to measure performance on a monthly
basis for a range of indicators, which support them in
reducing carbon emissions.
Wincanton has prepared its carbon emissions
information in line with the guidance provided
by the Carbon Disclosure Standards Board (CDSB)
Framework 1.1, which recommends that greenhouse
gas (GHG) emissions are reported for the same entities
as those for which financial statements are produced.
Emissions categorisation and organisational boundaries
are as per the GHG Protocol Corporate Standard for
operational control. Carbon Factors are as per Defra/
DECC conversion factors for company reporting 2013
with both electricity generation and distribution
emissions being included in the scope 2 emissions.
Wincanton currently records energy and fuel use for
managed supplies, which includes all supplies that
are wholly or partially managed at sites operated
by Wincanton for itself or its customers, irrespective
of whether the fuel and/or energy is purchased by
Wincanton. Emissions sources included are transport
diesel, LPG and LNG; mains electricity and natural gas;
gas oil and LPG for non-transport uses, and fuel for
business travel in Wincanton driven vehicles.
Wincanton has also included its consumption of
refrigerant fluorinated gases as a scope 1 emission.
No emissions sources have been excluded on the basis
of a Wincanton defined materiality threshold.
Total Wincanton scope 1 and 2 carbon emissions for
the year ended 31 March 2014 were 381,917 tonnes of
carbon dioxide equivalent (tCO2e).
Carbon intensity ratio
The Group has set internal targets for carbon emissions
reduction which are absolute in nature and which
encourage the Group to try to decouple emissions
performance from business performance. However,
changes in business activity levels do drive changes in
emissions and we therefore utilise a ‘carbon intensity’
measure to optimise the carbon efficiency of our
operations wherever possible.
Wincanton defines carbon intensity as total scope 1
and 2 carbon emissions from managed supplies per
unit of revenue.
Wincanton’s carbon intensity ratio for the year ended
31 March 2014 was 350 tCO2e per £m of revenue.
External reporting
Wincanton has been certified against the Carbon
Trust Standard since 2010 and is a participant in the
UK CRC Energy Efficiency Scheme. All CRC qualifying
emissions are included in our scope 1 and 2 carbon
emissions figures.
Wincanton has been submitting fully collated data to
the CDP for the past three years. The CDP, formerly the
Carbon Disclosure Project, is the leading international
index of climate change and carbon management
maturity for companies.
Since 2011 our CDP disclosure score has increased
from 56 per cent to 75 per cent highlighted in the
chart above.
Strategic report
Corporate responsibility
Governance
Accounts
25
in TRANSPORT
& LOGISTICS AWARDS
Expected reduction in
electricity, carbon and
maintenance costs at our site in
Corby compared to traditional
warehouse lighting
70%
Motor Transport, everywoman, Retail Week
Supply Chain Awards
Our people and innovative solutions are frequently recognised in
industry award schemes including Retail Week’s Supply Chain
Project of the Year and Motor Transport’s Customer Care Award
Other environmental impacts
In addition to managing carbon emissions, the Group
manages other environmental impacts including water
usage and waste. Examples of some of the initiatives
undertaken in the year ended 31 March 2014 are set
out below.
Lighting at Corby – Following a change to the layout
of our distribution centre in Corby, to accommodate
increased volumes, new lighting was required
to match the revised racking layout. 64 LED light
fittings with programmable sensor controls were
chosen. Feedback from employees has been very
positive. Light levels appear brighter and the more
natural tone of light compared to more traditional
lighting technologies provides an even better work
environment. Electricity, carbon and maintenance costs
are expected to reduce by 70 per cent compared to
traditional warehouse lighting.
Waste reduction at Branston – Certain products
of a retail customer were delivered from Europe in
chipboard shippers. Once the products had been
picked, the chipboard shippers could only be used as
fuel through an energy recovery plant at significant
cost to the customer. Given the Group’s expertise
in packaging innovation, Wincanton worked with a
supplier to design and trial a new size of corrugated
shipper. As a result approximately 250 tonnes of waste
chipboard per year have been eliminated and replaced
with recyclable cardboard.
Savings from eliminated chipboard and associated
handling costs and revenue from recyclate are
expected to reduce costs by £40,000 per year.
Heat reduction at Wigan – The Group continues to
challenge and progress opportunities with a leading
manufacturing customer to reduce waste and provide
sustainable energy solutions. In addition to internal and
external LED lighting, rapid rise doors and movement
and lux sensors on warehouse lighting, the Group has
developed and implemented an innovative solution
to utilise heat retained in new product following its
delivery from the manufacturing plant. A cost effective
solution was put in place to move the warm air to
other areas of the distribution centre. In the early stages
of operation, a reduction in month-on-month gas
consumption of 30 per cent has been realised.
Cool running at Sherburn – Deliveries for a leading
retailer are made on multi-temperature vehicles
with compartments for chilled, ambient and frozen
products. The frozen compartment was being
chilled to minus 25°C. A trial was run to increase the
temperature of the frozen compartment to reduce
energy use. During the trial period savings of over
110,000 litres of gas oil were made with no loss of
product quality. This will deliver annual savings of
approximately £150,000.
Winners of Wincanton’s Driver of the Year
Wincanton’s commitment to safety and driver training culminates
in its Driver of the Year competition. Fuel reduction techniques are
also given high priority
26 Wincanton plc Annual Report and Accounts 2014
Strategic report
Financial review
Maintaining a strong revenue
visibility, improving profitability
and reducing net debt
Adrian Colman
Group Finance Director
Underlying operating profit grew
by 6.0 per cent to £48.0m and
underlying operating margin
increased from 4.2 to 4.4 per cent.
Reduced net debt levels
throughout the year lowered
finance charges resulting in 25
per cent underlying EPS growth.
Change
+1.1%
+1.4%
+6.0%
20bps
+20.2%
+24.8%
Performance summary
Revenue
Underlying EBITDA
Underlying operating profit
Underlying operating margin (%)
Net financing costs
Underlying profit before tax
Amortisation of acquired
intangibles
Impact of pensions changes
Profit before tax
Underlying EPS (pence)
Net debt
2014
£m
2013
restated1
£m
1,098.3
1,086.8
63.4
48.0
4.4%
(22.4)
25.6
(6.5)
15.8
34.9
16.6p
(64.9)
62.5
45.3
4.2%
(24.0)
21.3
(7.3)
–
14.0
13.3p
1 Comparatives have been restated for the adoption of IAS 19 Employee Benefits (Revised). See note 23 to the financial statements.
(107.6)
–39.7%
Strategic report
Financial review
Governance
Accounts
27
Contract logistics 2013/14
Contract logistics 2012/13
£923.2m 1 Retail grocery
£236.4m
2 Retail general
£232.5m
merchandise
3 FMCG
£170.5m
4 Tankers and bulk £122.9m
£106.8m
5 Construction
£54.1m
6 Other
6
5
4
3
1
2
Contract logistics
The Contract logistics business reported revenues of £930.1m in the year,
a 0.7 per cent increase compared to the £923.2m reported in the year to
31 March 2013. The contractual split of this segment between open and
closed book remains relatively constant at 69 per cent (2013: 67 per cent).
Underlying operating profit for the year was £38.3m, 3.8 per cent up on
the £36.9m reported in 2012/13. The improvement in profitability primarily
reflects continued operational efficiency in the year.
The split of Contract logistics activities revenue by sub-sector is as follows:
Construction
FMCG
Retail grocery
Retail general merchandise
Tankers and bulk
Other
2014
£m
126.1
171.6
243.7
230.5
99.0
59.2
930.1
2013
£m
106.8
170.5
236.4
232.5
122.9
54.1
923.2
The overall 0.7 per cent increase in revenues in this sector is a combination
of underlying customer volume increases, principally in the Construction
sector, which drive up the activities in Wincanton’s operations, plus a net
gain in revenues from operations commencing, over those ending in
the year.
New business start-ups successfully going live in the year included
second convenience distribution centre operations for both Morrisons
and J Sainsbury, transport network operations for Coca Cola and
warehouse services for new UK market entrant Williams-Sonoma, Inc, a US
furniture retailer. In addition to new customers a number of key renewals
were secured in the year including a fuel distribution contract for Valero
(five years), network transport operations for GSK (two years), co-packing
and container operations for Procter & Gamble (three years), Pernod Ricard
(five years) and Brett Landscaping and Building Products (three years).
We continue to develop long term partnerships with existing customers
and over the last year have contracted with WHSmith and Phillips 66 taking
the relationships to 20 years and 15 years respectively.
The decline in Tankers and bulk revenues reflects contracts lost in 2012/13
where residual revenues for part of the year remained in 2013/14 prior to
the contracts ending.
£930.1m
0.7%
£243.7m
1 Retail grocery
2 Retail general
£230.5m
merchandise
3 FMCG
£171.6m
4 Tankers and bulk £99.0m
£126.1m
5 Construction
£59.2m
6 Other
6
5
4
3
1
2
In the year ended 31 March 2014,
Wincanton reported revenue of £1,098.3m
(2013: £1,086.8m), which represents a year
on year increase of 1.1 per cent.
Underlying operating profit grew by 6.0 per cent to £48.0m (2013: £45.3m),
providing an underlying operating margin of 4.4 per cent up from 4.2 per
cent in the prior year reflecting the impact of continuing efforts to improve
operational efficiency and cost control. Following the adoption of IAS 19
Employee Benefits (Revised) with effect from 1 April 2013, the prior year
underlying operating profit has been restated from £46.5m to £45.3m to
account for pension scheme administration charges, previously included in
financing charges and now reflected in operating profit (see note below).
The Group reported a net pension gain in the year of £15.8m in respect of
a programme of changes made to its pension arrangements, principally
the closure of the defined benefit sections of the Wincanton plc Pension
Scheme (the Scheme) to future accrual.
Net financing costs were £22.4m (2013: £24.0m), £1.6m lower year on year.
Financing charges principally comprise interest payable on loans plus other
financing items of £16.0m in total (2013: £18.4m) and £6.4m (2013: £5.6m)
of pension financing charge, a non-cash item in respect of the UK defined
benefit arrangements. This latter item for 2012/13 has been restated from
a credit of £4.0m to a charge of £5.6m following the adoption, on 1 April
2013, of IAS 19 Employee Benefits (Revised).
Profit before taxation of £34.9m compares to £14.0m in the prior year.
Tax in the year was a charge of £7.5m compared with £3.9m in the prior
year, restated from £6.5m following the adoption of IAS 19 Employee
Benefits (Revised).
Underlying earnings per share of 16.6p represents an increase of 24.8 per
cent from 13.3p in the prior year. On an overall basis the earnings per share
was 23.6p compared with 8.7p in 2012/13.
Trading
2014
£m
2013
restated
£m
Contract
logistics
930.1
Specialist
businesses
Total
168.2 1,098.3
Contract
logistics
923.2
Specialist
businesses
163.6
Total
1,086.8
38.3
48.0
9.7
4.1% 5.8% 4.4%
36.9
4.0%
8.4
5.1%
45.3
4.2%
Revenue
Underlying
operating
profit
Margin
The Group’s internal management structure aligns the Group under two
sectors, Contract logistics which is a provider of supply chain logistics
solutions and services and Specialist businesses of Containers, Wincanton
Records Management and Pullman. This structure has been constant
in both years to 31 March 2014 and hence the segments disclosure
remains unchanged.
28 Wincanton plc Annual Report and Accounts 2014
Strategic report
Financial review continued
Specialist businesses 2013/14
£168.2m
2.8%
1 Containers
2 Pullman
3 Records
Management
£78.5m
£68.6m
£21.1m
3
2
1
Specialist businesses 2012/13
£163.6m
1 Containers
2 Pullman
3 Records
Management
£76.8m
£67.7m
£19.1m
3
2
1
Caring for customers
With a 98% customer satisfaction rating, the home delivery service we
provide to Marks and Spencer is not just pleasing customers – it is also
winning praise from our industry. In May, we were presented with the
Customer Care Award at the Motor Transport Awards, in recognition of
the innovation, outstanding service, efficiency and quality of our service
Specialist businesses
The Specialist business segment of the Group comprises container
transport activities, Wincanton Records Management, which provides a
full suite of document storage and associated scanning and shredding
services, and the vehicle maintenance and repair business Pullman.
Revenue for this segment was £168.2m, 2.8 per cent up on the previous
year of £163.6m. Continuing tight focus on cost control and asset efficiency
improved underlying operating margin to 5.8 per cent (2013: 5.1 per cent)
and underlying operating profit of £9.7m was achieved (2013: £8.4m).
These Specialist businesses operate almost entirely under a closed
book model. Whilst the three activities are identifiable sub-sectors, and
for information the revenue split is given below, these are managed as
one segment.
Containers
Pullman
Records Management
2014
£m
78.5
68.6
21.1
168.2
2013
£m
76.8
67.7
19.1
163.6
The Container transport market continues to be weak in the UK with
limited overall volume and as such the business has focused on growing
activity levels with new and existing customers. Further, the business has
been very focused on cost control and fleet efficiency in the year.
Pullman’s trading was solid in the year. Revenues in the year increased over
the prior year, in particular due to new contract wins with Asda for around
half of its 1,800 vehicle home shopping fleet and Argos for HGV repair and
maintenance servicing in the second half of the year.
Records Management produced a strong organic growth performance,
gaining new customers across existing and new sectors together with
some ancillary activities such as shredding and scanning.
Changes to pension arrangements
The Group reported a net pension gain in the year of £15.8m in respect of
a programme of changes made to its pension arrangements, principally
the closure of the defined benefit sections of the Scheme to future
accrual. On 16 October 2013 the Group announced that it was entering
into consultation with active members of the defined benefit sections
of the Scheme over the proposal to close these sections of the Scheme
to future accrual. Following the conclusion of the consultation process
the closure took place with effect from 31 March 2014. Additionally, the
Group implemented a liability management programme which principally
comprised a Pension Increase Exchange option for current pensioners and
retiring members.
Net financing costs
Bank interest payable on loans/leases
Interest receivable
Net interest payable
Discounts unwinding re provisions
Pension financing item
Net financing costs
2014
£m
14.4
(0.4)
14.0
2.0
6.4
22.4
2013
restated
£m
16.6
(0.6)
16.0
2.4
5.6
24.0
Financing costs related to the Group’s debt of £14.4m reduced by £2.2m
compared to the prior year charge of £16.6m, principally due to the lower
average debt in the year which was £33m lower at £168m (2013: £201m).
Taxation
The tax charge of £7.5m (2013: £3.9m) reflects an effective tax rate on
underlying profits of 24.6 per cent (2013: 27.7 per cent). This reduction is
largely a result of the drop in the main UK corporation tax rate from 24 per
cent to 23 per cent, as offset by certain disallowable expenditure. Whilst the
main UK corporation tax rate is expected to ultimately trend to 20 per cent
by 2015/16, the factors influencing the effective tax rate in 2013/14 are
expected to remain reasonably constant, resulting in an effective tax rate
continuing slightly above the headline UK rate for the foreseeable future.
Strategic report
Financial review
Governance
Accounts
29
Open and closed book 2013/14
£1,098.3m
1.1%
1 Open book
2 Closed book
59%
41%
Open and closed book 2012/13
£1,086.8m 1 Open book
2 Closed book
57%
43%
2
1
2
1
Cementing plans
We have a long established relationship with
cement company CEMEX to deliver
building products and packed aggregates
to UK construction sites. In 2013/14, we won
a new three year contract for the planning
and transport of bagged cement from the
CEMEX plant at Rugby to UK construction
sites, retailers and wholesalers
The Group paid cash tax in the current year of £2.4m, an increase of
£2.1m on the prior year payment of £0.3m, primarily as available tax losses
have been utilised. The cash tax payable continues to trend below the
underlying charge due to the impact of the pension deficit recovery
payments made in the period. This is expected to continue going forward.
The total deferred tax asset carried forward at 31 March 2014 has decreased
to £24.0m (2013: £32.9m), primarily as a result of the decreased pension
deficit and the deferred tax asset thereon.
Profit after tax, earnings per share and dividend
The profit after tax reported for the Group for the year of £27.4m compares
to £10.1m in 2012/13.
These retained earnings translate to a basic EPS of 23.6p (2013: 8.7p). As set
out in note 7 the Group reports an alternative, underlying EPS figure which
excludes the impact of pensions changes and amortisation of acquired
intangibles, which has increased year on year by 24.8 per cent to 16.6p
from 13.3p.
The Group has not declared or paid a dividend this year in line with its
continuing objective to reduce net debt.
Impact of adoption of IAS 19 (Revised) – restatement
of comparatives
The net pension financing item for the prior year has been restated for the
adoption of IAS 19 Employee Benefits (Revised), which became effective
for the Group on 1 April 2013 and as a result the pension financing item
is now a net charge. This arises as the revised standard requires the same
discount rate, based on AA Corporate bonds, to be applied to both the
assets and liabilities of the Scheme rather than as previously applying a
future rate of return to the assets. The restatement of the year to 31 March
2013, which was first reported in the Group’s half year statement to
30 September 2013, shows first a £10.8m increase in financing charges with
a corresponding credit in the Statement of comprehensive income within
the remeasurements of defined benefit liability. Secondly, the revision to
IAS 19 required any administration expenses of the scheme previously
incorporated in the return on assets to be taken as a charge in operating
expenses. This has resulted in a £1.2m reduction in operating profit
matched by a corresponding reduction in net financing costs.
Based on the above, the restatement of the reported results for the Group
in the year to 31 March 2013 is summarised below. There was no impact on
the reported net assets/liabilities of the Group.
As previously
reported
£m
39.2
(14.4)
24.8
15.8p
20.4p
Return on
assets
£m
–
(10.8)
(10.8)
Admin
charges
£m
(1.2)
1.2
–
Incorporating
IAS 19
adjustment
£m
38.0
(24.0)
14.0
8.7p
13.3p
Operating profit
Net finance charges
Profit before tax
Basic EPS
Underlying EPS
Financial position
The summary financial position of the Group is set out below;
Non-current assets
Net current liabilities (ex net debt)
Non-current liabilities (ex net debt/pension deficit)
Net debt
Pensions deficit (gross of deferred tax)
Net liabilities
2014
£m
191.2
(215.0)
(50.4)
(64.9)
(110.9)
(250.0)
2013
£m
220.4
(191.2)
(59.4)
(107.6)
(148.7)
(286.5)
The movement in the year of £36.5m is principally due to retained profit
for the year of £27.4m and the remeasurement in the pension deficit net
of deferred tax of £5.9m. The retained profit includes the impact of the
changes to the Group’s pension arrangements principally the curtailment
gain arising from the closure of the defined benefit sections of the Scheme
to future accrual.
30 Wincanton plc Annual Report and Accounts 2014
Strategic report
Financial review continued
Financing and covenants
The Group’s committed facilities at the year end were £304m. Headroom in
committed facilities at 31 March 2014 was £239m.
The Group also has additional operating overdrafts which provide day
to day flexibility and amount to a further £12m in uncommitted facilities.
Sterling and Euro pools are operated and whenever possible, surplus cash
is netted against overdrafts.
The Group refinanced the main bank facility in November 2011 for a period
of four years. Following the first £10m amortisation effective in November
2013, the main bank facility is now £175m. The bank facility expires in
November 2015, and the £75m term loan from the Prudential/M&G UK
Companies Financing Fund LP expires in January 2022, with four equal
repayments commencing in January 2019. The Group’s facilities also
include the balance of the US Private Placement debt of £54m, which
expires in tranches of £34m (December 2015) and £20m (November 2016).
The Group maintains a mix of hedging instruments (swaps) to give an
appropriate level of protection against changes in interest rates. At the
year end £75m (2013: £70m) of debt was at fixed rates, and the balance at
floating rates.
Wincanton operates comfortably within its banking covenants, as
summarised in the table below:
Covenant
Adjusted net debt : EBITDA
Interest cover
Fixed charge cover
Ratio
<2.75:1
>3.5:1
>1.4:1
At 31 March 2014
1.55
5.15
1.86
The covenant ratio of adjusted net debt to EBITDA moves to < 2.5:1 as at
31 March 2015.
Net debt and cash flows
Group net debt at the year end was £64.9m (2013: £107.6m) a net cash
inflow of £42.7m. This cash generation in the period reflects cash generated
from operations, lower capital expenditure in the year, as compared to
prior years and the receipt of c. £5m from the sale of a surplus freehold
property. Additionally, improved working capital management throughout
the year has contributed to the reduction. The Group’s average level of net
debt during the year was also reduced by £33m from £201m in 2012/13 to
£168m in 2013/14.
The Group’s cash flows can be summarised in the following table:
Underlying operating profit
Depreciation and amortisation
EBITDA
Capital expenditure net of asset disposals
Net financing costs
Pension deficit payment
Onerous leases
Working capital movement/tax/other
Total
2014
£m
48.0
15.4
63.4
(1.7)
(13.6)
(14.1)
(10.2)
18.9
42.7
2013
restated
£m
45.3
17.2
62.5
(4.6)
(13.6)
(13.6)
(10.9)
(12.9)
6.9
The amount of cash interest paid reduced in the year reflecting the
lower level of average net debt compared to the prior year. The average
borrowing rate on debt including all fees, but excluding the non-cash
items of discounts unwinding and pension financing charges, is 7.7 per
cent (7.4 per cent in 2012/13).
Capital expenditure totalled £7.9m (2013: £11.1m). The year on year
reduction is largely as a result of a continued focus on cash generation and
the timing of spend on certain capital projects, elements of which will flow
into 2014/15. During the year the Group disposed of a surplus freehold
property in Runcorn for £4.8m, a level approximately equal to the net
book value.
In March 2012 the Group made provision for the onerous property liabilities
which were identified as having arisen due to the then change to market
conditions and a charge of £34.1m was recognised as a result, adding
to existing provisions. The cash outflows in respect of these liabilities in
the year ended 31 March 2014 were £10.2m. In the forthcoming year to
31 March 2015 these are forecast to be £12–15m and in subsequent years
the annual payments are expected to materially reduce as leases expire or
properties are utilised/sublet.
Strategic report
Financial review
Governance
Accounts
31
Closing net debt and average net debt have
declined by 39.7% and 16.4% respectively.
Adrian Colman, Group Finance Director
Pensions
The Group operates a number of pension arrangements in the UK
and Ireland.
Defined benefit arrangements
The Wincanton plc Pension Scheme (the Scheme), which has now closed
its defined benefit sections to future accrual (see below), had an IAS 19
deficit of £110.9m (2013: £148.7m) (£88.7m net of deferred tax) at the year
end. The deficit has reduced due to the changes to the Scheme detailed
below, together with an increase in the market value of the investments.
The discount rate has remained consistent with the prior year at 4.5 per
cent. Each 0.1 per cent movement in the rate impacts the liabilities of the
scheme by 1.7 per cent, currently some £15m.
The Group closed the defined benefit sections of the Scheme to future
accrual on 31 March 2014. Pension benefits built up to the date of closure
will be preserved. The affected members were offered alternative
pension provision within the Group’s range of defined contribution
pension arrangements and the majority have taken advantage of this
offer. The Group is also implementing a Pension Increase Exchange (PIE)
project where current pensioners and retiring members may elect for a
higher initial pension payment in exchange for foregoing certain rights to
future pension increases. As a result of the above changes, the Group has
reported a one off, non-cash credit of £20.2m (£15.8m net of associated
implementation costs).
The triennial valuation as at 31 March 2011 was finalised with the Trustee
in June 2012 with a technical provision basis deficit agreed of £189.5m.
The additional cash contribution made in the current year to fund the
deficit was £14.1m as part of the recovery plan set at the conclusion of the
last valuation. Going forward the payment profile agreed with the Trustee
increases the deficit recovery payment by RPI each year through the
recovery period to 2022/23. The next triennial valuation will be based on
the position as at 31 March 2014.
The approximate membership data split by key categories is as follows:
Actives
Deferred
Pensioners
2014
–
9,080
7,010
16,090
2013
1,360
8,160
6,790
16,310
Over recent years the Trustee has pursued a diversification of the
investment portfolio as part of a de-risking strategy and the programme
has continued in 2013/14 with changes to both the return-seeking and
matching portfolios. A trigger mechanism is being used to reduce the
return-seeking asset allocation as the funding level improves and at
31 March 2014 the target allocation remains unchanged from 31 March
2013 at 60:40 return-seeking to matching. During the year both the overall
market and the funding level have been impacted by the continuing
low interest rate environment albeit offset by a credible investment
performance. As part of the derisking strategy the Trustee, in conjunction
with the Company, has put in place liability hedging arrangements in the
year covering c. 30 per cent (2013: c. 10 per cent) of the interest rate and
inflation exposure of the Scheme.
Defined contribution arrangements
The Group’s defined contribution arrangements include the Retirement
Savings Section and Pension Builder Plan in the UK and a separate similar
local scheme in Ireland. Active membership of these schemes was 4,246
(2013: 3,650) in the year. In 2014 these schemes have been augmented by
a new auto enrolment section in line with the Government’s requirement
to offer pension arrangements to all employees. A further c. 10,000
employees became eligible to join this part of the scheme in June 2013
and the vast majority have done so. The income charge incurred for these
arrangements total £10.9m (2013: £7.9m).
Adrian Colman
Group Finance Director
The Strategic report as set out on pages 1 to 33 has been approved by
the Board.
On behalf of the Board
Stephen Williams
Company Secretary
32
Wincanton plc Annual Report and Accounts 2014
Strategic report
Risk
Principal risks
and uncertainties
Principal risks and uncertainties
In this section, we describe our key risk management and assurance
mechanisms and the principal risks and uncertainties that we consider to
be material and that may have a significant effect on the Group’s financial
position, results of operations and/or reputation.
Risk agenda
The Group faces a diverse range of risks and uncertainties that may
adversely affect it. The Group’s approach to risk management is designed
to encourage clear decision making as to which risks the Group takes and
how these are managed, based on an understanding of the potential
strategic, commercial, financial, compliance, legal and reputational
implications of these risks.
The Group works to ensure that effective risk management processes
are in place to support the delivery of its strategy. The Group monitors
its activities and external and internal environments for new, emerging
and changing risks to ensure that these are appropriately managed as
they arise.
The Board believes that the processes that are in place provide it with
sufficient information on the key risks and uncertainties faced by the
Group. The lines of responsibility for managing risk in the Group are set out
as follows:
Risk assessment
Ultimate responsibility for setting the Group’s risk appetite and for the
effective management of risk rests with the Board. Acting within authority
delegated by the Board, each key risk is owned by a member of the
Executive Management Team. The following structures are in place to
support the assessment of risks.
(cid:116) Key business risk reviews: An annual assessment of key risks
throughout the Group with the outputs presented to the Executive
Management Team and the Audit Committee.
(cid:116) Risk Committee: A Committee introduced to monitor the risk
management structures and support management in embedding risk
management throughout the Group.
(cid:116) Control risk self-assessment: A self-assessment programme introduced
to support the mitigation of key operating risks throughout the Group.
A risk register for each business segment is maintained and regularly
reviewed by the relevant segment management team. The Executive
Management Team consolidates the business segment risk registers to form
the Group risk register, which is monitored by the Board.
All risks are scored, using a 5 x 5 matrix, taking into consideration the
likelihood of an event occurring and the impact of that event. Likelihood is
based on the chance of an event occurring in the next 12 months on a five
point scale from ‘rare’ (less than five per cent change) to ‘almost certain’
(with a chance greater than 80%). The impact of an event is considered
within five categories; financial; operational; personal injury; reputation; or
compliance. Each impact category has a detailed definition across a five
point scale from ‘insignificant’ to ‘fundamental’. Where appropriate, impact
is considered in relation to the scale of the business sector in which the risk
has been identified.
Risk response
Once risks have been assessed, an appropriate mitigation response is
determined for each significant risk identified. The mitigation response
will depend upon the impact and likelihood assessment and, for example,
may consist of a control action or insurance. The risk mitigation response
reduces either the likelihood of the risk occurring or the impact on the
Group if the risk does occur, or both.
Business continuity planning
The Group has detailed plans in place to ensure an immediate and
appropriate response to a disaster. During the year under review, the Group
has enhanced its resilience in terms of IT disaster recovery by migrating
certain business critical applications and services to a new data centre.
Whistleblowing
The Group has in place a code of conduct, which all employees are
required to adhere to. The code of conduct sets out the ethical standards
expected and includes details of how matters can be raised in strict
confidence. Employees are encouraged to first talk to their line manager,
their manager’s line manager or to call the central HR team directly.
Principal risks
The Group risk register identifies the principal risks facing the business
as a whole, including those that are managed directly at Group level.
Summarised below are the key risks that have been identified and that
could have a material impact on the Group’s reputation, operations
or financial performance. A number of other risks reflect social and
ethical issues.
Strategic report
Risk
Governance
Accounts
33
Health and safety
Strategic market
position and ongoing
commercial operations
Risk
The Group’s operations take place in a diverse
range of operating environments. These
operations require ongoing monitoring and
management of health and safety risks in
order to ensure a safe working environment
for our employees and others we engage
with. A failure to manage these risks properly
may give rise to significant potential liabilities
from the Group’s interaction either with the
public or employees.
The Group acts in a competitive and
complex market and with large and
sophisticated customers. The Group has
distinct commercial pressures in maintaining
levels of revenue and margin from
existing customers, building new business
relationships and maximising the utilisation
of assets.
Legal compliance
The Group acts within jurisdictions, markets
and sectors which are highly regulated or
covered by significant legislation.
Net debt and
pensions deficit
The compliance with the covenant structures
in the Group’s financing arrangement, the
future refinancing of the existing debt and
the management of the Group pension fund
are key to the future financial sustainability
of the Group.
Mitigation
The Group maintains detailed health and safety
procedures and processes which are managed
by a team of dedicated health and safety
professionals. The team focus on developing
behaviours which identify situations that could
lead to accidents as well as supporting and
advising operational management and running
a programme of site reviews and audits.
The Group maintains a consistently high level
of operational performance. Furthermore, a high
quality business development team exists to
identify opportunities in the third party logistics
market and the benefits to Wincanton in that
market. Dedicated teams exist to manage
ongoing customer relationships and contract
renewal processes within the Group’s defined
frameworks. In addition the Group is focused on
clearly articulating its existing as well as developing
innovative solutions in the logistics market place.
The Group employs internal and external subject
matter experts, supported by legal counsel, to
set policy and monitor application including risk-
based testing programmes. The Group maintains
programmes of appropriate staff training to
ensure legal compliance, operational efficiencies
and to minimise mistakes. This is backed up with
comprehensive record keeping policies. Finally,
appropriate IS management processes and
governance exist to ensure system access controls
operate and to monitor movements of our own
and, where relevant, our customers’ data.
The Group is acutely focused on growing
operating profit and generating free cash
flow to enable it to address these issues. The
Group maintains comprehensive relationship
management with its banking partners and
provides senior management resources to the
management of bank covenant compliance.
The Group monitors both the external financing
market and changes occurring in the way pension
arrangements are provided including maintaining
detailed financial planning and forecasting
models. The Group maintains senior management
focus on these balance sheet areas and a close
relationship exists between the Group and the
Pension Trustee board. During the year the Group
closed the defined pension arrangements to
future accrual thereby preventing the build-up of
further risk.
People
IS infrastructure and
product development
The inability to recruit and retain
management and employees with the
necessary and appropriate competencies,
values and behaviours may restrict the
Group’s ability to grow.
The Group has an appropriate human resources
structure which maintains the necessary
standard of recruitment processes, based on key
competencies, plus monitors and develops the
talent pool within the Group’s employee base.
The Group is highly dependent on the
provision of a high quality IS infrastructure
as it is essential to the smooth running of
the business as well as that of its customers
where we operate key systems such as
warehouse management and transport
planning systems.
The Group completes regular reviews to consider
the corporate IS roadmap and agree its IS
approach. Particular focus is given to the approach
and infrastructure required to ensure adequate
disaster recovery processes and procedures are in
place. The Group maintains an extensive IS team,
including teams charged with innovating new
products and services and others who maintain
and secure the existing infrastructure. The IS
team also includes change experts working with
appropriate project management methodologies.
34 Wincanton plc Annual Report and Accounts 2014
Governance
Board of
Directors
The Board is committed to the highest
standards of corporate governance
Steve Marshall
Chairman
Steve was appointed Chairman in December 2011. Steve is currently
Executive Chairman of Balfour Beatty plc and Chairman of Biffa Group
Holdings Ltd. He is also a non-executive Director of Halma plc. He was
previously Chairman of Delta plc, Torex Retail plc and Queens’ Moat
Houses plc and Group Chief Executive of both Thorn plc and Railtrack
Group plc, having previously served as Group Finance Director of
each company. His earlier career included a variety of corporate and
operational roles at Grand Metropolitan plc (now Diageo plc), Burton
Group PLC and Black & Decker. He is a Fellow of the Chartered Institute of
Management Accountants.
Eric Born
Chief Executive
Eric was appointed an Executive Director in October 2010 and
subsequently became Chief Executive in December 2010. He joined the
business as Chief Operating Officer in April 2009 from Gategroup, where
he was Group SVP and President West/South Europe. Prior to that, he
had various senior roles in the retail industry including Managing Director
of Frimago AG in Switzerland and Managing Director of Office World in
the UK. Eric is also a non-executive Director of John Menzies plc.
Adrian Colman
Group Finance Director
Adrian was appointed Group Finance Director in January 2013. He was
formerly Finance Director with Psion plc, an international technology
business, through to its acquisition by Motorola Solutions, Inc. in October
2012. Prior to joining Psion, Adrian was Chief Financial Officer of London
City Airport and before that Financial Controller and Head of Investor
Relations at QinetiQ Group plc.
Paul Venables
Senior Independent non-executive Director
Paul became a non-executive Director of Wincanton in September
2009. A Chartered Accountant, he is currently Group Finance Director
of Hays plc, having joined from DHL Logistics, a division of Deutsche
Post World Net. Prior to the acquisition of Exel plc by Deutsche Post in
December 2006, he was Deputy Group Finance Director, a member
of the executive board of Exel plc and Chairman of their Acquisitions
and Projects Review Board. During 13 years with Exel he held a number
of senior finance and operational roles, including Finance Director of
Exel’s European and Global operations.
Strategic report
Governance
Board of Directors
Accounts
35
The members of the Committees are as follows
Nomination Committee
Steve Marshall – Chairman
Eric Born
Jonson Cox*
David Radcliffe
Martin Sawkins
Paul Venables
Richard Adam**
Remuneration Committee
Martin Sawkins – Chairman
Jonson Cox*
David Radcliffe
Steve Marshall
Paul Venables
Richard Adam**
Audit Committee
Paul Venables – Chairman
Jonson Cox*
David Radcliffe
Martin Sawkins
Richard Adam**
*until 31 May 2014 **from 1 June 2014
Richard Adam
Non-executive Director from 1 June 2014
Richard became a non-executive Director of Wincanton on 1 June 2014.
A Chartered Accountant, Richard is currently Group Finance Director
at Carillion plc, a position he has held since 2007. Immediately prior to
joining Carillion, Richard was Group Finance Director of Associated British
Ports Holdings plc. Prior to this he gained broad experience in a number
of public and private company finance director roles after qualifying
at KPMG. Richard has previously been non-executive Director and the
Chairman of the Audit Committee of SSL International plc.
Jonson Cox
Non-executive Director until 31 May 2014
Jonson became a non-executive Director of Wincanton in October
2005. Jonson is currently Chairman of Coalfield Resources plc and
the Water Services Regulation Authority. Until March 2010, he was
Group Chief Executive of Anglian Water Group plc. Former positions
include Chief Executive of Valpak Limited, a business services company,
Chief Operating Officer of Railtrack Group plc and Managing Director of
Kelda Group plc (formerly Yorkshire Water plc). His early career was with
Royal Dutch Shell. Jonson stood down from the Board on 31 May 2014.
David Radcliffe
Non-executive Director
David became a non-executive Director of Wincanton in July 2012.
He is currently Chief Executive of Hogg Robinson Group plc where
David has spent most of his career.
Martin Sawkins
Non-executive Director
Martin became a non-executive Director of Wincanton in July 2012.
Martin is currently Group HR Director of Rentokil Initial plc. Martin has
operated within both the plc and private equity environments and
previously held positions as Group HR Director at HomeServe plc; Group
HR Director at The AA Limited; and HR Director at Centrica Home and
Road Services. Prior to this Martin held a number of senior positions
in HR and operations at UEF Limited, Bridon plc, British Aerospace and
United Biscuits.
36 Wincanton plc Annual Report and Accounts 2014
Governance
Corporate governance report
Chairman’s introduction
Corporate governance is key to ensuring that Wincanton is run in a successful,
responsible and sustainable way. The Corporate governance report for the year
ended 31 March 2014 sets out the Group’s approach by describing how the
Board works, our views on risk management, the Wincanton team and includes
separate reports from each of the Board Committees.
The UK Corporate Governance Code
The principal rules applying to the Company are contained in the UK Corporate
Governance Code (the Code), which the Board is committed to complying with
to the extent that it is required to. I would like to highlight how each of the
Code’s main principles are being applied in practice, other than in respect of
remuneration, which is addressed in the Directors’ remuneration report.
Board effectiveness
During the year, a performance review of the Board, its key Committees and
of the Directors both individually and as a team was undertaken. The process
and findings are described on page 37. Following this review, I am satisfied that
the Board and its Committees are performing efficiently and that there is the
appropriate balance of skills, experience, independence and knowledge of
the Company to enable the Directors to discharge their respective duties
and responsibilities effectively.
Commitment
The non-executive Directors devoted significant time to the Company over
and above attendance at Board and Committee meetings. During the year, the
non-executive Directors carried out visits to individual sites and received
briefings from members of the Group’s management team on a number of
matters. The full Board remains totally committed to the success of Wincanton
and to ensure that it is run to the highest standards of corporate governance.
Steve Marshall
Chairman
Compliance statement
Wincanton and its subsidiaries (the Group) continue to be committed to
maintaining high standards of corporate governance. The UK Corporate
Governance Code 2012 applies to accounting periods beginning on or after
1 October 2012. In addition, the Company complied with the provisions of
the UK Corporate Governance Code 2010, as required by Listing Rule 9.8.6.
Throughout the year ended 31 March 2014, the Board considers that it and the
Company have complied without exception with the provisions of the Codes.
The Codes are issued by the Financial Reporting Council and are available for
review on the Financial Reporting Council’s website www.frc.org.uk.
Organisation and structure of the Board
Role of the Board
Wincanton plc (the Company) is led and controlled by the Board, which is
collectively responsible for the long term success of the Company. The Board is
committed to maintaining the highest standards of corporate governance.
Board decisions
The Board has a formal schedule of matters reserved to it for decision making,
including the approval of annual and half year results, annual budgets, material
acquisitions and disposals, material agreements and major capital commitments.
The powers and duties of the Directors are determined by legislation and by the
Company’s Articles of Association. Directors are required to act in a way they
consider, in good faith, would be most likely to promote the success of the
Company for the benefit of shareholders as a whole. In doing so, the Directors
have regard (amongst other matters) to:
(cid:2)(cid:3) the likely consequences of any decision in the long term;
(cid:2)(cid:3) the interest of the Company’s employees;
(cid:2)(cid:3) the need to foster business relationships with suppliers, customers and others;
(cid:2)(cid:3) the impact of the Company’s operations on the community and the
environment;
(cid:2)(cid:3) the desirability of the Company to maintain a reputation for high standards
of business conduct; and
(cid:2)(cid:3) the need to act fairly towards all shareholders of the Company.
In addition to their statutory duties, the Directors must ensure that the Board
focuses effectively on all of its accountabilities.
Roles of the Chairman and Chief Executive
The different roles of the Chairman and Chief Executive are acknowledged.
A responsibility statement for each of these roles has been agreed with the
Chairman and Chief Executive respectively and adopted by the Board. The
Chairman is primarily responsible for the workings of the Board and ensuring that
its strategic and supervisory role is achieved. The Chief Executive is responsible
for the day-to-day running of the business. In discharging his responsibilities,
the Chief Executive is advised and assisted by the Executive Management Team,
which oversees the operational and financial performance of the Group.
Role of the non-executive Directors
The non-executive Directors are chosen for their diversity of skills and experience.
Each non-executive Director is appointed for a fixed term of three years. This
term may then be renewed by mutual agreement. Non-executive Directors are
subject to annual election by shareholders. Non-executive Directors scrutinise,
measure and review the performance of the Executive Management Team; assist
in the development of the strategy; review the Group financial information;
ensure systems of internal control and risk management are appropriate and
effective; review the relationship with the external auditor through the Audit
Committee; and review the remuneration of, and succession planning for, the
Board. At least twice a year, the Chairman and non-executive Directors meet
without the Executive Directors being present.
Strategic report
Governance
Corporate governance report
Accounts
37
Role of the Senior Independent non-executive Director
Board changes in the year
Paul Venables is the Senior Independent non-executive Director. Paul acts as a
sounding board for the Chairman and serves as intermediary to other Directors
where necessary. Paul is available to shareholders if they have concerns, where
contact through the normal channels of Chairman and Chief Executive has failed
to resolve such concerns or for which such contact is inappropriate.
Board Committees
There are three Board Committees; the Audit Committee, the Nomination
Committee and the Remuneration Committee. The terms of reference of each
Committee are set by the Board, are reviewed annually and are available on the
Group’s website. Membership of a Committee is determined by the Board on
the recommendation of the Nomination Committee and in consultation with
the appropriate Committee Chairman. Details of each Board Committee,
including membership, meetings, role and activities in the year ended
31 March 2014 are set out on pages 39 to 41 and 48.
Executive Management Team
The Executive Management Team is responsible for implementing strategy
and policy set by the Board and for the operational management of the Group.
At the date of this report, the Executive Management Team comprises the
Executive Directors and five senior business unit and support function leaders
of the Group. The Executive Management Team meets monthly.
Attendance at Board and Committee meetings
There is normally full attendance at Board and Committee meetings, although
occasionally there may be non-attendance due to unforeseen circumstances.
If a Director is unable to attend, the Director will review the Board or Committee
papers and provide comments and feedback to the Chairman, Committee
Chairman or Company Secretary who ensures that the comments received are
raised at the meeting. Individual members of the Executive Management Team
are invited to attend Board meetings at least once each year. Directors are given
appropriate documentation in advance of each Board or Committee meeting.
This normally includes a detailed report on current trading and full papers on
matters where the Board will be required to make a decision or give its approval.
Health and safety is reviewed at every Board meeting. The Board has nine
scheduled Board meetings each year. The table below sets out the attendance
of the Directors at the scheduled Board meetings during the year under review:
Steve Marshall
Paul Venables
Jonson Cox
David Radcliffe
Martin Sawkins
Eric Born
Adrian Colman
Attended/
scheduled
9/9
9/9
9/9
9/9
9/9
9/9
9/9
Attendance at Committee meetings is set out in the separate reports on each of
the Committees below.
Composition of the Board
The composition of the Board and its Committees is regularly reviewed to ensure
that the balance and mix of skills and experience is maintained.
As at the year end and as at the date of this report, the Board comprises of the
Chairman, four independent non-executive Directors and two Executive Directors.
This gives the Board a good balance of independence and experience, ensuring
that no one individual or group of individuals has undue influence over the
Board’s decision-making.
There were no new appointments to the Board during the 2013/14 financial year.
Jonson Cox stepped down from the Board after nearly nine years as a non-
executive Director on 31 May 2014 and Richard Adam was appointed as an
independent non-executive Director on 1 June 2014.
Director independence
The Board considers that the Chairman was independent on appointment and
all non-executive Directors are independent for the purposes of the Code.
Conflicts of interest
During the year, a review of the Directors’ interests and appointments was
carried out by the Company Secretary. The Board considered and authorised
each Directors’ reported actual or potential conflicts of interest. The Board
continues to monitor and review potential conflicts of interest on a regular basis.
Board effectiveness
Performance evaluation
The Board, its Committees and the individual Directors participate in an annual
evaluation of performance. In the year under review, the Board evaluation
process was carried out by way of an internal questionnaire. The findings of
the evaluation confirmed that the composition, interaction and experience
of the Board remains appropriate. The Directors also participated in detailed
reviews of individual performance. The Senior Independent non-executive
Director carried out the Chairman’s performance evaluation, together with the
other non-executive Directors and with input from the Executive Directors.
Information and professional development
On joining the Board, Directors receive an induction tailored to their individual
requirements, which includes meeting with the Executive Directors and
members of the Executive Management Team and visits to key sites. It also
covers a review of the Group’s governance, policies, structure and business,
including details of the risks and operational issues facing the Group.
As part of the Board evaluation process, the training and development needs
of individual Directors are reviewed by the Chairman. The Company makes the
necessary resources available should any Director require training.
There is an agreed procedure for Directors to be able to take independent
professional advice, if necessary, at the Company’s expense. In addition, all
Directors have access to the advice and services of the Company Secretary.
Executive Directors’ other directorships
Executive Directors may be invited to become non-executive Directors of other
companies. Any such appointments are set out in the biographical information
set out on page 34 and any fees are disclosed in the Annual report on
remuneration. Each Executive Director is limited to one non-executive role
at any one time.
Protection available to shareholders
Directors are ultimately responsible for most aspects of the Company’s business
dealings. Therefore, they face potentially significant personal liability under
criminal or civil law, the UK Listing, Prospectus, Disclosure & Transparency Rules,
and face a range of penalties including private or public censure, fines and/or
imprisonment. In line with normal market practice, the Company believes that
it is in the Company’s best interests to protect Directors from the consequences
of innocent error or omissions.
The Company maintains, at its expense, a Directors’ and Officers’ liability insurance
policy to provide an indemnity in certain circumstances for the benefit of Group
personnel including, as recommended by the Code, the Directors. This insurance
policy does not provide cover where the Director or Officer has acted
fraudulently or dishonestly.
38 Wincanton plc Annual Report and Accounts 2014
Governance
Corporate governance report continued
Engagement with shareholders and major
stakeholders
Relations with shareholders
The Company continued to maintain an effective dialogue with shareholders to
ensure that the Company’s strategy is understood and that any queries can be
dealt with in a constructive manner.
The Company maintains regular contact with institutional shareholders, fund
managers and analysts through meetings led by the Chief Executive and Group
Finance Director. Brokers’ reports and analysts’ briefing notes are regularly
distributed to all Directors. The Board receives updates on feedback raised by
institutional shareholders, fund managers and analysts, which enable the
Directors to form a view of the priorities and concerns of the Company’s
stakeholders. In addition, the Chairman meets major institutional shareholders
from time to time.
Communications with shareholders
The Group’s website contains up to date information for shareholders and other
interested parties, including share price information, announcements and news
releases, Annual Reports and other shareholder circulars.
Shareholders have a choice of how to receive their Company communications.
The Company recognises the benefit of electronic communications and
encourages shareholders to receive communications via electronic means.
Annual General Meeting
The Company’s thirteenth Annual General Meeting (AGM) will be held at 1:00pm
on Wednesday, 16 July 2014 at the offices of Buchanan, 107 Cheapside, London
EC2V 6DN. Details of the business to be proposed at the meeting are contained
in the Notice of AGM.
The AGM provides an opportunity for the Board to meet with shareholders and
provides an update on the performance and plans of the Company.
Shareholders are invited to ask questions at the AGM and have the opportunity
to meet Directors and senior managers.
Communications with other stakeholders
Throughout the year, the Directors and senior managers meet with a range of
external stakeholders. The purpose of these events is to discuss the Group’s
position in a range of business, policy and public interest issues and to learn
more about stakeholders’ views.
Risk management
The Board takes ultimate responsibility for the Group’s systems of risk
management and internal control and reviews their effectiveness.
The Group’s systems and controls are designed to ensure that the Group’s
exposure to significant risk is managed appropriately, but the Board recognises
that any system of internal control is designed to mitigate and not eliminate risk
and can only provide reasonable and not absolute assurance against material
misstatement or loss.
Risk management practices
In order to manage risk, the following risk management structures are in place:
(cid:2)(cid:3) Key business risk reviews: An annual assessment of key risks throughout
the Group with the outputs presented to the Executive Management Team
and the Audit Committee.
(cid:2)(cid:3) Risk Committee: A committee introduced to monitor the risk management
structures and support management in embedding risk management
throughout the Group.
(cid:2)(cid:3) Control risk self-assessment: A self-assessment programme introduced to
support the mitigation of key operating risks throughout the Group.
The Board assessed the effectiveness of the risk management processes and
internal controls during the year covering all material controls, including financial,
operational and compliance. Such assessment is based on reports presented to
the Board and the Audit Committee, including:
(cid:2)(cid:3) the results of Internal Audit’s reviews of internal controls; and
(cid:2)(cid:3) a Group wide certification that effective controls had been maintained or,
where any significant non-compliance or breakdown had occurred, that
appropriate remedial action has been or is being undertaken.
Central to the Group’s systems of internal control are its processes and framework
for risk management. These comply with the Turnbull Guidance on internal
controls and were in place throughout the year and to the date of this report.
The Group’s systems of internal control operate through a number of different
processes. These are:
(cid:2)(cid:3) a clear system of delegated authorities from the Board to the management
team with certain matters reserved exclusively for the Board’s decision;
(cid:2)(cid:3) the annual review of the strategy and plans of each of the business segments
and of the Group as a whole in order to identify the risks that the Group faces
and any mitigating actions;
(cid:2)(cid:3) regular financial reporting against budgets and the review of results and
forecasts by Executive Directors, including particular areas of business or
project risk;
(cid:2)(cid:3) regular reporting, monitoring and review of the effectiveness of health and
safety processes;
(cid:2)(cid:3) the review and authorisation of proposed investment, divestment and capital
expenditure throughout the Group;
(cid:2)(cid:3) a Group wide risk management framework, which is established throughout
the Group. Key risks are identified and assessed and action plans are
developed to mitigate or eliminate unwanted exposures. The results of these
are subject to review;
(cid:2)(cid:3) reviews and tests by Internal Audit of critical business processes and controls
and specific reviews in areas of perceived high risk; and
(cid:2)(cid:3) the Group’s policy in relation to staff being able to raise concerns, in
confidence, about possible improprieties on matters of financial reporting and
other issues.
Internal Audit
Internal Audit’s work is designed to provide effective risk based coverage over
the internal control environment. This is summarised in an audit plan, which is
approved by the Board and the Audit Committee and updated on a rolling basis.
The Internal Audit department reviews the extent to which systems of
internal control:
(cid:2)(cid:3) are designed and are operating effectively;
(cid:2)(cid:3) are adequate to manage the Company’s key risks; and
(cid:2)(cid:3) safeguard the Company’s assets.
The Head of Internal Audit reports to the Group Finance Director and has direct
access to the Chief Executive and the Chairman of the Audit Committee.
The Head of Internal Audit attends all Audit Committee meetings and reports
regularly on Internal Audit reviews to the Executive Management Team.
Internal Audit’s key objectives are to provide independent and objective
assurance on risks and controls to the Board, Audit Committee and senior
management, and to assist the Board in meeting its corporate governance
and regulatory responsibilities. During the year, the effectiveness of the Internal
Audit function was considered by the Head of Internal Audit and the Audit
Committee. The results of the assessment were that the Internal Audit function
operates effectively.
The role of Internal Audit and the scope of its work continue to evolve to take
account of changes within the business and emerging best practice. A formal
audit charter is in place.
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Governance
Corporate governance report
Accounts
39
Wincanton employees
Wincanton employees are at the heart of the Group’s business. On 31 March 2014,
the Group employed approximately 15,440 people. Most of these people work
in the UK with approximately 400 employed in Ireland. Of all employees, 83%
are men and 17% are women. The average age of the Company’s employees is
42 years. Of all management level employees, 80% are men and 20% are women.
Of the Board, including the Chairman, Executive and non-executive Directors,
100% are men.
The Group is committed to ensuring its development and the development
of its employees. In doing so, it adopts the following principles:
Innovation, research and development
Wincanton employees have extensive knowledge, expertise and know-how.
New ideas, improvements to processes and design and innovation are
fundamental to the Group’s ability to adapt to the challenges of the future.
During the year, the Group was active in the development of new products and
supply chain services to support current and future customer requirements.
Community and charitable activities
With operations all over the UK and Ireland, the Group supports and makes a
positive impact to local communities. During the year ended 31 March 2014, the
Group contributed £2k (2013: £11k) to charitable and community programmes.
(cid:2)(cid:3) to build and maintain close harmony with its customers;
(cid:2)(cid:3) to treat every employee with care, respect and integrity;
Nomination Committee
(cid:2)(cid:3) to ensure the health and safety of every employee;
Membership
(cid:2)(cid:3) to recruit the best people and to develop them to their full potential;
Attendance at Nomination Committee meetings
(cid:2)(cid:3) to ensure that teamwork thrives; and
(cid:2)(cid:3) to minimise operational effects upon the community and the environment.
The Group values the differences between employees that define them as
unique individuals and that diversity within the workplace is an integral part of
achieving success. The Group also recognises its responsibilities to its employees.
The Group’s focus is on driving a high performance culture and improving
performance at every level. The Group is committed to maximising and unlocking
the potential of its employees and developing and retaining the most talented
people in the Group.
The Group’s equality, fairness and diversity strategies are based on the
following principles:
Recruitment
Apply non-discriminatory treatment to all potential and actual applicants during
the recruitment process, and comply with legislative requirements, best practice
and codes of practice, enabling the Group to draw on the widest pool of
potential talent.
Training and career development
Ensure that opportunities for training, promotion and transfer are made equally
available to all employees, with decisions based solely on the qualifications and
suitability of the candidates, removing all artificial and irrelevant barriers to
employees’ contributions to the Group.
Terms and conditions of employment
Ensure that policies including compensation, benefits and any other relevant
issues associated with terms and conditions of employment comply with legal
minimum standards, are formulated and applied without regard to age, sex,
gender identity, pregnancy, maternity, marital status, disability, colour, race,
nationality, ethnic or national origins, sexual orientation, religion, belief or
political affiliation and are reviewed regularly.
The Company operates a Share Incentive Plan and actively promotes participation
so that all employees can be actively involved in the Group’s performance.
Working environment and communications
Ensure that employees are provided with an environment in which they are
able to conduct their work safely, securely and without discrimination.
The Group is large and communication occurs in multi-faceted ways.
Communication ensures that employees are connected to and engaged with
the Group, ensuring that they know what is expected of them and that they feel
valued for what they do. Communication is two way and employees are given
the opportunity to share their views in a consultative manner.
Steve Marshall
Paul Venables
Jonson Cox
David Radcliffe
Martin Sawkins
Eric Born
Attended/scheduled
2/2
2/2
2/2
2/2
2/2
2/2
Role of the Nomination Committee
The Nomination Committee’s role is to review the leadership needs of the Board
and senior management, with a view to ensuring the Group’s continued ability
to perform effectively. The Nomination Committee’s remit, which is set out in its
terms of reference, includes responsibility for:
(cid:2)(cid:3) reviewing the structure, size and composition of the Board and its Committees
and making recommendations to the Board on any desired changes;
(cid:2)(cid:3) reviewing the succession plans for the Executive Directors;
(cid:2)(cid:3) making recommendations to the Board on suitable candidates to fill vacancies
for both non-executive and Executive Directors;
(cid:2)(cid:3) ensuring that the procedure for appointing new Directors is rigorous
and transparent and that appointments are made on merit and against
objective criteria;
(cid:2)(cid:3) reviewing potential conflicts of interests of Directors; and
(cid:2)(cid:3) reviewing the external commitments of the Directors and the time required
to discharge their responsibilities effectively.
Before a Board appointment is made, the Nomination Committee evaluates
the skills, knowledge and experience of the Board to ensure that any new
appointment complements these qualities. Candidates from a wide range of
backgrounds are considered and appointments are made on merit, with due
regard to the benefits of diversity on the Board, including gender. The selection
process generally involves interviews with a number of candidates and use of the
services of a professional search firm.
For the appointment of a chairman, the Nomination Committee prepares a job
specification, including an assessment of the time commitment expected,
recognising the need for availability in the event of a crisis.
Diversity on the Board
The Davies Review, published in February 2011, contained a review of ‘Women
on Boards’. The Company is committed to the principle of diversity set out in the
Davies Review and diversity in the fuller sense, and will continue to consider all
diversity matters for future Board and senior management appointments.
40 Wincanton plc Annual Report and Accounts 2014
Governance
Corporate governance report continued
Activities in the year ended 31 March 2014
Activities in the year ended 31 March 2014
The Nomination Committee met twice during the year. The business covered
at the meetings included the following:
The Audit Committee met three times during the year. The business covered
at the meetings included the following:
(cid:2)(cid:3) review of the structure, size and composition of the Board and Committees
taking into consideration the results of the Board evaluation process;
(cid:2)(cid:3) review of the Executive Director and senior manager succession plans; and
(cid:2)(cid:3) the annual review of the Directors’ conflicts of interests declarations.
As part of the Board evaluation process, the operation of the Nomination
Committee was evaluated and it was confirmed that the Nomination Committee
operates effectively.
Audit Committee
Membership
Attendance at Audit Committee meetings
Paul Venables
Jonson Cox
David Radcliffe
Martin Sawkins
Attended/scheduled
3/3
3/3
3/3
3/3
Role of the Audit Committee
Each member of the Audit Committee is independent and the membership
meets the requirements of the Code. The Group Finance Director, Head of
Internal Audit and the external auditor attend and report at Audit Committee
meetings. The Company Chairman and the Chief Executive also regularly attend
Audit Committee meetings. During the year, the Audit Committee met privately
with the external auditor and separately with the Head of Internal Audit.
The Audit Committee has unrestricted access to Company documents and
information as well as to management and the external auditor.
The Audit Committee assists the Board on the effective discharge of its
responsibilities for financial reporting and internal control, together with the
procedures for the identification, assessment and reporting of risks. The Audit
Committee’s remit, which is set out in its terms of reference, includes
responsibilities for:
(cid:2)(cid:3) monitoring the integrity of the financial statements of the Company and any
formal announcements relating to the Company’s financial performance,
reviewing significant financial reporting judgements contained therein;
(cid:2)(cid:3) reviewing the Company’s internal financial controls and reviewing the
Company’s internal control and risk management systems;
(cid:2)(cid:3) monitoring and reviewing the effectiveness of the Company’s internal
audit function;
(cid:2)(cid:3) making recommendations to the Board, for it to put to the shareholders
for their approval in a general meeting, in relation to the appointment,
re-appointment and removal of the external auditor and to approve their
remuneration and terms of engagement;
(cid:2)(cid:3) reviewing and monitoring the external auditor’s independence and objectivity
and the effectiveness of the audit process, taking into consideration relevant
UK professional and regulatory requirements;
(cid:2)(cid:3) developing and implementing policy on the engagement of the external
auditor to supply non-audit services, taking into account relevant ethical
guidance regarding the provision of non-audit services by the external
audit firm;
(cid:2)(cid:3) reporting to the Board, identifying any matters in respect of which it considers
that action or improvement is needed and making recommendations as to
the steps to be taken; and
(cid:2)(cid:3) reporting to the Board on how it has discharged its responsibilities.
Financial statements
(cid:2)(cid:3) reviewed the financial statements in the 2013 Annual Report and Accounts
and the half year results to 30 September 2013. As part of these reviews the
Audit Committee received from the external auditor a report on their audit of
the Annual Report and Accounts and their review of the half year results;
(cid:2)(cid:3) reviewed papers addressing the key judgement and accounting matters
pertinent to the full year and half year results; and
(cid:2)(cid:3) reviewed the preliminary and half year results announcements.
Control environment and risk management
(cid:2)(cid:3) received reports by Internal Audit setting out the audit programme, its
progress against the programme, the results of key audits and other
significant findings, the adequacy of management’s response and the
timeliness of resolution of actions;
(cid:2)(cid:3) reviewed and agreed the Group Internal Audit Plan for the year ending
31 March 2015; and
(cid:2)(cid:3) received reviews from Internal Audit on risk management programmes
completed in the year including a Group wide Control risk self assessment
and formal Group risk mapping exercise.
External audit process
(cid:2)(cid:3) reviewed the effectiveness of the overall audit process for the year ended
31 March 2013, meeting with the external auditor and management
separately to identify any areas of concern in the preparation of the
financial statements;
(cid:2)(cid:3) approved the audit strategy for the year ended 31 March 2014;
(cid:2)(cid:3) reviewed independence and objectivity and agreed the terms of
appointment, areas of responsibility, associated duties and scope of the audit
as set out in the engagement letter for the year;
(cid:2)(cid:3) reviewed and agreed the audit fees;
(cid:2)(cid:3) reviewed internal control and key accounting and audit issues; and
(cid:2)(cid:3) reviewed recommendations made by the external auditor and the adequacy
of management’s response.
Independence of auditor
(cid:2)(cid:3) reviewed the extent of non-audit services provided by the auditor in
accordance with the established policy. This control is exercised by ensuring
non-audit projects, where fees are expected to exceed £60,000 are subject to
prior approval of both the Audit Committee Chairman and the Group Finance
Director. If non-audit project fees are expected to exceed £100,000 the prior
approval of the Board is required.
The Audit Committee continued to monitor the level of non-audit work
undertaken by the auditor. Full disclosure of the audit and non-audit fees paid
during the year is made in Note 3 to the financial statements.
Under the Audit Committee’s terms of reference, the Audit Committee is
responsible for recommending to the Board the appointment, reappointment
and removal of the external auditor. The Audit Committee is satisfied with the
external auditor’s effectiveness.
As part of the Board evaluation process, the operation of the Audit Committee
was evaluated and it was confirmed that the Audit Committee operates
effectively.
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Governance
Corporate governance report
Accounts
41
Effectiveness of external auditor
To assess the effectiveness of the external audit process, the external auditor is
asked on an annual basis to set out the actions that it has taken to ensure
objectivity and independence, including where non-audit services are provided.
The Company monitors the auditor’s performance, behaviour and effectiveness
during the exercise of its duties, which informs the Committee’s decision to
recommend reappointment on an annual basis.
Auditor independence
As part of KPMG’s ethics and independence policies, all KPMG partners and staff
annually confirm their compliance with their ethics and independence manual,
including in particular that they have no prohibited shareholdings. KPMG’s ethics
and independence manual is fully consistent with the professional practice
rules of the APB Ethical Standards by whom they are regulated for audit
purposes. In addition, KPMG has underlying safeguards in place to maintain
independence through:
(cid:2)(cid:3) instilling professional values;
(cid:2)(cid:3) communications;
(cid:2)(cid:3) internal accountability;
(cid:2)(cid:3) risk management; and
(cid:2)(cid:3) independent reviews.
Further safeguards include a regular review of the composition of the audit team
including rotation in accordance with the relevant regulations. Any significant
new engagement undertaken for the Company is subject to acceptance
procedures, requiring consultation with Andrew Campbell-Orde, the Senior
Statutory Auditor. KPMG also considers the fees paid by the Company and its
related entities for professional services provided by it.
Non-audit services
Permissible non-audit services that KPMG can perform are enshrined in the APB’s
Ethical Standard 5 and in the Company’s own policy. KPMG operates a global
system to ensure that all requests from the Company, via local KPMG offices,
for KPMG to provide non-audit services are considered in the context of the
Company’s policy and KPMG’s ethical standards.
Audit tendering
The Audit Committee has noted the changes to the Code, the recent findings of
the Competition Commission and the Guidance for Audit Committees issued by
the Financial Reporting Council, each in the context of tendering for the external
audit contract at least every 10 years. The Company’s external audit has not been
tendered since the Company demerged in 2001. The Audit Committee
has determined, in line with the transition arrangements provided, to tender
the external auditor at the end of the current five-year rotation of the Senior
Statutory Auditor in 2016. There are no contractual obligations that restrict the
choice of the external auditor.
Financial reporting and significant financial issues
The principal matters of judgement considered by the Committee in relation
to the 2013/14 accounts and how they were addressed were:
Property provisions
The year end balance sheet includes property provisions of £33.4m. Considering
the size and nature of the onerous lease provision, the Committee reviewed a
report by management which set out in detail on a property by property basis,
both the utilisation of the provision during the year and the basis of the year end
provision. The Committee also considered the work performed by KPMG in
testing the assumptions.
The Committee discussed the appropriateness of the assumptions used on all
material properties and any changes in those assumptions that had been made
versus that used in the prior year and after extensive discussion was satisfied
that the assumptions used and the disclosures in the reports and accounts
were appropriate.
Goodwill
The year end balance sheet includes goodwill of £77.3m. The Committee
reviewed the carrying value of goodwill by examining a report by management
which set out in detail the values attributable to each cash generating unit, the
expected value in use, based on projected cash flows and the key economic
assumptions related to growth rates and discount rates. The Committee also
considered the work undertaken by KPMG in testing the projections. After
discussion, the Committee was satisfied that the assumptions used and the
disclosures in the reports and accounts were appropriate.
Pension scheme deficit
The year end balance sheet includes a pension scheme deficit of £110.9m.
In addition to the normal review of the basis of the accounting for the pension
scheme, in the year ended 31 March 2014, there have been three areas of
significant change, the first relating to the amendment to IAS 19 Employee
Benefits (Revised), the second resulting from the closure of the defined benefit
arrangements to future accrual and the third the implementation by the Group
of a Pension Increase Exchange (PIE) exercise. The Committee reviewed the
pension items, by examining a report by management based on work performed
by the Company’s actuary which set the key assumptions underpinning
the calculation of the deficit and the related income statement items.
The Committee also considered the work performed by KPMG in testing the
assumptions.
The Committee discussed the appropriateness of the key assumptions used
both in calculating the deficit and also the net pension gain relating to the
closure and the PIE. After extensive discussion the Committee was satisfied
that the assumptions used and the disclosures in the reports and accounts
were appropriate.
Materiality and misstatements
The auditor, following discussion with the Audit Committee, set materiality
at £1.3m. The Committee agreed with the auditor that all corrected and
uncorrected misstatements identified through their audit with a value in excess
of £0.1m would be reported to the Committee. The auditor reported to the
Committee the misstatements that they had found in the course of their work
and no material amounts remain unadjusted. The Committee confirmed that
it was satisfied that the auditor had fulfilled its responsibilities with diligence
and professional scepticism.
After reviewing the presentations and reports from management and consulting,
where necessary, with the auditor, the Committee was satisfied that the financial
statements appropriately addressed the critical judgements and key estimates
(both in respect to the amounts reported and the disclosures). The Committee
was also satisfied that the significant assumptions used for determining the value
of assets and liabilities had been appropriately scrutinised, challenged and were
sufficiently robust.
42 Wincanton plc Annual Report and Accounts 2014
Governance
Directors’ remuneration report
Remuneration Committee Chairman’s Introduction
Introduction
I am pleased to introduce the Directors’ remuneration report for the year ended
31 March 2014, which has been prepared in accordance with the new rules and
guidance on remuneration reports as set out in the Large and Medium-sized
Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013.
The Directors’ remuneration report will be presented to shareholders for
approval at the Company’s AGM, which will be held on 16 July 2014. At the AGM,
shareholders will have the opportunity to vote on two separate remuneration
resolutions as follows:
(cid:2)(cid:3) A binding vote on the Directors’ remuneration policy as set out on pages 43 to
47, which describes the Company’s forward looking Directors’ remuneration
policy which will, subject to shareholder approval, become formally effective
on 1 April 2015; and
(cid:2)(cid:3) an advisory vote on the Annual report on remuneration as set out on pages 48
to 55, which provides details of the remuneration earned by Directors for
performance in the year ended 31 March 2014 and how the Company intends
to pay its Directors for the year ending 31 March 2015.
Responsibility of the Remuneration Committee
The main task of the Remuneration Committee (the Committee) is to ensure that
the remuneration of Directors and senior managers supports the delivery of the
strategic objectives of the Group. This is achieved by setting remuneration in the
context of the markets in which we operate, making a significant proportion of
remuneration dependent on delivering demanding performance targets and
developing a culture of high performance linked to retention of key individuals
and skills.
General remuneration principles
Executive Directors’ remuneration consists of base salary, annual bonus,
including deferred annual bonus, long term incentives, pension provision and
taxable benefits. The bonus and long term incentive elements are performance
related and are conditional on continued service to encourage retention.
To assess performance, targets are set at the start of each performance cycle that
are clear, robust and objective alongside a realistic appraisal of performance in
the context of the wider economic environment in which the Group operates.
Remuneration packages are intended to be sufficiently competitive to attract,
retain and motivate individuals of the quality required to achieve the Group’s
objectives and thereby enhance shareholder value. The Committee aims to
ensure that pay rewards all employees fairly and responsibly for their
contribution. In addition, the Committee aims to ensure that the Directors’
remuneration policy does not raise environmental, operational, social or
governance risks by inadvertently motivating irresponsible behaviours.
The main principles are to:
(cid:2)(cid:3) attract and retain Executive Directors and other senior managers to run the
Company effectively for the benefit of all stakeholders;
(cid:2)(cid:3) adopt a competitive and straightforward approach to remuneration, which
meets shareholder expectations; and
(cid:2)(cid:3) structure remuneration to promote the long term development of the Group
and to reward individuals in line with performance.
Major activities during 2013/14
The Company’s approach to remuneration arrangements for Directors has not
changed in the year ended 31 March 2014 and no changes are planned for
the year ending 31 March 2015. However, as highlighted in last year’s report,
the current bonus and long term incentive arrangements come to a natural
conclusion at the end of the year ending 31 March 2015. As a result, during
the year, the Committee has carried out a review to consider the arrangements
that should replace the existing arrangements.
The Committee appreciates the importance of sharing and discussing changes
to remuneration policy with major shareholders. As a result, the Committee
undertook a consultation exercise with its 10 largest shareholders, who
collectively held circa 55% of the Company’s share capital at the time the
consultation exercise commenced. In addition, proxy voting agencies were
included in the consultation exercise. Feedback was predominantly positive,
as described in more detail on page 46.
I would like to thank shareholders for their active participation in the consultation
exercise. The principles behind a change in policy were to simplify executive pay
arrangements, de-leverage variable pay by making it less geared to the share price,
broadly maintain fair value and to continue to ensure that the new arrangements
are supported by shareholders. The resulting policy, which is due to come into
effect from 1 April 2015, is set out in detail in the Directors’ remuneration policy
section of this report. The existing policy is set out in the Annual report on
remuneration on pages 48 to 55. To facilitate the implementation of the new
policy, the Board is seeking authority from shareholders at the Company’s 2014
Annual General Meeting for the establishment and implementation of a new
Long Term Incentive Plan, further details of which can be found in the Notice of
Annual General Meeting dated 4 June 2014.
As described above, the Committee aims to ensure remuneration promotes the
long term development of the Group and rewards all employees fairly and
responsibly for their contributions. Against this background, the Committee
made a number of key decisions during the year:
(cid:2)(cid:3) No salary increases were awarded to Executive Directors in 2013/14,
compared to an average increase of 1% for employees. Effective 1 July 2014,
the Committee has awarded salary increases of 2% to Executive Directors;
the average increase to employees is expected to be at least 2%.
(cid:2)(cid:3) The Committee has awarded a bonus to the Executive Directors in the year
after taking into consideration:
–(cid:3) the Group’s operating profit performance;
–(cid:3) the individual performance of the Executive Directors against both financial
and operational personal objectives; and
–(cid:3) the average bonus payable to other employees in the Group.
(cid:2)(cid:3) The Committee approved awards under the Company’s Special Option Plan
to the Executive Directors and other senior managers in the Group who have
been identified as having key skills and / or are in key roles to significantly drive
value to the Group.
Shareholder dialogue
As I have already stated, the Committee acknowledges the importance of taking
into consideration the views of shareholders and other stakeholders and the
Committee will continue to have a productive and open dialogue with all parties.
Martin Sawkins
Remuneration Committee Chairman
Compliance Statement
This Directors’ remuneration report has been prepared on behalf of the Board by
the Remuneration Committee in accordance with the Large and Medium-sized
Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013.
The Committee adopts the principles of good governance as set out in the
UK Corporate Governance Code and complies with the UKLA Listing Rules.
The first part of this report, which is not subject to audit, sets out the Company's
remuneration policy. The sections subject to audit in the Annual report on
remuneration are highlighted accordingly.
Strategic report
Governance
Directors’ remuneration report
Remuneration policy
Accounts
43
Remuneration policy
The Committee regularly reviews the Directors’ remuneration policy to ensure
it supports shareholder interests and closely reflects business strategy.
When setting the Directors’ remuneration policy, the Committee additionally
takes into account the following:
(cid:2)(cid:3) total remuneration levels operating in companies of a similar size and
complexity such as:
–(cid:3) revenue and scale of operation;
–(cid:3) number of employees;
–(cid:3) market capitalisation and enterprise value;
–(cid:3) customer base; and
–(cid:3) geographic reach;
(cid:2)(cid:3) the responsibilities of each individual role;
(cid:2)(cid:3) individual performance; and
(cid:2)(cid:3) an individual’s experience.
The following tables set out the Company’s proposed Directors’ remuneration
policy. As a result of the existing remuneration policy coming to a natural end at
the end of the 2014/15 financial year, the Company intends that this policy will
take effect from 1 April 2015, subject to shareholder approval. The existing policy
was designed to support the turnaround business plan in ensuring a sustainable
long term future, restoring, and enhancing shareholder value. However, it was
only intended to be in place in alignment with the turnaround strategy. The
proposed policy in respect of Executive Directors, as set out below, is intended
to continue to support alignment of Executive Directors with both Company
performance and shareholder interests, as well as simplify the structure and
improve the long term retention value.
Executive Directors
Salary
Purpose and
link to strategy
Operation
Salaries are set at a sufficient level to recruit and retain individuals of the necessary quality to deliver the Group’s strategy.
Base salaries are normally reviewed annually, with changes effective 1 July.
Salaries are typically set after considering:
(cid:2)(cid:3) the responsibilities of each individual role;
(cid:2)(cid:3) progression within role;
(cid:2)(cid:3) individual performance;
(cid:2)(cid:3) an individual’s experience; and
(cid:2)(cid:3) salary levels in companies of a similar size and complexity.
Salaries may be adjusted and any increase will ordinarily be (in percentage of salary terms) in line with those of the wider workforce.
Increases beyond those granted to the wider workforce may be awarded in certain circumstances such as:
(cid:2)(cid:3) where there is a change in responsibility;
(cid:2)(cid:3) progression in the role;
(cid:2)(cid:3) material market misalignment; or
(cid:2)(cid:3) a significant increase in the scale of the role and/or size, value and/or complexity of the Group.
Where increases are awarded in excess of the wider employee population, the Committee will provide an explanation in the relevant
Annual report on remuneration.
Benefits
Purpose and
link to strategy
Operation
Opportunity
The Group provides the appropriate benefits for Executive Directors in a business of this size in order to recruit and retain individuals of the
necessary quality to deliver the Group’s strategy.
Benefits include but are not limited to:
(cid:2)(cid:3) Company car or car allowance
(cid:2)(cid:3) Private medical insurance for the Executive Director and their direct family
(cid:2)(cid:3) Personal accident and travel insurance
(cid:2)(cid:3) Death in service cover
In addition, relocation assistance is available on a case by case basis. Assistance may include (but is not limited to) facilitating and/or
meeting the costs of removal and other relocation costs, children’s education, a limited amount of family travel and tax equalisation
arrangements and may extend to facilitating and/or meeting the costs of re-establishing them to their previous location at the end of
the employment or assignment.
Benefits vary by role and individual circumstance and eligibility is reviewed periodically. Benefits are not anticipated to exceed 10% of
salary per annum over the period for which this policy applies. The Committee retains the discretion to approve a higher cost in
exceptional circumstances (e.g. relocation) or in circumstances where factors outside of the Group’s control have materially
changed (e.g. costs of medical premiums). If this occurs, the Committee will provide details and rationale in the relevant Annual
report on remuneration.
44 Wincanton plc Annual Report and Accounts 2014
Governance
Remuneration policy continued
All employee share plans
Purpose and
link to strategy
The Company encourages voluntary participation in share ownership through the Group where share plans are appropriate.
Operation of all
employee share plans
Opportunity
Under the current all employee share plan arrangements, Executive Directors are entitled to participate in the Company’s Share
Incentive Plan (SIP).
Participants make monthly contributions from their gross salary to buy Partnership Shares. The Company currently awards 1 Matching
Share for every 4 Partnership Shares acquired. In addition, any dividends paid in respect of shares held under the SIP are used to buy
Dividend Shares.
In line with HMRC limits, the rules of the Company’s SIP set out the following maximum levels, which may be amended from time to time
so that they are in line with legislation:
Free Shares – The maximum value of Free Shares per tax year is £3,600.
Partnership Shares bought by employees – The maximum pre-tax salary that can be used to buy Partnership Shares is £1,800 per annum.
Matching Shares – The Company can match employees’ Partnership Share purchases by giving them additional shares. The maximum
award of Matching Shares is 2 Matching Shares for each Partnership Share bought. The Company currently awards 1 Matching Share for
every 4 Partnership Shares bought.
Pension
Purpose and
link to strategy
The Group provides the appropriate pension provision for Executive Directors in a business of this size in order to recruit and retain
individuals of the necessary quality to deliver the Group’s strategy.
Operation of pension
arrangements
Executive Directors are entitled to join the defined contribution section of the Wincanton pension scheme. In certain circumstances, for
example where the Annual Allowance level set by HMRC is met, the pension provision will be in the form of a taxable cash supplement.
Opportunity
Up to 22% of pensionable salary.
Bonus
Purpose and
link to strategy
Operation
Opportunity
Performance measure:
The aim of the annual bonus is to incentivise and recognise the performance of Executive Directors in respect of their annual contribution
to the delivery of the Group’s strategy by rewarding performance against stretching financial and personal objectives.
Performance is measured over each financial year. Performance measure weightings and individual objectives are reviewed prior to the
start of the financial year to ensure they remain appropriate and reinforce the business strategy. Performance targets are set annually
to ensure they are appropriately stretching and reflect those strategic objectives. At the end of the year, the Committee determines
the extent to which these targets were achieved.
The bonus is normally settled in cash. However, if the share ownership guideline is yet to be achieved, any bonus earned above 100% of
salary must be used by the Executive Director to purchase Wincanton shares until the share ownership guideline is achieved. All bonus
awards are at the discretion of the Committee.
An Executive Director’s annual bonus cannot exceed 150% of salary.
A bonus of up to 25% of maximum is payable for ‘Threshold’ performance, 50% of maximum for ‘Target’ performance and up to 100% of
the bonus is earned for ‘Maximum’ performance, with straight-line vesting in between.
Annual performance is typically based on achievement of underlying operating profit targets and personal objectives.
Underlying operating profit has a minimum weighting of 60% and a maximum weighting of 80%, and achievement of personal objectives
has a minimum weighting of 20% and a maximum weighting of 40%.
Personal objectives include an element relating specifically to financial objectives other than underlying operating profit; currently 50% of
personal objectives and is expected to remain so over the term of this policy.
In exceptional circumstances, the Committee has the ability to exercise discretion to override the formulaic bonus outcome within
the limits of the plan where it believes the outcome is not truly reflective of performance and to ensure fairness to both shareholders
and participants.
Recovery provisions
Clawback provisions exist in respect of misstatements.
Strategic report
Governance
Remuneration policy
Accounts
45
Long term incentives
Purpose and
link to strategy
Operation
Opportunity
Performance measures
The aim of long term incentives is to incentivise and recognise the performance of Executive Directors in respect of their contribution
to the delivery of the Group’s strategy over the longer term by rewarding strong financial performance and sustained increase in
shareholder value.
Performance is measured over a period of no less than three years.
The Committee reviews the performance measure weightings ahead of each award to ensure alignment with Wincanton’s strategy and
has discretion to adjust weightings to ensure alignment to that strategy. Performance targets are reviewed ahead of each performance
period and the Committee has discretion to adjust targets to ensure they remain appropriate and stretching. Targets are set having regard
to a number of internal and external reference points.
Awards may be granted as nil-cost options or conditional share awards. Dividends or dividend equivalents may be awarded in shares or
cash equal to the dividends paid during the period between the date of grant and the date on which the shares vest.
Maximum award levels for Executive Directors are 100% of salary. In exceptional circumstances, for example on recruitment, individual
awards may be granted up to 250% of salary.
25% of an award vests for ‘Threshold’ performance and 100% of an award vests for ‘Maximum’ performance, with straight-line vesting
in between.
Performance measures are TSR relative to an appropriate comparator group and EPS growth.
Each measure is subject to a minimum weighting of 25%.
For TSR, ‘Threshold’ performance for Wincanton is median ranking in the comparator group and ‘Maximum’ is upper quartile ranking.
In exceptional circumstances, the Committee has the ability to exercise discretion to override the formulaic performance outcome
downwards to ensure alignment of pay with the underlying performance of the business during the performance period.
Recovery provisions
Clawback and malus provisions exist in respect of vested and unvested awards in circumstances of misstatement and misconduct.
Shareholding guidelines
Purpose and
link to strategy
Shareholding guidelines ensure alignment between Executive Directors and shareholders.
Operation
Shareholding guidelines are for any new Executive Director to accrue and then maintain a holding of shares with a value of 150% of their
salary as assessed by the Committee from time to time; for Eric Born and Adrian Colman the shareholding guideline remains at 300% of
salary. Any bonus achieved in excess of 100% of salary will be required to be used to purchase shares until the shareholding guideline
is met.
Notes to the policy table
For the long term incentives, the Committee has selected EPS as one performance
measure due to it providing good line of sight for Executive Directors. In addition,
relative TSR supports alignment of Executive Director remuneration with
shareholder interests and it takes into account the impact of changes in the
external environment on Company performance.
For the annual bonus, underlying operating profit performance reflects the basis
on which the Group is managed; sustained operating profit performance
improvement should enable the Group to improve its balance sheet position.
By measuring the personal performance of an Executive Director, the Committee
is also able to monitor performance against other key strategic objectives.
When setting the performance targets for short and long term incentives, the
Committee considers a range of internal and external reference points such as
the Company’s strategic plan, consensus market forecasts, previous Company
performance and other companies’ performance ranges. The Committee then
sets stretching, yet achievable, incentive targets. The Committee also has
discretion to adjust the performance conditions during the performance period
in exceptional circumstances, provided the new conditions are no tougher or
easier to achieve than originally intended.
Previous commitments
The Company will honour all commitments previously entered into and
Executive Directors will be eligible to receive payment from any existing
arrangement made prior to the implementation of the Directors’
remuneration policy.
Differences between the remuneration policy for
Executive Directors and employees generally
Pay mix – The remuneration policy for Executive Directors is more heavily
weighted towards variable pay than for other employees to make a greater
part of their pay conditional on the delivery of the Company’s strategy.
Bonus – Certain employees are eligible to receive a bonus with the bonus
potential based on their organisational level (grade) within the business.
In addition to the Company’s Executive Bonus Plan, the Company operates
a management bonus scheme and some employees are eligible for a bonus
depending on the customer contract on which they work.
LTI – Up to 30 senior managers in the Group who have been identified as having
key skills and/or are in key roles to significantly drive value to the Group, are
eligible to receive long term incentive awards, within a framework in line with
the long term incentives awarded to the Executive Directors. Such awards
encourage alignment of our senior staff with our shareholders.
Pensions – All employees, including the Executive Directors, are eligible to be
members of one of the defined contribution sections of the pension scheme.
The level of pension provision for employees is determined by their
organisational level (grade) and/or age.
SIP – The Company operates a Share Incentive Plan and actively promotes
participation so that all employees can be actively involved in the Group’s
performance.
46 Wincanton plc Annual Report and Accounts 2014
Governance
Remuneration policy continued
Consideration of employment conditions elsewhere
in the Group
In making remuneration decisions and to ensure that there is a consistent
approach across the Group, the Committee considers the pay and employment
conditions across the Group. For example, the Committee considers the range
of base pay increases across the Group as a factor in determining the base salary
increases for Executive Directors. In addition, the Committee reviews the annual
bonus awards and long term incentive arrangements, as well as base salaries
and levels of pension provision for the Executive Management Team.
Eric Born
Fixed
100%
Target
56%
£540,976
33%
11%
£964,276
Maximum
34%
40%
26%
£1,599,226
Fixed pay
Annual bonus
LTIP
The Committee has not formally consulted with employees but is kept informed
of significant changes to Group policy as well as pay reviews and bonus awards
made to other employees. Further, as members of the Board, the Committee
members receive updates from the Executive Management Team on their
discussions and consultations with employees.
Adrian Colman
Fixed
100%
Target
59%
£367,023
29%
12%
£627,123
Consideration of shareholders’ views
The Committee considers developments in institutional investors’ best practice
expectations and the views expressed by shareholders during any dialogue.
The Committee is committed to maintaining a dialogue with shareholders
and consults extensively with major shareholders and institutional investors
when making substantive changes to remuneration policy.
The Committee consulted with its main shareholders in respect of the policy
proposed to be implemented with effect from 1 April 2015. Overall, shareholders
provided positive feedback on the proposed changes. Some shareholders
queried the initial proposal to reduce the shareholding requirement from 300%
of salary to 100% of salary; it was generally recognised by shareholders that a
shareholding requirement of 300% of salary was substantially ahead of market
practice for comparative companies but that a reduction to 100% of salary was
going too far in the opposite direction. After careful consideration, the Committee
decided that any new Executive Director would be required to hold 150% of
salary in shares, while shareholding requirements for current Executive Directors
would remain unchanged at 300% of salary. Other feedback from shareholders
focused on improving disclosure regarding the factors that the Committee
considers when setting incentive performance targets. The Committee is
mindful of all feedback received and, to this end, has improved such disclosure
in this report.
Illustrations of application of remuneration policy
The charts opposite set out how much the Chief Executive and Group Finance
Director could earn under the Directors’ remuneration policy in the year ending
31 March 2016.
In the charts opposite, scenarios are based on the following assumptions. Note
that performance scenarios exclude the impact of any share price appreciation
and accrual of dividends or dividend equivalents:
Remuneration receivable for different performance scenarios
Fixed pay
Fixed
(cid:2)(cid:3) Salary effective from 1 July 2014 as disclosed in the
Maximum
Target
Annual report on remuneration on page 51
(cid:2)(cid:3) 2013/14 pensions and taxable benefits as provided in the
single figure table in the Annual report on remuneration
on page 50
Annual bonus
Nil payout
LTIP
Nil payout
Bonus award at
50% of maximum
opportunity
Threshold LTIP
vesting at 25% of
opportunity
Payout of 100%
of award
Full LTIP vesting
Maximum
35%
35%
30%
£1,040,223
Fixed pay
Annual bonus
LTIP
Approach to remuneration on recruitment of an
Executive Director
When hiring or appointing a new Executive Director, including by way of internal
promotion, remuneration packages will be set in accordance with the Company’s
Directors’ remuneration policy. In determining appropriate remuneration for a
new Executive Director, the Committee will take into consideration all relevant
factors, including the experience and calibre of the individual and the quantum/
nature of remuneration and the jurisdiction from which the candidate was
recruited, to ensure that arrangements are in the best interests of both Wincanton
and its shareholders. Initial salaries may be set below market and consideration
given to phasing any increases over two or three years subject to development
in the role and normal variable pay will be subject to the maxima provided in the
Directors’ remuneration policy.
The Committee may consider it appropriate to grant one off awards to
compensate for the loss of incentive arrangements forfeited on leaving a previous
employer. In doing so, the Committee will consider relevant factors, including
the structure of the awards forfeited, the toughness of performance conditions
attached to those awards and the likelihood of those conditions being met.
Compensation for forfeited awards will be on a fair value matching basis. To the
extent that it is not possible or practical to provide compensation within the terms
of the Company’s existing incentive plans, a bespoke arrangement may be used,
exercising the discretion available to the Committee under the UK Listing Rules.
When the Company announces an Executive Director appointment, if applicable,
it will provide an explanation of why a compensation award was granted and a
breakdown of that payment.
In the case of an internal promotion, any outstanding variable pay awarded in
relation to the previous role will be continued on the original terms.
Service contracts and policy for payments on
termination and change of control
Under the Executive Directors’ service contracts, the Company is required to give
12 months’ notice and the Executive Director 6 months’ notice of termination.
Service contracts for new Executive Directors will generally be limited to
12 months’ notice from both the Company and the Director.
All Executive Directors are appointed for an indefinite period but are subject
to annual re-election at the Annual General Meeting.
Details of employment contracts for existing Executive Directors are summarised
in the table below:
Executive
Director
Eric Born
Adrian
Colman
Date of
appointment
to the Board
1 October
2010
7 January
2013
Date
of current
contract
Notice
period
(Company)
Notice
period
(Director)
4 October 2008 12 months
6 months
6 December
2012
12 months
6 months
Unexpired
term
Rolling
12 months
Rolling
12 months
The Executive Directors’ service contracts are available for inspection by
shareholders at the Company’s registered office.
Strategic report
Governance
Remuneration policy
Accounts
47
If notice is served by either party, the Executive Director can continue to receive
basic salary, taxable benefits and pension provision for the duration of their
notice period during which time the Company may require the individual to
continue to fulfil their current duties or may assign a period of ‘gardening leave’.
Further, the Committee will take account of an Executive Director’s duty to
mitigate their loss. There are no arrangements in place between the Company
and its Directors that provide for remuneration for loss of office following a
change of control of the Company, other than in respect of the treatment of
incentives, as set out below.
In addition to the contractual provisions regarding payment on termination set
out above, the Group’s incentive plans and share schemes contain provisions for
termination of employment, based on ‘good leaver’ and ‘bad leaver’ treatment.
Good leavers are typically defined as participants who leave early on account of
injury, disability or ill health, death, a sale of their employer or business in which
they were employed, statutory redundancy, retirement or any other reason
at the discretion of the Committee, with bad leavers determined otherwise.
In circumstances of termination on notice the Committee will determine an
equitable remuneration package, having regard to the particular circumstances
of the case.
For good leavers, the annual bonus is normally tested for performance over the
full financial year and is pro-rated for the period of the financial year worked by
the Director; there is no provision for an amount in lieu of bonus to be payable
for any part of the notice period not worked, with Committee discretion to treat
otherwise. Bad leavers would lose the right to the annual bonus.
For good leavers, deferred shares will vest on the date of leaving, with Committee
discretion to allow for earlier release. Bad leavers would lose the right to deferred
shares. For entitlement to shares under long term incentive arrangements, for
a good leaver, the award will not be forfeited on cessation of employment
and instead will continue to vest on the normal vesting date or earlier at the
discretion of the Committee, subject to the performance conditions attached
to the relevant awards. The awards will, other than if the Committee determines
otherwise, be scaled back pro rata for the period of the vesting period worked
by the Executive Director. Bad leavers would lose the right to any outstanding
share awards.
If employment is terminated by the Company, the departing Executive Director
may have a legal entitlement (under statute or otherwise) to additional amounts,
which would need to be met for example, in a redundancy situation. In addition,
the Committee retains discretion to settle any other amounts reasonably due
to the Executive Director, for example to meet the legal fees incurred by the
Executive Director in connection with the termination of employment, where
the Company wishes to enter into a settlement agreement (as provided for
below) and the individual must seek independent legal advice.
In certain circumstances, the Committee may approve new contractual
arrangements with departing Executive Directors including (but not limited to)
settlement, confidentiality, restrictive covenants and/or consultancy
arrangements. These will be used sparingly and only entered into where the
Committee believes that it is in the best interests of the Company and its
shareholders to do so.
In the event of a change of control, all unvested awards under the deferred
annual bonus and long term incentive arrangements would vest, to the extent
that any performance conditions attached to the relevant awards have been
achieved. The awards will, other than if the Committee determines otherwise,
be scaled back pro rata for the proportion of the performance period worked
by the Director prior to the change of control. Alternatively, unvested long term
incentive arrangements may not vest on a change of control and instead may
be replaced by an equivalent grant of a new award, as determined by the
acquiring Company.
Policy on Executive Directors holding external
appointments
Executive Directors are able to accept one non-executive Director appointment
outside the Company with the consent of the Board, as such appointments can
enhance Directors’ experience and add value to the Company. Any fees may be
retained by the Director.
Letters of appointment for non-executive Directors
The Chairman and non-executive Directors’ terms of appointment are recorded
in letters of appointment. All Directors are subject to re-election every three years
in accordance with the Company’s Articles of Association. In line with corporate
governance best practice, all Directors currently put themselves forward for
re-election at each AGM. The required notice is six months written notice from
either side. Non-executive Directors are not entitled to any remuneration on loss
of office.
Non-
executive
director
Steve
Marshall
Richard
Adam
Jonson
Cox
Martin
Sawkins
David
Radcliffe
Date of
original
letter of
appointment
Effective date
of current
letter of
appointment
Date of
appointment
Unexpired
term1
Expiry of
current term
14 December
2011
21 November
2011
14 December
2011
5 months 21 November
2014
1 June
2014
9 April
2014
35 months
1 June
2014
21 October
2005
21 October
2005
21 October
2011
n/a
27 July
2012
27 July
2012
22 June
2012
22 June
2012
13 months
13 months
27 July
2012
27 July
2012
1 June
2017
31 May
20142
27 July
2015
27 July
2015
Paul
Venables
2 September
2009
23 July
2009
2 September
2012
14 months 2 September
2015
1 Full months from date of this report.
2 Date of resignation.
Non-executive Directors’ letters of appointment are available for inspection by
shareholders at the Company’s registered office.
Non-executive Directors
Purpose and link
to strategy
The Company seeks to attract and retain a high calibre
Chairman and non-executive Directors by offering
market competitive fee levels.
Operation
Opportunity
On the appointment of a new Chairman or non-
executive Director, the fees will be set taking into
account the experience and calibre of the individual.
Neither the Chairman nor the non-executive Directors
participate in any of the Company’s short or long term
incentive arrangements, nor do they receive benefits
or pension provision. They are however reimbursed
for reasonable costs incurred in carrying out their role.
The Chairman receives an annual fee. The non-executive
Directors receive an annual base fee and additional fees
are paid to reflect additional responsibilities, such as
chairing a Board Committee.
The Chairman and non-executive Directors receive
their annual fee paid monthly in instalments. The fee
of the Chairman is set by the Committee and the fees
of the non-executive Directors are approved by the
Board, on the recommendation of the Chairman and
Chief Executive.
Fee levels are reviewed on a periodic basis, and may be
increased taking into account factors such as the time
commitment of the role and market levels in companies
of a similar size and complexity. Fees for the Chairman
and non-executive Directors will not exceed £500,000
in aggregate as set out in the Articles of Association of
the Company.
48 Wincanton plc Annual Report and Accounts 2014
Governance
Annual report on remuneration
Introduction
This section of the Directors’ remuneration report sets out the Company’s
remuneration of its Directors during the year ended 31 March 2014 and how
the Company intends to pay its Directors for the year ending 31 March 2015.
This report is subject to an advisory vote by shareholders at the Company’s AGM
on 16 July 2014.
Membership of the Remuneration Committee
The Committee’s composition complied with Section D of the UK Corporate
Governance Code throughout the year. The following table sets out the
attendance at Remuneration Committee meetings held in the year.
Martin Sawkins (Chairman)
Jonson Cox
Steve Marshall
David Radcliffe
Paul Venables
Attended/scheduled
4/4
4/4
4/4
4/4
4/4
At the date of this report, the membership of the Committee comprises four
independent non-executive Directors plus the Company Chairman. The members
represent diverse backgrounds and experience, which is designed to provide
balance and diversity within the Committee. In addition to formal Committee
meetings, Committee members met outside of the scheduled meetings
as necessary. No attendee was present when their own remuneration was
being discussed.
In addition to the members of the Committee, the Chief Executive, Group
Finance Director, HR Director and Company Secretary attended certain of the
Committee meetings by invitation. The executive attendees were invited to
provide advice and assistance to Committee meetings that materially supported
the Committee in making appropriately considered and informed decisions.
In particular:
(cid:2)(cid:3) the Chief Executive and the HR Director advised the Committee on matters
relating to the appropriateness of awards for the Executive Directors and
members of the Executive Management Team;
(cid:2)(cid:3) the HR Director also advised on HR strategy and the application of policies
across the Group;
(cid:2)(cid:3) the Group Finance Director advised on the performance conditions, in
particular the impact of changes to accounting standards and market
consensus; and
(cid:2)(cid:3) the Company Secretary attended as Secretary to the Committee and provided
advice in relation to share dilution and the Employee Share Trust.
Kepler Associates is the appointed external adviser to the Committee.
The Committee evaluates the support provided by its advisers annually and
is comfortable that Kepler Associates provides objective and independent
remuneration advice to the Committee and do not have any connections with
Wincanton that may impair their independence. Kepler Associates is a founding
member and signatory of the Code of Conduct for Remuneration Consultants,
details of which can be found at www.remunerationconsultantsgroup.com.
During the year, Kepler Associates attended certain Committee meetings to
provide advice that materially supported the Committee in making appropriately
considered and informed decisions, which included market information,
governance developments, advice on the appropriate structure of short term
incentives and long term incentives and comparator group pay and performance.
Fees payable to Kepler Associates amounted to £12k in the year, based on time
and materials. The increase in the year is a result of the advice provided to the
Committee in relation to the significant remuneration policy review and
shareholder consultation exercise that was undertaken in the year.
Terms of Reference of the Remuneration Committee
The Terms of Reference of the Committee are reviewed annually and were
updated in the year predominantly to incorporate changes to the remuneration
reporting environment. The Committee’s Terms of Reference are available on
the Group’s website. The main responsibilities of the Committee are to:
(cid:2)(cid:3) determine and agree with the Board the broad policy for the remuneration
of the Company’s Executive Directors and the Chairman;
(cid:2)(cid:3) approve the design of, and determine targets for, relevant performance
related pay schemes operated by the Group;
(cid:2)(cid:3) determine whether performance targets have been met;
(cid:2)(cid:3) review the design of all share incentive plans for approval by the Board
and shareholders;
(cid:2)(cid:3) oversee any major changes in employee benefit structures at Group level; and
(cid:2)(cid:3) select and appoint consultants to provide independent advice to
the Committee.
Activities of the Committee in the year ended
31 March 2014
The principal business covered during the year included the following:
(cid:2)(cid:3) considering the Directors’ remuneration policy to take effect from 1 April 2015;
(cid:2)(cid:3) reviewing the Directors’ remuneration report;
(cid:2)(cid:3) agreeing bonus awards in respect of the year ended 31 March 2013;
(cid:2)(cid:3) reviewing annual salaries and determining that the Executive Directors would
receive no pay rise;
(cid:2)(cid:3) measuring and concluding that the performance conditions for the 2010
Performance Share Plan and the 2011 Special Option Plan awards have not
been met and setting the performance conditions for the 2013 Special Option
Plan awards; and
(cid:2)(cid:3) commencing a review of future bonus and long term incentive arrangements.
Stakeholder engagement and consultation
The Committee recognises the importance of engaging with stakeholders in
relation to the setting of remuneration policy. At the Company’s 2013 AGM, the
advisory resolution seeking approval for the Directors’ remuneration report
received the following votes.
Votes for
%
Votes
against
%
Total
votes
% of ISC
voted
Votes
withheld
50,616,424
76.6
15,471,410
23.4 66,087,834
54.3% 2,563,552
1 The ISC (Issued Share Capital) of the Company as at the date of the Company’s 2013 AGM
was 121,747,293.
At a General Meeting of the Company held in July 2011, the Company obtained
shareholder approval to put in place the current remuneration arrangements,
specifically the Company’s Special Option Plan (the Company’s current long term
incentive plan) and the Company’s Executive Bonus Plan (annual bonus plan).
Those arrangements were put in place following a detailed shareholder
consultation exercise. One major shareholder voted against those plans and has
continued to do so as reflected in the table above. The Company has retained a
dialogue with all major shareholders throughout the period since the current
policy was introduced. The current remuneration arrangements were put in
place for a period through to the end of the financial year to 31 March 2015.
The Committee considers all feedback it receives and has sought to address all
feedback in finalising the new remuneration policy, including those concerns
raised by the major shareholder that voted against the Directors’ remuneration
report at the 2013 AGM.
The Committee Chairman has met with shareholders to discuss, amongst other
things, the Group’s remuneration policy. In addition, a formal consultation exercise
led by the Chairman of the Remuneration Committee has been carried out in
relation to proposed changes to the Company’s remuneration policy, as set out
in more detail in the Directors’ remuneration policy section of this report.
The Company will put this policy to the 2014 AGM.
Strategic report
Governance
Annual report on remuneration
Accounts
49
Relative importance of spend on pay
The following table is intended to assist in understanding the relative importance of the remuneration in the context of the Group’s financial position more generally.
Item
Remuneration of all employees1
Dividend or share buyback
2014
£m
478.3
–
2013
£m
480.3
–
Difference2
£m
(2.0)
–
1 This includes all personnel expenses, including Executive Directors, as set out in Note 4 to the consolidated financial statements.
2 Despite all personnel expenses reducing in 2013/14 compared to 2012/13, the average number of employees has reduced. As a result, the average personnel expenses in 2013/14
increased by 1% compared to 2012/13.
Performance and pay
Set out below is a line graph that shows the TSR performance over a five year period for both a holding of the Company’s shares and the FTSE Small Cap, which has
been used as the Company is a constituent of the FTSE Small Cap.
TSR
300
270
240
210
180
150
120
90
60
30
Mar
2009
Mar
2010
Wincanton
FTSE Small Cap
Mar
2011
Mar
2012
Mar
2013
Mar
2014
Source: Bloomberg
Below is a table that sets out the total remuneration and the amount vesting under short term (bonus) and long term incentive plans (as a percentage of the
maximum that could have been achieved) in each year of the same period as set out in the graph above, for the Chief Executive.
Year ended 31 March Chief Executive
2014
2013
2012
20111
20112
2010
Eric Born
Eric Born
Eric Born
Eric Born
Graeme McFaull
Graeme McFaull
Chief Executive single figure
of total remuneration
£’000
885
822
710
249
397
655
Annual bonus payout against
maximum opportunity
68%3
69%3
41%3
0%
0%
64%4
Long-term incentive vesting
rates against maximum
opportunity
100%5
100%6
100%6
n/a
0%7
9%8
1 Appointed 14 December 2010.
2 Resigned on 14 December 2010.
3 The maximum opportunity for ‘single figure’ purposes is 100% of salary. 50% of bonus is deferred in shares which vest subject to performance and are therefore defined as a
long term incentive.
4 The maximum opportunity for ‘single figure’ purposes is 25% of salary. 75% of bonus is deferred in shares which vest subject to performance and are therefore defined as a
long term incentive.
5 Awards under the Company’s Executive Bonus Plan vested in full.
6 Awards under the Company’s Deferred Annual Bonus Scheme vested in full.
7 Awards under the Company’s Share Match Incentive Scheme and the Performance Share Plan all lapsed due to performance conditions not being met.
8 Awards under the Company’s Share Match Incentive Scheme and the Executive Share Option Scheme vested in full however the awards under the Executive Share Option Scheme
were ‘underwater’ and are excluded from this table.
50 Wincanton plc Annual Report and Accounts 2014
Governance
Annual report on remuneration continued
The following table sets out the percentage change in annual cash awarded to the Chief Executive between the year ended 31 March 2013 and the year ended
31 March 2014 as compared to the change in annual cash awarded to a comparator group of employees, as set out below.
Salary
Taxable benefits
Bonus
At 31
March
2014
£’000
415
72
At 31
March
2013
£’000
415
71
Change
%
0%
1%
At 31
March
2014
£’000
26
7
At 31
March
2013
£’000
26
7
Change
%
0%
0%
At 31
March
2014
£’000
2821
7
At 31
March
2013
£’000
2872
7
Change
%
(2)%
–
Total
At 31
March
2013
£’000
728
85
At 31
March
2014
£’000
723
86
Change
%
(1)%
1%
Eric Born
Comparator group3
1 This represents the cash portion of the bonus awarded in respect of the year ended 31 March 2014. 50% will be paid in cash and the remaining 50% deferred in shares.
2 This represents the cash portion of the bonus awarded in respect of the year ended 31 March 2013. 50% was paid in cash and the remaining 50% deferred in shares.
3 The Comparator group is an average cost per person for all management level employees (circa 300 employees). This comparator group was chosen on the basis that it is broadly the same
group of employees that are entitled to participate in the Company’s general management bonus plan and that are entitled to a similar range of taxable benefits. Further, a significant
proportion of the Company’s employees are on legacy employment arrangements as a result of employees transferring into the business or are entitled to remuneration arrangements
determined by the customer rather than Wincanton.
Payments made in the year under review
Single total figure of remuneration – Executive Directors (audited)
Fixed Pay
Salary and fees
Taxable benefits1
Pension related benefits2
Sub total
Bonus
Long-term incentives4
Sub total
Total5
At 31
March
2014
£’000
415
26
91
532
2823
71
353
885
Eric Born
At 31
March
2013
£’000
415
26
91
532
287
3
290
822
At 31
March
2014
£’000
300
16
45
361
1713
–
171
532
Adrian Colman6
At 31
March
2013
£’000
75
4
10
89
42
–
42
131
1 The taxable benefits comprise the gross value of those benefits provided to the Executive Directors, including company car allowance and healthcare. The value of company car allowance
provided during the year ending 31 March 2014 was £25,000 for Eric Born and £15,600 for Adrian Colman.
2 The pension related benefits comprise the amounts contributed to the defined contribution section of the Company’s pension scheme or the salary supplement provided in lieu of
such contributions.
3 The bonus amount is equal to the cash element of the Executive Bonus Plan which will be awarded to the Executive Directors in respect of the year ended 31 March 2014.
Further information is detailed on page 52.
4 The long term incentives set out the value of those deferred shares that vested under the Executive Bonus Plan in the year ended 31 March 2014 and under the Deferred Annual Bonus
Scheme in the year ended 31 March 2013, both subject to performance. These shares are valued as at the date of vest. Further information concerning the exercise of long term incentives
can be found on page 54.
5 The total figure excludes the value of Matching Shares awarded under the Company’s SIP in the year due to the value being de minimis. Full details of shares held under the Company’s SIP
can be found on page 54.
6 Appointed 7 January 2013.
Strategic report
Governance
Annual report on remuneration
Accounts
51
Payments to past Directors
There have been no payments made to past Directors during the year under review.
Payments for loss of office
There have been no payments for loss of office made during the year under review.
Single total figure of remuneration – non-executive Directors (audited)
The below table sets out the fees of the non-executive Directors in the year. For 2013/14, the Chairman received an annual fee of £170,000 and the non-executive
Directors received a base fee of £45,000. Additional fees of £7,500 were payable to Committee chairmen (excluding the Nomination Committee, which is chaired by
the Chairman). It is intended that the fees will remain unchanged in the year ending 31 March 2015. The other information required under the Large and Medium-
sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 in respect of non-executive Directors does not apply and has therefore been
excluded for simplicity.
Steve Marshall
Paul Venables
At 31 March
2014
£’000
At 31 March
2013
£’000
At 31 March
2014
£’000
At 31 March
2013
£’000
At 31 March
2014
£’000
Jonson Cox
At 31 March
2013
£’000
At 31
March 2014
£’000
Martin Sawkins1
At 31 March
2013
£’000
At 31 March
2014
£’000
David Radcliffe1
At 31 March
2013
£’000
Fixed pay
Fees
Committee Chair fee
Total
1 Appointed 27 July 2012.
170
–
170
170
–
170
45
8
53
45
8
53
45
–
45
45
–
45
45
8
53
30
5
35
45
–
45
30
–
30
Executive Director salaries
Executive Director salaries are reviewed annually with any change effective from 1 July. The salaries of the Executive Directors as at 31 March 2014 and with effect from
1 July 2014 are set out in the following table:
Eric Born
Adrian Colman
Salary as at
1July 2014
Salary as at
31 March 2014
£423,300
£306,000
£415,000
£300,000
Change
Salary as at
31 March 2013
2%
2%
£415,000
£300,000
Change
0%
0%
Total pension scheme entitlements
Eric Born and Adrian Colman are members of a defined contribution section of the Wincanton pension scheme. An amount equivalent to 22% of Eric Born’s pensionable
salary and 15% of Adrian Colman’s pensionable salary was payable in the year ending 31 March 2014. Insofar as the individual provision levels exceeded £50,000,
the provision was in the form of a taxable cash supplement. Pension provisions are intended to remain at the same level for 2014/15, however the annual allowance
reduces to £40,000 in the 2014/15 tax year and therefore any pension provision in excess of this level will be in the form of a taxable cash supplement in 2014/15.
Taxable benefits for 2014/15 will be provided in line with those offered in 2013/14.
52 Wincanton plc Annual Report and Accounts 2014
Governance
Annual report on remuneration continued
Executive Bonus Plan
Executive Bonus Plan framework
Awards made under the Executive Bonus Plan are determined by the Committee’s assessment of the performance during the year based on the key areas set out below.
All performance targets are linked to the Group’s strategy.
The maximum bonus potential for Eric Born is 200% of base salary and for Adrian Colman it is 150% of base salary.
60% of an Executive Director’s maximum potential is based on underlying operating profit performance. The bonus accrues on a straight-line basis between
minimum and maximum thresholds. No bonus will be paid for performance below the minimum threshold, with 21% of this element payable at minimum threshold.
The remaining 40% of an Executive Director’s maximum bonus potential is based on personal objectives, which are designed to support the Group’s strategy and
reinforce its values with 50% of the personal objectives relating specifically to financial measures other than underlying operating profit.
50% of the annual bonus is paid in cash. The remaining 50% is deferred in shares, which only vest subject to continued service and underlying operating profit
performance. Every 12 months following the date of award, up to and including the anniversary in 2015, half of the deferred shares vest subject to 80% of each year’s
budgeted underlying operating profit target being met and continued employment. Deferred awards are made as nil cost options with reference to the Company’s
30 day average share price for the period finishing on the last working day of the financial year of the Company.
2014/15 will be the last year of operation for the Executive Bonus Plan. At the anniversary in 2015, all remaining deferred share awards may vest subject still to 80%
of budgeted underlying operating profit for the year ending 31 March 2015 being met and continued employment. To the extent that a bonus is awarded in respect
of the 2014/15 financial year, the bonus will be awarded 50% in cash and 50% in shares with the shares vesting immediately on the date of award. This will be
replaced by the new annual bonus arrangements for the 2015/16 financial year, as described in the Directors’ remuneration policy (subject to shareholder approval).
Executive Bonus Plan performance for the year ended 31 March 2014
Achievement against targets for the annual bonus awards for performance in the year ending 31 March 2014 are as follows:
Operating profit performance
Bonus level as percentage of maximum opportunity
Minimum
£45.3m
13%
Maximum
£50.8m
60%
Actual
£48.0m
36%
Personal objectives set during the year covered areas such as: preparing for the next re-financing; building the platform to capture stronger future growth; continuing
to improve health and safety performance; improving the current operating model; and driving team performance.
Overall, the Committee concluded that progress was made in the areas covered by the personal objectives and the Executive Directors delivered strong performance
during the year under review. This element contributed to a payment of 32% of the maximum potential award for Eric Born and 36% of the maximum potential award
for Adrian Colman.
The value of the bonus awarded in respect of the year ended 31 March 2014 is set out as follows. The Deferred Share value will be included in future single figure
tables to the extent that those shares vest:
Eric Born
Adrian Colman
Cash element
Deferred in shares
Total award 2014
£282,200
£162,000
£282,200
£162,000
£564,400
£324,000
Percentage of salary at
31 March 2014
Total award 2013
Percentage of salary at
31 March 2013
136%
108%
£574,504
£84,6191
138%
28%1
1 Appointed 7 January 2013, with the 2013 award therefore being pro rated based on service in 2012/13.
Deferred share performance for the year ended 31 March 2014 (audited)
For the deferred bonus vesting for performance in the year, the budgeted underlying operating profit target was £47.3m and actual operating profit was £48.0m.
The following deferred bonus awards therefore vested for performance in respect of the year ended 31 March 2014:
Total number
of deferred
shares held at
31 March 2014
Number of
deferred shares
available to vest
during 2013/14
750,851
78,986
107,296
–
% vesting on
performance
100%
–
No. of interests
vesting on
performance
107,296
–
Type
Nil cost option
Nil cost option
Facevalue1
£70,815
–
Percentage of
salary
17%
–%
Eric Born
Adrian Colman
1 Based on the share price on the day of vest of 66p.
2014/15 Executive Bonus Plan framework
The maximum bonus opportunity for Eric Born at 200% of basic salary and Adrian Colman at 150% of basic salary will remain unchanged in the 2014/15 financial year.
In addition, the performance measures will operate on the same basis as in the 2013/14 financial year with 60% of any award based on underlying operating profit
performance and 40% based on personal objectives, with 50% of the personal objectives allocation relating to financial targets other than operating profit.
The targets themselves, as they relate to 2014/15 are deemed commercially sensitive. However, retrospective disclosure of the targets and performance against them
will be provided in next year’s remuneration report to the extent that they do not remain commercially sensitive at that time.
Strategic report
Governance
Annual report on remuneration
Accounts
53
Long Term Incentives – Special Option Plan
In the year under review, the Company made long term incentive awards through the Special Option Plan. The award made in the year to Eric Born was equivalent
to 200% of salary and to Adrian Colman was equivalent to 150% of salary. The awards were made as market priced options, which means that the Executive Directors
only realise value, to the extent that the options meet the performance conditions and vest, from any increase in the share price over the option price.
Performance targets
In order for awards under the Special Option Plan to vest, average TSR growth has to be in excess of 10% per annum with full vesting achieved at 22% per annum
during the three year period from date of award with straight-line option vesting between points. There is also an EPS underpin which requires that underlying EPS
cannot reduce at any point during the relevant three year period. Were EPS to reduce at any point during the relevant three year period, the relevant awards would
lapse in full. These performance conditions apply to all outstanding Special Option Plan awards.
Awards vesting for performance ending in the year under review (audited)
No awards vested for performance in the financial year ended 31 March 2014.
Awards made in the year under review (audited)
Details of options awarded to the Executive Directors in the year under review are set out below. The EPS performance period for the 12 July 2013 award is 1 April
2013 to 1 April 2016 and the TSR performance period is the period of 36 consecutive months commencing on the date of award.
Date of
award
No. of shares
under award as at
1 April 2013
Vest
date
Eric Born
12/07/2013
12/07/2016
Adrian Colman
12/07/2013
12/07/2016
–
–
Option
exercise
price1
£0.68
£0.68
Share price at
date of award2
Additional shares
awarded during
the year
No. of shares
lapsed during
the year
No. of shares
exercised during
the year
No. of shares
under award at
31 March 2014
£0.66
£0.66
1,225,997
886,262
–
–
–
–
1,225,997
886,262
1 The option price is calculated using the three-day average share price immediately preceding the date of award.
2 The closing share price on the date of award.
Application of the Special Option Plan for 2014/15
For 2014/15, the Committee intends that the Special Option Plan will be operated in exactly the same way and with the same performance conditions as in 2013/14.
Long Term Incentives – Performance Share Plan
In 2010 Eric Born was awarded nil cost options under the terms of Wincanton’s previous long term incentive the Performance Share Plan. This is the only outstanding
award under this Plan. The performance condition is based on EPS and relative TSR.
A maximum of 50% of the award was subject to the Group’s cumulative annual underlying EPS; with 25% vesting if cumulative annual EPS was 70.0p, rising on a
straight-line basis to 50% vesting if cumulative annual underlying EPS was 72.4p. When the Committee set that performance condition, the Group also had operations
in Mainland Europe. As a result of the disposal of the Mainland European operations, the Committee amended the performance condition so that it would be based
on EPS of the continuing operations with the target range therefore being between 65.2p and 67.6p. Actual cumulative underlying EPS for the continuing operations
was 56.9p and the performance condition therefore failed.
In addition to the EPS condition, 50% was subject to the Group’s TSR relative to the TSR of the constituents of the FTSE 250 at the date of grant in the three
consecutive years following grant. 12.5% would vest where performance was equal to the median performance of the FTSE 250 rising on a straight-line basis to 50%
(maximum vesting) if TSR performance is in the upper quartile of the FTSE 250 constituents. Minimum vesting required 51% TSR growth whereas the Company
achieved negative TSR growth of 68%. The performance condition therefore failed.
As a result of both performance conditions having failed, the award held by Eric Born lapsed, as set out in the table below:
Date of
award
No. of shares
under award as at
1 April 2013
Vest
date
Eric Born
22/07/2010
22/07/2013
163,080
Option
exercise
price
Nil
Share price at
date of award
£2.21
Additional shares
awarded during
the year
No. of shares
lapsed during
the year
No. of shares
exercised during
the year
No. of shares
under award at
31 March 2014
–
163,080
–
–
Executive Directors’ external appointments
Eric Born is a non-executive Director of John Menzies plc. During the year ended 31 March 2014, Eric received and retained £40,500 in fees.
54 Wincanton plc Annual Report and Accounts 2014
Governance
Annual report on remuneration continued
Share ownership
Total share interests at 31 March 2014 (audited)
Director
Eric Born
Adrian Colman
Steve Marshall
Paul Venables
Jonson Cox
Martin Sawkins
David Radcliffe
Shares
Unvested and subject to
continued employment
Owned/vested
Vested but unexercised
62,349
36,000
20,000
35,000
36,589
25,000
9,532
1,240
107,296
–
–
–
–
–
–
–
–
–
–
–
–
Nil-cost options
Unvested and subject
to performance
643,555
78,986
–
–
–
–
–
Vested but unexercised
–
–
–
–
–
–
–
Options
Unvested and subject
to performance
3,531,552
1,945,584
–
–
–
–
–
Share ownership policy (audited)
Employee share ownership is a key part of the Company’s remuneration policy and is designed to help maintain long term commitment and business understanding,
offering the opportunity to benefit from any growth in shareholder value. Eric Born and Adrian Colman are required to build and then maintain a shareholding level
currently of three times annual salary. Both Eric Born and Adrian Colman have not met this guideline as at 31 March 2014. It is anticipated that the guideline will be
met in the 2015/16 financial year.
Executive Directors’ share interests as at 31 March 2014 (audited)
Partnership Shares held under the SIP
31 March 2013
31 March 2014
31 March 2014
Unrestricted shares held
31 March 2013
4,961
–
4,140
–
57,388
36,000
57,388
36,000
31 March 2014
62,349
36,000
Total shares held
31 March 2013
61,528
36,000
Eric Born
Adrian Colman1
1 Appointed 7 January 2013.
The only changes in the Directors’ personal holdings between 1 April 2014 and the date of this report are as follows; a connected party to Adrian Colman purchased
5,500 shares; and Eric Born purchased 213 Partnership Shares and was awarded 53 Matching Shares.
Strategic report
Governance
Annual report on remuneration
Accounts
55
Directors’ Long Term Incentive Plan Interests (audited)
Date of
award
No. of shares
under award as at
1 April 2013
Vest
date
Option
exercise
price1
Share price at
date of award2
Additional shares
awarded during
the year
No. of shares
lapsed during
the year
No. of shares
exercised during
the year
No. of shares
under award at
31 March 2014
Performance Share Plan
Eric Born
Special Option Plan
22 July 2010
22 July 2013
163,080
Nil
Eric Born
12 July 2012
12 July 2015
2,305,555
12 July 2013
12 July 2016
–
Adrian Colman
29 January 2013 29 January 2016
1,059,322
12 July 2013
12 July 2016
–
Executive Bonus Plan deferred shares
Eric Born
12 July 2012
12 July 2013
Adrian Colman
12 July 2013
12 July 2013
– 12 July 2015
12 July 2014
– 12 July 2015
12 July 2014
– 12 July 2015
214,5913
–
–
£0.36
£0.68
£0.71
£0.68
Nil
Nil
Nil
£2.21
£0.33
£0.66
£0.69
£0.66
£0.33
£0.66
£0.66
–
–
1,225,997
–
886,262
–
536,2604
78,9864,5
1 The option price is calculated using the three day average share price immediately preceding the date of award.
2 The Mid Market Quotation (MMQ) share price on the date of award.
3 The award is made with reference to the 30 calendar day average of the Company’s MMQ ending on 31 March 2012, which was £0.79.
4 The award is made with reference to the 30 calendar day average of the Company’s MMQ ending on 31 March 2013, which was £0.54.
5 Adrian Colman was appointed on 7 January 2013. As a result the bonus award was pro rated based on his length of service.
Non-executive Directors’ share interests as at 31 March 2014 (audited)
Steve Marshall
Paul Venables
Jonson Cox
David Radcliffe
Martin Sawkins
Opening
–
35,000
36,589
–
–
Purchased
20,000
–
25,000
9,532
163,080
–
–
–
–
–
–
–
Disposed
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,305,555
1,225,997
1,059,322
886,262
214,591
536,260
78,986
Closing
20,000
35,000
36,589
25,000
9,532
There were no changes in the non-executive Directors’ personal holdings between 1 April 2014 and the date of this report. Richard Adam was appointed on 1 June 2014
and holds no Wincanton shares.
Dilution limits
All share/option awards are made under plans that incorporate dilution limits consistent with the guidelines provided by the Association of British Insurers. These limits
are 10% in any rolling ten year period for all plans and 5% in any rolling ten year period for executive share plans. Estimated dilution from existing awards made over
the last ten years up to 31 March 2014 is as follows:
All employee share plans
Executive share plans
Actual
5.2%
2.3%
Limit
10%
5%
56 Wincanton plc Annual Report and Accounts 2014
Governance
Directors’ report
Other statutory information
Principal activities
Wincanton plc is the parent Company of the Group. The Group is a leading
provider of supply chain solutions in the UK and Ireland.
Strategic report
Wincanton is required to prepare a fair review of the business of the Group
during the year ended 31 March 2014 and of the position of the Group at the
end of the financial year and a description of the principal risks and uncertainties
facing the Group (known as a Strategic report). The purpose of the Strategic
Report is to enable shareholders to assess how the Directors have performed
their duty under Section 172 of the Companies Act 2006. The information that
fulfils the requirement of the Strategic report can be found in pages 1 to 33.
Details of the Group’s business goal, strategy and model are on pages 4 to 9.
The information that fulfils the requirements of the Corporate governance report
can be found on pages 36 to 57.
Corporate governance report
The Corporate governance statement as required by Rule 7.2.1 of the Financial
Conduct Authority’s Disclosure and Transparency Rules is set on page 36.
Management report
For the purposes of Rule 4.1.5R(2) and Rule 4.18 of the Finance Conduct
Authority’s Disclosure and Transparency Rules, this Directors’ report and the
Strategic report on pages 1 to 33 comprise the Management report.
Events after the balance sheet date
There were no reportable events after the balance sheet date.
Directors
The Directors during the year and at the date of this report are:
Executive
Eric Born, Chief Executive
Authority to purchase shares
The Company was authorised at the 2013 AGM to purchase its own shares
within certain limits. During the year ended 31 March 2014, the Company did not
purchase any shares under this authority. The Directors will, however, seek
renewal of their authority to purchase in the market the Company’s shares at the
AGM on 16 July 2014.
Annual General Meeting 2014
The Company’s thirteenth AGM will be held at 1:00pm on Wednesday, 16 July
2014 at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. The Notice of
Annual General Meeting 2014, which contains full explanations of the business
to be conducted at the AGM, is set out in a separate shareholder circular.
Substantial shareholdings
At the date of this report, the Company has been notified of the following major
shareholdings. Both the number of shares held and the percentage holding are
stated as at the date of notification to the Company:
Shareholder
Aberforth Partners LLP
Ameriprise Financial, Inc
Trustee of the Wincanton plc
EBT
F&C Asset Management plc
Henderson Global Investors
Newton Investment
Management
Rathbone Brothers Plc
Schroders plc
Type of
holding
Indirect
Direct and
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct and
indirect
Number of
shares held
6,372,400
13,393,159
6,070,647
5,350,308
6,805,289
5,844,481
9,058,170
14,969,856
9,632,569
Holding (% of
issued share
capital)
5.25
11.00
5.00
4.40
5.58
4.80
7.54
12.30
6.367
Adrian Colman, Group Finance Director
Standard Life Investments
Non-executive
Steve Marshall, Chairman
Richard Adam (appointed 1 June 2014)
Jonson Cox (resigned 31 May 2014)
David Radcliffe
Martin Sawkins
Paul Venables
At the 2014 AGM, Richard Adam will offer himself for election and all other
current Directors will retire and offer themselves for re-appointment.
Biographical details of all Directors are set out on pages 34 and 35. Details of the
service contracts of the Executive Directors and the letters of appointment for
the non-executive Directors are set out in the Directors’ annual report on
remuneration on pages 46 and 47 respectively.
Results and dividends
The Group profit attributable to equity shareholders for the financial year
amounted to £27.4m. The Directors do not propose a dividend.
Going concern
After making enquiries, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in business for
the foreseeable future. The financial statements are therefore prepared on a
going concern basis. Further details of the Group’s liquidity position and going
concern review are provided in Notes 25 and 1 respectively to the Group
financial statements.
Share capital
Details of the Company’s issued share capital as at 31 March 2014, which
includes options granted under the Group’s employee share schemes, are set
out in Note 6 to the Company financial statements.
Accounting policies, financial instruments and risk
Details of the Group’s accounting policies, together with details of financial
instruments and of financial risk are provided in Notes 1 and 25 to the Group
financial statements.
Additional information
Where not provided elsewhere in the Directors’ report, the following provides the
information required to be disclosed by Section 992 of the Companies Act 2006.
Each ordinary share of the Company carries one vote at general meetings of
the Company. There are no restrictions on the transfer of ordinary shares in
the capital of the Company other than certain restrictions, which may from
time to time be imposed by law. In accordance with the Listing Rules of the
Financial Conduct Authority, certain employees are required to seek approval
of the Company to deal in its shares.
Employees who participate in the SIP, whose shares remain in the plan’s trust,
give directions to the trustee to vote on their behalf by way of a Form of Direction.
The Company is not aware of any agreements between shareholders that may
result in restrictions on the transfer of securities and/or voting rights. The rules
governing the appointment and replacement of Directors are set out in the
Company’s Articles of Association. The Company’s Articles of Association may
only be amended by a special resolution at a general meeting of shareholders.
Strategic report
Governance
Directors’ report
Accounts
57
The Company is not aware of any significant agreements to which it is party
that take effect, alter or terminate upon a change of control of the Company
following a takeover. The Company is not aware of any contractual or other
agreement, which is essential to its business that ought to be disclosed in this
Directors’ report.
Auditor
Upon the recommendation of the Audit Committee and approval of the Board,
resolutions to appoint KPMG LLP as auditor, and to authorise the Directors to fix
their remuneration, will be proposed at the 2014 AGM.
Each of the Directors who held office at the date of approval of this Directors’
report confirms that, so far as each Director is aware, there is no relevant audit
information of which the Company’s auditor is unaware and each Director has
taken all the steps that ought to have been taken in his or her duty as a Director
to make himself aware of any relevant audit information and to establish that the
Company’s auditor is aware of that information.
Directors’ statement on the annual report
The Directors consider the annual report taken as a whole, to be fair, balanced
and understandable and that it provides the information necessary for the
shareholders to assess the Company’s performance, business model and strategy.
On behalf of the Board
Stephen Williams
Company Secretary
Statement of Directors’ responsibilities in respect of the Annual Report
and the Accounts
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the parent Company’s transactions and disclose
with reasonable accuracy at any time the financial position of the parent
Company and enable them to ensure that its financial statements comply with
the Companies Act 2006. They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic report, Directors’ report, Directors’ remuneration report and
Corporate governance statement that comply with that law and those
regulations.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company’s website. Legislation in the
UK governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Responsibility Statement of the Directors in respect of the Annual
Report and Accounts
The Directors confirm that to the best of their knowledge:
(cid:2)(cid:3) the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the undertakings included in
the consolidation taken as a whole; and
(cid:2)(cid:3) the management report required by DTR 4.1.8R (contained in the Strategic
report and the Directors’ report) includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
The Directors approved the above responsibility statement on 4 June 2014.
The Directors are responsible for preparing the Annual Report and Group and
parent Company financial statements in accordance with applicable law and
regulations.
Stephen Williams
Company Secretary
4 June 2014
Wincanton plc
Registered in England and Wales No. 4178808
Company law requires the Directors to prepare Group and parent Company
financial statements for each financial year. Under that law, they are required to
prepare the Group financial statements in accordance with IFRSs as adopted by
the EU and applicable law and have elected to prepare the parent Company
financial statements in accordance with UK Accounting Standards and applicable
law (UK Generally Accepted Accounting Practice).
Under Company law, the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of affairs of
the Group and parent Company and of their profit or loss for that period. In
preparing each of the Group and parent Company financial statements, the
Directors are required to:
(cid:2)(cid:3) select suitable accounting policies and then apply them consistently;
(cid:2)(cid:3) make judgements and estimates that are reasonable and prudent;
(cid:2)(cid:3) for the Group financial statements, state whether they have been prepared in
accordance with IFRSs as adopted by the EU;
(cid:2)(cid:3) for the parent Company financial statements, state whether applicable UK
Accounting Standards have been followed, subject to any material departures
disclosed and explained in the parent Company financial statements; and
(cid:2)(cid:3) prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and the parent Company will
continue in business.
58 Wincanton plc Annual Report and Accounts 2014
Governance
Independent auditor’s report to the members of Wincanton plc only
Opinions and conclusions arising from our audit
Goodwill (£77.3 million)
1. Our opinion on the financial statements is unmodified
We have audited the financial statements of Wincanton plc for the year ended
31 March 2014 which comprise the Consolidated income statement, the
Consolidated statement of comprehensive income, the Consolidated and
Company balance sheets, the Consolidated statement of changes in equity, the
Consolidated statement of cash flows and the related notes. In our opinion:
(cid:2)(cid:3) the financial statements give a true and fair view of the state of the Group’s
and of the parent Company’s affairs as at 31 March 2014 and of the Group’s
profit for the year then ended;
(cid:2)(cid:3) the Group financial statements have been properly prepared in accordance
with International Financial Reporting Standards as adopted by the European
Union (IFRS as adopted by the EU);
(cid:2)(cid:3) the parent Company financial statements have been properly prepared in
accordance with UK Accounting Standards; and
(cid:2)(cid:3) the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
2. Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements the risks of
material misstatement that had the greatest effect on our audit were as follows.
Property provisions (£33.4 million)
Refer to page 41 (Audit Committee report), page 67 (accounting policy) and
page 79 (financial disclosures).
(cid:2)(cid:3) The risk – In the year ended 31 March 2012, an onerous lease provision was
recognised in relation to the empty or under-utilised sites which formed part
of the Group portfolio. This was as a result of significant unexpected
withdrawals by customers from sites in response to the external market
environment and a deterioration in both general economic conditions and
the overall property market. The calculation of this provision required the
Directors to make a number of judgements and estimates at the time of initial
calculation, but also requires ongoing trading conditions and market
sentiment to be reflected as time progresses.
This remains an area of significant judgement in the current year as changes
in assumptions, particularly relating to the forecasting of cash flows and
changes in market sentiment could lead to a material impact on the profit
for the period.
The forecasting of cash flows and assessment of market sentiment are
therefore key judgemental areas that our audit is concentrated on.
(cid:2)(cid:3) Our response – In this area our audit procedures included, among others,
the use of our own property specialists to critically assess the Group's
measurement of market confidence, in particular to challenge the
assumptions relating to the length of time currently marketed properties
will remain empty prior to letting and the rent-free periods which would
be required to be offered by comparing to industry norms for the particular
location. We challenged the key inputs to the calculation of the provision;
the discount rate used, through comparison with industry competitors; the
forecast cash flows by assessing the historical accuracy of these cash flows,
and the assessment of market confidence by performing sensitivity analysis
on the key void and rent-free period assumptions.
Refer to page 41 (Audit Committee report), page 66 (accounting policy) and
pages 74 and 75 (financial disclosures).
(cid:2)(cid:3) The risk – Goodwill acquired in a business combination is allocated to the
Group’s Cash Generating Units (CGUs), which are aligned with its operating
segments; Contract Logistics and Specialist Businesses. The recoverable
amounts of the CGUs are determined from value in use calculations and
where the carrying value of a CGU exceeds its recoverable amount an
impairment charge is required. This is a key judgement area as adverse
changes in assumptions, particularly relating to forecast cash flows and
discount rates could reduce the recoverable amount below the carrying
amount, and potentially give rise to a material impairment charge.
The forecasting of cash flows and the selection of an appropriate discount rate
are therefore key judgemental areas that our audit is concentrated on.
(cid:2)(cid:3) Our response – In this area our audit procedures included, among others,
evaluating the Group's budgeting procedures upon which the forecast cash
flows are based by performing an assessment of the historical accuracy of
budgets. We challenged the Group’s selection of the discount rate used by
considering the basis of the calculation of the discount rate and used external
data (including competitor analysis) to determine an appropriate range and
compared the actual rate used to that range. For the period beyond the three
year financial budgets and forecasts, we considered whether the growth
rate used was consistent with both historical performance and future
business strategies.
We evaluated the Group’s sensitivity analysis, by performing our own analysis
to assess the sensitivity of the impairment reviews to changes in the key
assumptions of the discount rate, growth rate and the forecast cash flows.
We considered the adequacy of the Group’s disclosures in respect of the
impairment testing of goodwill and whether disclosures about the sensitivity
of the outcome of the impairment assessment to changes in key assumptions
properly reflected the risks inherent in it.
Pension scheme deficit (£110.9 million)
Refer to page 41 (Audit Committee report), pages 66 and 67 (accounting policy)
and pages 81 to 84 (financial disclosures).
(cid:2)(cid:3) The risk – Significant estimates are made in valuing the defined benefit
section of the Group's post-retirement Scheme and small changes in either
the assumptions or estimates used to value the Group's net pension deficit
may have a significant effect on the results and financial position of the Group.
The key assumptions in the calculation of the net deficit are the discount rate,
inflation rate and mortality/life expectancy.
The defined benefit section of the Scheme was closed to future accrual from
31 March 2014, which resulted in a curtailment gain of £15.0 million. During
the period the Group also changed the benefits of the plan to offer a Pension
Increase Exchange (PIE) option, resulting in a gain of £5.2 million; a combined
gain of £20.2 million. There are a number of inherent assumptions made in the
calculation of these items, small changes in which might have a significant
impact on the Group’s results and financial position. The key assumptions are
the inflation rate and salary increases in respect of the curtailment gain and
in calculating the PIE past service gain the assumed uptake of the PIE option
in future.
The selection of the inflation rate, salary increase and uptake of the PIE option
are therefore key judgemental areas that our audit is concentrated on.
Strategic report
Governance
Independent auditor’s
report to the members
of Wincanton plc only
Accounts
59
(cid:2)(cid:3) Our response – With the support of our own actuarial specialists, we
challenged the key assumptions applied to the membership data to
determine the Group's net deficit, the curtailment gain and the PIE gain,
as identified above. This included a comparison of these key assumptions
against externally derived data.
Also with the support of our actuarial specialists, we challenged the
methodology underlying the calculation of both the £15.0 million curtailment
gain recognised in the year on the closure of the defined benefit section
to future accrual and the £5.2 million gain recognised on the completion
of the PIE.
We also considered the adequacy of the Group's disclosures in respect of
the sensitivity of the deficit to these assumptions and in relation to the
impact of the closure of the defined benefit section to future accrual and
the implementation of the PIE exercise.
3. Our application of materiality and an overview of the scope
of our audit
The materiality for the financial statements as a whole was set at £1.3 million.
This has been determined with reference to a benchmark of Group profit before
taxation, which we consider to be one of the principal considerations for
members of the Company in assessing the financial performance of the Group.
Materiality represents 3.7% of group profit before tax and 5.1% of underlying
Group profit before tax as disclosed in the financial review.
We agreed with the Audit Committee to report to it all corrected and
uncorrected misstatements we identified through our audit with a value in
excess of £0.1 million, in addition to other audit misstatements below that
threshold that we believe warranted reporting on qualitative grounds.
Audits for group reporting purposes were performed by component auditors at
the key reporting component in Guernsey and by the group audit team in the
UK. These group procedures covered 100% of total Group revenue; 100% of
underlying Group profit before taxation; and 100% of total Group assets.
The audits undertaken for group reporting purposes at the key reporting
components of the Group were all performed to materiality levels set by, or
agreed with, the group audit team. These materiality levels were set individually
for each component and ranged from £1.0 million to £1.3 million.
4. Our opinion on other matters prescribed by the Companies Act 2006
is unmodified
In our opinion:
(cid:2)(cid:3) the part of the Directors’ Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006; and
(cid:2)(cid:3) the information given in the Strategic Report and the Directors’ Report for the
financial year for which the financial statements are prepared is consistent
with the financial statements; and
(cid:2)(cid:3) the information given in the Corporate governance report set out on page 38
with respect to internal control and risk management systems in relation to
financial reporting processes and about share capital structures is consistent
with the financial statements.
5. We have nothing to report in respect of the matters on which we are
required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based on the
knowledge we acquired during our audit, we have identified other information
in the annual report that contains a material inconsistency with either that
knowledge or the financial statements, a material misstatement of fact, or that
is otherwise misleading.
In particular, we are required to report to you if:
(cid:2)(cid:3) we have identified material inconsistencies between the knowledge we
acquired during our audit and the Directors’ statement that they consider that
the annual report and financial statements taken as a whole is fair, balanced
and understandable and provides the information necessary for shareholders
to assess the Group’s performance, business model and strategy; or
(cid:2)(cid:3) the Corporate Governance Report does not appropriately address matters
communicated by us to the Audit Committee.
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
(cid:2)(cid:3) adequate accounting records have not been kept by the parent Company,
or returns adequate for our audit have not been received from branches
not visited by us; or
(cid:2)(cid:3) the parent Company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the accounting
records and returns; or
(cid:2)(cid:3) certain disclosures of Directors’ remuneration specified by law are not made;
or
(cid:2)(cid:3) we have not received all the information and explanations we require for our
audit; or
(cid:2)(cid:3) a Corporate Governance Statement has not been prepared by the Company.
Under the Listing Rules we are required to review:
(cid:2)(cid:3) the Directors’ statement, set out on page 57, in relation to going concern; and
(cid:2)(cid:3) the part of the Corporate governance report on page 36 relating to the
Company’s compliance with the nine provisions of the 2010 UK Corporate
Governance Code specified for our review.
We have nothing to report in respect of the above responsibilities.
Scope of report and responsibilities
As explained more fully in the Directors’ Responsibilities Statement set out
on page 57, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.
A description of the scope of an audit of financial statements is provided on
the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.
This report is made solely to the Company’s members as a body and is subject
to important explanations and disclaimers regarding our responsibilities,
published on our website at www.kpmg.com/uk/auditscopeukco2013a,
which are incorporated into this report as if set out in full and should be read
to provide an understanding of the purpose of this report, the work we have
undertaken and the basis of our opinions.
Andrew Campbell-Orde (Senior Statutory Auditor) for and on behalf of
KPMG LLP, Statutory Auditor
Chartered Accountants
100 Temple Street
Bristol
BS1 6AG
4 June 2014
60 Wincanton plc Annual Report and Accounts 2014
Accounts
Consolidated income statement
For the year ended 31 March 2014
Revenue
Underlying operating profit
Amortisation of acquired intangibles
Net pension gain
Operating profit
Financing income
Financing cost
Net financing costs
Profit before tax
Income tax expense
Profit attributable to equity shareholders of Wincanton plc
Earnings per share
– basic
– diluted
1 Where applicable, comparatives have been restated for the adoption of IAS 19 Employee Benefits (Revised), see note 23.
Note
2
2
3
3
5
5
5
6
7
7
2014
£m
1,098.3
48.0
(6.5)
15.8
57.3
0.4
(22.8)
(22.4)
34.9
(7.5)
27.4
23.6p
21.7p
2013
restated1
£m
1,086.8
45.3
(7.3)
–
38.0
0.6
(24.6)
(24.0)
14.0
(3.9)
10.1
8.7p
8.4p
Strategic report
Governance
Accounts
61
Consolidated statement of comprehensive income
For the year ended 31 March 2014
Profit for the year
Other comprehensive income/(expense)
Items which will not subsequently be reclassified to the income statement
Remeasurements of defined benefit liability, net of deferred tax
Items which are or may subsequently be reclassified to the income statement
Net foreign exchange (loss)/gain on investment in foreign subsidiaries net of hedged items
Effective portion of changes in fair value of cash flow hedges
Net change in fair value of cash flow hedges transferred to the income statement
Income tax relating to components of other comprehensive income
Other comprehensive income/(expense) for the year, net of income tax
Total comprehensive income/(expense) attributable to equity shareholders of Wincanton plc
1 Where applicable, comparatives have been restated for the adoption of IAS 19 Employee Benefits (Revised), see note 23.
Note
6
2014
£m
27.4
5.9
(0.1)
(0.2)
2.0
0.1
1.7
7.7
35.1
2013
restated1
£m
10.1
(29.9)
0.4
(0.7)
1.4
–
1.1
(28.8)
(18.7)
62 Wincanton plc Annual Report and Accounts 2014
Accounts
Consolidated balance sheet
At 31 March 2014
Non-current assets
Goodwill and intangible assets
Property, plant and equipment
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current liabilities
Income tax payable
Borrowings and other financial liabilities
Trade and other payables
Employee benefits
Provisions
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Borrowings and other financial liabilities
Employee benefits
Provisions
Deferred tax liabilities
Net liabilities
Equity
Issued share capital
Share premium
Merger reserve
Hedging reserve
Translation reserve
Retained earnings
Total equity deficit
These financial statements were approved by the Board of Directors on 4 June 2014 and were signed on its behalf by:
E Born
Chief Executive
A Colman
Group Finance Director
Note
9
10
13
14
15
16
17
18
23
19
17
23
19
13
2014
£m
105.5
61.7
24.0
191.2
6.4
135.4
131.9
273.7
(9.7)
(12.1)
(322.9)
(0.3)
(23.9)
(368.9)
(95.2)
96.0
(184.7)
(110.9)
(49.4)
(1.0)
(346.0)
(250.0)
12.2
12.8
3.5
(1.8)
0.3
(277.0)
(250.0)
2013
£m
114.4
73.1
32.9
220.4
7.1
144.6
103.2
254.9
(7.5)
(13.9)
(312.3)
(0.3)
(22.8)
(356.8)
(101.9)
118.5
(196.9)
(148.7)
(58.4)
(1.0)
(405.0)
(286.5)
12.2
12.8
3.5
(3.6)
0.4
(311.8)
(286.5)
Strategic report
Governance
Accounts
63
Consolidated statement of changes in equity
At 31 March 2014
Balance at 1 April 2012
Total comprehensive income
Increase in IFRS 2 reserve
Own shares disposed of on
exercise of options
Balance at 31 March 2013
Balance at 1 April 2013
Total comprehensive income
Increase in IFRS 2 reserve
Own shares disposed of on
exercise of options
Balance at 31 March 2014
Issued
share
capital
£m
12.2
–
–
–
12.2
12.2
–
–
–
Share
premium
£m
12.8
Merger
reserve
£m
3.5
–
–
–
12.8
12.8
–
–
–
–
–
–
3.5
3.5
–
–
–
Hedging
reserve
£m
Translation
reserve
£m
IFRS 2
reserve
£m
(4.3)
0.7
–
–
(3.6)
(3.6)
1.8
–
–
–
0.4
–
–
0.4
0.4
(0.1)
–
–
14.6
–
0.6
–
15.2
15.2
–
1.4
–
16.6
12.2
12.8
3.5
(1.8)
0.3
Retained earnings
Own
shares
£m
(16.6)
–
–
1.3
(15.3)
Profit and
loss
£m
(290.6)
(19.8)
–
(1.3)
(311.7)
Total
equity
deficit
£m
(268.4)
(18.7)
0.6
–
(286.5)
(15.3)
(311.7)
(286.5)
–
–
33.4
–
35.1
1.4
0.4
(0.4)
–
(14.9)
(278.7)
(250.0)
64 Wincanton plc Annual Report and Accounts 2014
Accounts
Consolidated statement of cash flows
For the year ended 31 March 2014
Operating activities
Profit before tax
Adjustments for
– depreciation and amortisation
– net pension gain
– interest expense
– profit on disposal of plant, property and equipment
– share-based payments fair value charges
Decrease in trade and other receivables
Decrease/(increase) in inventories
Increase/(decrease) in trade and other payables
Decrease in provisions
Increase in employee benefits before pension deficit payment
Income taxes paid
Cash generated before pension deficit payment
Pension deficit payment
Cash flows from operating activities
Investing activities
Proceeds from sale of property, plant and equipment
Interest received
Additions of property, plant and equipment
Additions of computer software costs
Cash flows from investing activities
Financing activities
Decrease in borrowings
Payment of finance lease liabilities
Interest paid
Cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Represented by
– cash at bank and in hand
– restricted cash, being deposits held by the Group’s captive insurer
1 Where applicable, comparatives have been restated for the adoption of IAS 19 Employee Benefits (Revised), see note 23.
2014
£m
34.9
21.9
(15.8)
22.4
(0.1)
1.4
64.7
9.1
0.7
5.7
(9.8)
2.1
(2.4)
70.1
(14.1)
56.0
6.2
0.4
(7.9)
–
(1.3)
(10.5)
(1.5)
(14.0)
(26.0)
28.7
103.2
131.9
115.7
16.2
131.9
2013
restated1
£m
14.0
24.5
–
24.0
–
0.6
63.1
14.5
(0.4)
(22.3)
(18.0)
0.5
(0.3)
37.1
(13.6)
23.5
6.5
0.6
(10.3)
(0.8)
(4.0)
(63.7)
(4.0)
(14.2)
(81.9)
(62.4)
165.6
103.2
88.2
15.0
103.2
Strategic report
Governance
Accounts
65
Notes to the consolidated financial statements
1. Accounting policies
Statement of compliance
Wincanton plc is a company incorporated in England and Wales. The Group’s
consolidated financial statements consolidate those of the Company and its
subsidiaries (together referred to as the Group), plus proportionately consolidate
the Group’s interest in jointly controlled entities.
The consolidated financial statements have been prepared and approved by the
Directors in accordance with International Financial Reporting Standards (IFRS)
and International Financial Reporting Interpretations Committee (IFRIC)
interpretations, as adopted by the International Accounting Standards Board
(IASB) and by the European Union (EU) and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS (Adopted IFRS).
The following standards issued by the IASB have been adopted by the EU, but
only become effective for accounting periods commencing after 31 March 2014:
(cid:2)(cid:3) IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS
12 Disclosures of Interests in Other Entities, amendment to IAS 27 Separate
Financial Statements and amendment to IAS 28 Investments in Associates and
Joint Ventures are a package of new standards and amendments that set out
the basis for consolidation and the accounting requirements. The Group will
adopt these standards on 1 April 2014.
(cid:2)(cid:3) Amendments to IAS 32 Financial Instruments: Presentation – Offsetting
Financial Assets and Financial Liabilities. These amendments set out the
criteria required for offsetting. The Group will adopt these amendments on
1 April 2014.
The Group does not currently expect that adoption of these standards will have
a significant effect on the consolidated results or financial position of the Group.
The Company has elected to prepare its parent Company financial statements
in accordance with UK Accounting Standards; these are presented on pages 91
to 94 and present information about the Company as a separate entity
and not about its group.
Basis of preparation
The Group and parent Company financial statements are presented in pounds
sterling, rounded to the nearest hundred thousand. They are prepared on the
historical cost basis except where assets or liabilities are required to be stated at
their fair value.
The preparation of Group financial statements under Adopted IFRS and parent
Company financial statements under UK Accounting Standards requires
management to make judgements, estimates and assumptions that affect the
application of policies and the reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.
The estimates and assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is
revised and/or in future periods if applicable. Judgements made by management
in the application of Adopted IFRS that have significant effect on the Group
financial statements and estimates with a significant risk of material adjustment
in the next year are discussed in the relevant notes to these consolidated
financial statements.
The accounting policies set out below have been applied consistently to all
periods presented in these Group financial statements with the exception of first
time application of IAS 19 Employee Benefits (Revised), IFRS 13 Fair Value
Measurement and Amendments to IFRS 7 Financial Instruments: Disclosures –
Offsetting Financial Assets and Financial Liabilities. Except for the adoption of
IAS 19 Employee Benefits (Revised) the adoption of these standards has not had
a significant effect on the consolidated results or financial position of the Group.
The impact of adopting IAS 19 Employee Benefits (Revised) is set out in note 23.
The Group’s business activities, together with the factors likely to affect its future
development, performance and position are set out on pages 11 to 13 and
pages 26 to 31, which also contain a review of the financial position of the Group,
its cash flows, liquidity position and borrowing facilities. In addition, note 25 to
the financial statements includes the Group’s objectives, policies and processes
for managing its capital; its financial risk management objectives; details of its
financial instruments and hedging activities; and its exposures to credit risk and
liquidity risk.
The Group is reporting net liabilities of £250.0m (2013: £286.5m) primarily as a
result of a past loss and also the pension deficit. The main movement since the
prior period relates to the profit in the year. The current syndicated core bank
funding facility of £175m amortises by £10m in November 2014 and expires in
November 2015 and the longer term funding loan of £75m amortises from year
7 of the 9 year term and matures in 2022. In addition, the US Private Placement
bond (USPP) matures in tranches in 2015 and 2016.
As part of the year end process the Directors have undertaken a going concern
review, as required by IAS 1 Presentation of Financial Statements, including
determining the headroom available when the Group’s facilities are compared to
the forecast monthly cash flows for the forthcoming financial year and sensitising
the borrowing covenants to give an indication of the headroom therein. Having
undertaken this review the Directors have a reasonable expectation that the
Company and the Group overall have adequate resources to continue to meet
their obligations as they fall due and satisfy their borrowing covenants for the
foreseeable future. Accordingly these financial statements have been prepared
on a going concern basis.
Basis of consolidation
The consolidated Group financial statements include the financial statements
of the Company and its subsidiary undertakings made up to the balance sheet
date. When the Company acquired the Wincanton group of companies upon
demerger from the former parent in May 2001, the changes in group structure
were accounted for using the principles of merger accounting available under
UK GAAP at the time. Businesses acquired or disposed of since then have been
accounted for using acquisition accounting principles from or up to the date
that control passed.
Subsidiaries are those entities controlled by the Group. Control exists when the
Group has the power, directly or indirectly, to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. In assessing control,
potential voting rights that presently are exercisable or convertible are taken into
account. The financial statements of subsidiaries are included in the consolidated
financial statements from or up to the date that control passed.
Jointly controlled entities are those entities over whose activities the Group has
joint control, established by contractual agreement. The consolidated financial
statements include the Group’s proportionate share of the assets, liabilities,
revenue and expenses which are included with items of a similar nature on a
line-by-line basis, from or up to the date that joint control passes.
Intra-group balances, and any unrealised gains and losses or income and
expenses arising from intra-group transactions, are eliminated in preparing the
consolidated financial statements. Unrealised gains arising from transactions with
jointly controlled entities are eliminated to the extent of the Group’s interest in
the entity. Unrealised losses are eliminated in the same way as unrealised gains,
but only to the extent that there is no evidence of impairment.
66 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
Intangible assets
Goodwill
All business combinations are accounted for by applying the purchase method.
Goodwill represents amounts arising on acquisition of subsidiaries and jointly
controlled entities.
Goodwill is stated at cost less any impairment losses (see below). Goodwill
is allocated to cash-generating units and is tested annually for impairment
(see below).
Other intangible assets
Intangible assets arising under a business combination (acquired intangible
assets) are capitalised at fair value as determined at the date of acquisition
and are stated at that fair value less accumulated amortisation (see below)
and impairment losses (see below).
Amortisation is charged to the income statement on a straight-line basis over
the estimated useful lives of acquired intangible assets from the date they are
acquired as follows:
Customer relationships
Software rights
6 to 10 years
1 to 5 years
The cost of computer software purchased or developed in-house which has
the capacity to generate economic benefits for a period in excess of one year
is capitalised as an intangible asset. Amortisation is charged to the income
statement on a straight-line basis over the following estimated useful lives:
Computer software costs
3 to 5 years
Major software projects, such as the Group back office project, may be amortised
over lives of up to 10 years.
Property, plant and equipment
Items of property, plant and equipment are stated at cost or deemed cost less
accumulated depreciation (see below) and impairment losses (see below).
The cost of tangible assets includes directly attributable costs, including
appropriate commissioning costs. The cost of financing the construction of
major properties is included in their capitalised cost. The interest rate applied
represents the actual finance costs incurred on the funds borrowed specifically
to construct the asset.
Plant and equipment acquired by way of finance lease is stated at deemed cost,
being an amount equal to the lower of its fair value and the present value
of the minimum lease payments at inception of the lease, less accumulated
depreciation (see below) and impairment losses (see below). Lease payments are
accounted for as described in the accounting policy on expenses. Finance leases
are those under the terms of which the Group assumes substantially all the risks
and rewards of ownership.
Subsequent expenditure
The Group recognises in the carrying amount of an item of property, plant and
equipment the costs incurred in replacing part of such an item if it is probable
that the future economic benefits will flow to the Group and when the cost can
be measured reliably. All other such costs, including the derecognition of the
replaced part of the item, are expensed in the income statement as incurred.
Depreciation
Depreciation is charged to the income statement on a straight-line basis over the
estimated useful life of each part of an item of property, plant and equipment.
Freehold land is not depreciated. The estimated useful lives are as follows:
Freehold and long leasehold buildings
Short leasehold improvements
Plant and equipment, furniture and fittings
Office machinery and computers
Motor vehicles
50 years
life of lease
5 to 25 years
3 to 5 years
5 to 10 years
The range of useful economic lives given reflects the fact that assets held for
specific contracts are depreciated over the lives of those contracts.
The residual value of tangible assets, if significant, is reassessed annually.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based
on the first-in first-out principle and includes expenditure incurred in acquiring
the inventories and bringing them to their existing location and condition.
Net realisable value is the estimated selling price in the ordinary course of
business, less selling expenses.
Trade and other receivables
Trade and other receivables are stated at their fair value on initial recognition
(discounted if material) and subsequently at amortised cost, i.e. less any
impairment losses (see below).
Cash and cash equivalents
Cash and cash equivalents comprises cash balances, restricted cash and
call deposits.
Trade and other payables
Trade and other payables are stated at their fair value on initial recognition
(discounted if material) and subsequently at amortised cost.
Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies at the balance sheet date are translated into sterling at the
foreign exchange rate ruling at that date. Foreign exchange differences arising
on such translation are recognised in the income statement.
The assets and liabilities of foreign operations, including goodwill and fair value
adjustments arising on consolidation, are translated into sterling at the foreign
exchange rates ruling at the balance sheet date. The revenues and expenses of
foreign operations are translated into sterling at rates approximating the foreign
exchange rates ruling at the dates of the transactions. Foreign exchange
differences arising on translation are recognised directly in a separate component
of other comprehensive income. They are released into the income statement
upon disposal.
Employee benefits
The Group operates both defined contribution and defined benefit pension
arrangements. The assets of these arrangements are held in separate Trustee
administered funds independent of the Group. The investment strategy of the
Trustee and Group is to maximise investment returns, with a key area for
management attention being to seek to meet the Group’s funded defined
benefit obligations. In accordance with this strategy certain investments are
designated at fair value and are accounted for as set out below. The defined
benefit arrangements closed to future accrual with effect from 31 March 2014.
Defined contribution arrangements
Obligations for contributions to defined contribution pension arrangements are
recognised as an expense in the income statement as incurred.
Defined benefit arrangements
The Group’s net obligation in respect of defined benefit pension arrangements
is calculated separately for each plan by estimating the amount of future benefit
that employees have earned in return for their service in the current and prior
periods; that benefit is discounted to determine the present value, and the fair
value of any scheme assets is deducted. The discount rate is the yield at the
balance sheet date on AA credit rated bonds that have maturity dates
approximating the terms of the Group’s obligations. The calculation is performed
by a qualified actuary using the projected unit method.
Where the calculation results in an asset to the Group, this is limited to the
present value of any future refunds from the scheme or reductions in future
contributions to the scheme.
Past service costs arise due to a plan amendment or a curtailment. They are
recognised in the income statement immediately.
Strategic report
Governance
Accounts
67
1. Accounting policies (continued)
Remeasurement gains and losses that arise in calculating the Group’s obligation
in respect of a scheme are recognised in full through other comprehensive
income in the statement of comprehensive income.
Share-based payment transactions
The Group has applied the requirements of IFRS 2 Share-based Payments to the
grants of options made under the Executive Share Option Schemes, Performance
Share Plan, Share Match Incentive Schemes, Deferred Annual Bonus Scheme,
Special Option Plan and Executive Bonus Plan.
The Group issues options under equity-settled share-based incentive schemes
to certain employees which are measured at the date of grant as the fair value
of the employee services required in exchange for the grant. The fair value
determined is expensed on a straight-line basis over the vesting period, based
on the Group’s estimate of shares that will eventually vest and adjusted for the
effect of non-market based vesting conditions.
Fair value is measured by an external valuer using the Binomial, Monte-Carlo
or scenario-modelling methods as appropriate. The expected life assumptions
used in the models have been adjusted, based on management’s best estimate,
for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
A number of shares in the Company are held in trust on behalf of employees
who hold options under the Group’s equity-settled share-based incentive
schemes. Such shares are held by an employee benefit trust and are treated as
treasury shares and shown in the balance sheet as a deduction from equity.
Other share schemes
Shares awarded on a matching basis to employees participating in the
Company’s Share Incentive Plan are purchased at the prevailing market rate and
charged to the income statement each period as employees make an eligible
contribution. The shares purchased are held in a separately administered
offshore trust for the benefit of the Plan participants.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event and it is probable that
an outflow of economic benefits will be required to settle the obligation. If the
effect is material, provisions are determined by discounting the expected future
cash flows.
The Group provides for onerous property provisions on a site by site basis due
to the unique nature and location of each site. Provision is made for the best
estimate of the expected cost of empty and under-utilised properties, including
dilapidations where applicable. Dilapidations are provided for specific individual
properties and properties where the lease is due to end within 3 years on the
basis that the outflow of resources is probable and the amount of the obligation
can be reliably estimated. Where significant, amounts are discounted.
The Group provides for insurance claims on an appropriate discounted basis
depending on the expected timing of their settlement. Provision is made for
the estimated costs of claims arising from past events based on the advice
of the Group’s external insurance advisers.
Impairment
The carrying amounts of the Group’s assets, other than inventories and deferred
tax assets, are reviewed at each balance sheet date to determine whether there
is any indication of impairment. An asset is considered for impairment testing
if objective evidence indicates that one or more events had a negative effect
on the estimated future cash flows of the asset. If any such indication exists the
asset’s recoverable amount is estimated. The two exceptions are dealt with as
per the separate applicable accounting policy. For trade receivables specific bad
debts are provided against unless the Group is satisfied that no recovery of the
amount owing is possible; at that point the amount considered irrecoverable
is written off.
An impairment loss is recognised whenever the carrying amount of an asset or
cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in the income statement. Impairment losses recognised in respect of
cash-generating units are allocated first to reduce the amount of goodwill
allocated to the applicable cash-generating unit and then to reduce the carrying
amount of the other assets in the unit on a pro-rata basis. A cash-generating unit
is the smallest identifiable group of assets that generates cash inflows that are
largely independent of the cash inflows from other assets or groups of assets.
Calculation of recoverable amount
The recoverable amount of the Group’s receivables carried at amortised cost is
calculated as the present value of expected future cash flows, discounted at the
original effective interest rate inherent in the asset. Receivables with a short
duration are not discounted.
The recoverable amount of other assets is the greater of their fair value less costs
to sell and value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs.
Reversals of impairment
An impairment loss in respect of goodwill is not reversed. An impairment loss
in respect of a receivable carried at amortised cost is reversed only to the extent
that the carrying amount does not exceed the carrying amount that would
have been determined if no impairment loss had been recognised and if the
reversal can be related objectively to an event occurring after the impairment
was recognised.
In respect of other assets, an impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount.
Revenue recognition
Revenue from services rendered is recognised in the income statement on the
delivery of those services based on the proportion of the total delivered that
can be reliably measured at the balance sheet date. Where payments are
received in advance of revenue being recognised they are included as deferred
income. Where revenue is recognised in advance of amounts being invoiced it
is reported as accrued income.
Expenses
Lease payments
Payments made under operating leases are recognised in the income statement
on a straight-line basis over the term of the lease. Lease incentives received are
recognised in the income statement as an integral part of the total lease expense.
For finance leases the minimum lease payments are apportioned between the
finance charge and the reduction of the outstanding liability. The finance charge
is allocated to each period during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the liability.
Net financing costs
Net financing costs comprise interest payable and other charges less
interest income.
Interest payable on borrowings is calculated using the effective interest rate
method. Other charges include bank fees, amortisation of bank and USPP
arrangement fees, unwinding of discounts, and losses on hedging
instruments that are recognised in the income statement (see hedge
accounting policy below).
Interest income includes interest receivable on funds invested and gains on
hedging instruments, and these are recognised in the income statement as
they accrue.
The interest expense component of finance lease payments is recognised in
the income statement using the constant periodic rate of return method.
Net financing costs include the net interest on the net defined benefit
pension liability.
68 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the consolidated financial statements continued
1. Accounting policies (continued)
Taxation
Tax on profits or losses for the year comprises current and deferred tax and is
recognised in the income statement except to the extent that it relates to items
recognised directly in other comprehensive income or equity, in which case it is
recognised in the relevant component.
Current tax is the expected tax payable on the taxable income for the year, using
tax rates enacted or substantively enacted at the balance sheet date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for: the initial recognition
of goodwill, the initial recognition of assets or liabilities that affect neither
accounting nor taxable profit, and differences relating to accumulated profits
of overseas subsidiaries to the extent that they will probably not be distributed.
The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be utilised.
Deferred tax assets are reduced to the extent that it is no longer probable that
the related tax benefit will be realised.
Operating segments
Operating segments are identified on the basis of information that is provided
to the Board, which is the Group’s chief operating decision-maker, to allocate
capital and resources and to assess performance.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments to hedge its exposure to foreign
exchange and interest rate risks arising from operational, financing and investment
activities. In accordance with its treasury policy, the Group does not hold or issue
derivative financial instruments for trading purposes. However, derivatives that
do not qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments which are accounted for as trading instruments
are recognised initially and subsequently stated at fair value. The gain or loss on
remeasurement to fair value is recognised immediately in the income statement.
However, where derivatives qualify for hedge accounting, recognition of
any resultant gain or loss depends on the nature of the item being hedged
(see below).
The fair value of interest rate swaps are determined by discounting the future
cash flows at rates determined by year end yield curves.
The fair value of forward exchange contracts is their quoted market price at the
balance sheet date, being the present value of the quoted forward price.
Upon initial recognition attributable transaction costs are recognised in the
income statement when incurred.
Fair value hedges
Where a derivative financial instrument is designated as a hedge of the variability
in fair value of a recognised asset or liability or an unrecognised firm commitment,
all changes in the fair value of the derivative are recognised immediately in
the income statement. The carrying value of the hedged item is adjusted by
the change in fair value that is attributable to the risk being hedged (even if
it is normally carried at cost or amortised cost) and any gains or losses on
remeasurement are also recognised immediately in the income statement
(even if those gains would normally be recognised directly in reserves). Hedge
accounting is discontinued when the Group revokes the hedging relationship,
the hedge instrument expires or is sold, terminated, exercised or no longer
qualifies for hedge accounting. The adjustment to the carrying amount of the
hedged item arising from the hedged risk is amortised to profit or loss from
that date.
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability
in cash flows of a highly probable forecast transaction, the effective part of any
gain or loss on the derivative financial instrument is recognised directly in equity
within hedging reserves. The ineffective part of any gain or loss is recognised
immediately within underlying operating profit, or within net financing costs
in the case of interest rate swaps designated as cash flow hedges. When the
forecast transaction that was being hedged is realised and affects profit or loss,
the cumulative gain or loss on the derivative financial instrument is removed
from equity and recognised in the income statement in the same period.
When the forecast transaction subsequently results in the recognition of a
non-financial asset or non-financial liability, the associated cumulative gain or
loss is removed from equity and included in the initial cost or other carrying
amount of the non-financial asset or non-financial liability.
When a hedging instrument expires or is sold, terminated or exercised, or the
entity revokes designation of the hedge relationship but the hedged forecast
transaction is still expected to occur, the cumulative gain or loss at that point
remains in equity and is recognised in accordance with the above policy when
the transaction takes place. If the hedged transaction is no longer expected to
take place, the cumulative gain or loss is removed from equity and recognised
immediately in the income statement.
Hedge of monetary assets and liabilities
Where a derivative financial instrument is used to economically hedge the
foreign exchange exposure of a recognised monetary asset or liability, no hedge
accounting is applied and any gain or loss on the hedging instrument is
recognised in the income statement.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value, less attributable
transaction costs. Subsequent to initial recognition, interest-bearing borrowings
are stated at amortised cost with any difference between cost and redemption
value being recognised in the income statement over the period of the
borrowings on an effective interest basis. Interest-bearing borrowings which
are designated hedged items in a fair value hedge arrangement are carried
at fair value (see policy above).
Dividends
Dividends are recognised in the period in which they are declared, approved,
or paid.
Strategic report
Governance
Accounts
69
2. Operating segments
Wincanton plc provides contract logistics services in the UK and Ireland. The Group manages its operations in two distinct operating segments: Contract logistics
(the majority of activities including transport and warehousing for various market sectors including retailers, manufacturers, defence and construction) and Specialist
businesses (Pullman, Containers and Wincanton Records Management).
The results of the operating segments are regularly reviewed by the Board to allocate resources to these segments and to assess their performance. The Group
evaluates performance of the operating segments on the basis of revenue and underlying operating profit. Assets and liabilities are reviewed at a consolidated level
only, therefore segmental information is not provided.
Revenue from external customers2
Depreciation
Amortisation of software intangibles
Reportable segment underlying operating profit3
Total Group assets4
Additions to reportable segment non-current assets:
– property, plant and equipment
– computer software costs
Total Group liabilities
Contract logistics
Specialist businesses
Consolidated
2014
£m
930.1
(10.7)
(2.2)
38.3
2013
restated1
£m
923.2
(12.6)
(2.1)
36.9
2014
£m
168.2
(2.5)
–
9.7
5.7
–
8.0
0.8
2.2
–
Note
10
9
10
9
2013
restated1
£m
2014
£m
163.6
1,098.3
(2.5)
–
8.4
2.0
–
(13.2)
(2.2)
48.0
464.9
7.9
–
2013
restated1
£m
1,086.8
(15.1)
(2.1)
45.3
475.3
10.0
0.8
(714.9)
(761.8)
1 Where applicable, comparatives have been restated for the adoption of IAS 19 Employee Benefits (Revised), see note 23.
2 Included in segment revenue is £1,071.1m (2013: £1,058.8m) in respect of customers based in the UK.
3 Underlying operating profit is stated before amortisation of acquired intangibles and, where applicable, exceptionals.
4 Total Group assets include non-current assets of £185.5m (2013: £215.6m) in the UK.
3. Operating profit
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Underlying1
£m
1,098.3
(1,030.3)
68.0
(20.0)
48.0
Amortisation and
Exceptionals2
£m
–
–
–
9.3
9.3
2014
Total
£m
1,098.3
(1,030.3)
68.0
(10.7)
57.3
Underlying1
restated
£m
Amortisation and
Exceptionals2
£m
1,086.8
(1,022.8)
64.0
(18.7)
45.3
–
–
–
(7.3)
(7.3)
2013
Total
restated
£m
1,086.8
(1,022.8)
64.0
(26.0)
38.0
1 Underlying operating profit is stated before amortisation of acquired intangibles and, where applicable, exceptionals.
2 Comprises the amortisation of acquired intangibles and, where applicable, exceptionals.
70 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the consolidated financial statements continued
3. Operating profit (continued)
The following items have been charged in arriving at operating profit:
Auditor’s remuneration:
Audit fees for statutory audit services
– subsidiary undertakings
Non-audit fees
– fees paid to the Auditor and its associates for assurance services
Depreciation and other amounts written off property, plant and equipment
– owned
Amortisation and other amounts written off software intangibles
Operating lease rentals
– plant and equipment
– land and buildings
Exceptionals
Net pension gain
Net gain on changes to pension arrangements
Note
10
9
2014
£m
0.2
0.1
13.2
2.2
25.6
36.3
2014
£m
15.8
15.8
2013
£m
0.2
0.1
15.1
2.1
30.0
36.9
2013
£m
–
–
Costs and incomes are included as exceptionals where they are non-recurring and where not to do so would distort the reported underlying profit performance of
the Group.
Following consultation with the active members, the defined benefit sections of the Group’s pension arrangements were closed to future accrual with effect from
31 March 2014. This has led to a non-cash curtailment gain of £15.0m offset by implementation costs associated with the closure of £3.8m. In addition, the Group has
recently launched a Pension Increase Exchange (PIE) project, where current pensioners and retiring members may elect to take a higher initial payment in exchange
for foregoing certain rights to future pension increases. This resulted in a non-cash past service credit of £5.2m offset by implementation costs of £0.6m.
Strategic report
Governance
Accounts
71
4. Personnel expenses, including Directors
Wages and salaries
Share-based payments (including IFRS 2 fair value charges)
Social security contributions
Contributions to defined contribution pension arrangements
Current service cost of defined benefit pension arrangements
Average number of persons employed by the Group (including Directors) during the year
Directors’ emoluments
Salaries
Bonus
Other benefits
Non-executive Directors’ fees
Total emoluments
Note
23
23
2014
£m
416.5
2.5
38.7
10.9
9.7
478.3
2014
15,440
2014
£’000
715
453
178
366
1,712
Full details of each individual Director’s emoluments, bonuses deferred in shares, share options and pension entitlements are given in the Annual report on
remuneration on pages 48 to 55.
5. Net financing costs
Recognised in the income statement
Interest income
Interest expense
Finance charges payable in respect of finance leases
Unwinding of discount on provisions
Interest on the net defined benefit pension liability
Net financing costs
The interest income relates primarily to the deposits held by the Group’s captive insurer.
Recognised in other comprehensive income
Foreign currency translation differences for foreign operations
The above amounts are recognised in the translation reserve.
Note
19
23
2014
£m
0.4
0.4
(13.9)
(0.5)
(2.0)
(6.4)
(22.8)
(22.4)
2014
£m
(0.1)
(0.1)
2013
restated
£m
421.5
0.9
39.4
7.9
10.6
480.3
2013
15,700
2013
£’000
693
516
183
352
1,744
2013
restated
£m
0.6
0.6
(16.1)
(0.5)
(2.4)
(5.6)
(24.6)
(24.0)
2013
£m
0.4
0.4
72 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the consolidated financial statements continued
6. Income tax expense
Recognised in the income statement
Current tax expense
Current year
Adjustments for prior years
Deferred tax expense
Current year
Adjustments for prior years
Total income tax expense
Reconciliation of effective tax rate
Profit before tax
Income tax using the UK corporation tax rate of 23% (2013: 24%)
Effect of tax rates in foreign jurisdictions
Trading losses utilised in the period
Non-deductible expenditure
Change in UK corporation tax rate
Adjustments for prior years
– current tax
– deferred tax
Total tax expense for the year
Recognised in other comprehensive income
Remeasurements of defined benefit pension liability
Income tax relating to foreign exchange movements
2014
£m
4.4
0.2
4.6
3.5
(0.6)
2.9
7.5
34.9
8.0
(0.3)
–
0.1
0.1
0.2
(0.6)
7.5
6.1
(0.1)
6.0
2013
restated
£m
0.3
0.2
0.5
3.8
(0.4)
3.4
3.9
14.0
3.3
(0.3)
(0.6)
1.6
0.1
0.2
(0.4)
3.9
(7.6)
–
(7.6)
The main UK Corporation tax rate reduced from 24% to 23% with effect from 1 April 2013. The closing UK deferred tax provision is calculated based on the rate of 20%.
Strategic report
Governance
Accounts
73
7. Earnings per share
Earnings per share calculation is based on the earnings attributable to the equity shareholders of Wincanton plc of £27.4m (2013: £10.1m) and the weighted average
of 116.1m (2013: 115.8m) shares which have been in issue throughout the year. The diluted earnings per share calculation is based on there being 10.3m (2013: 4.3m)
additional shares deemed to be issued at £nil consideration under the Company’s share option schemes. The weighted average number of ordinary shares for both
basic and diluted earnings per share are calculated as follows:
Weighted average number of ordinary shares (basic)
Issued ordinary shares at the beginning of the year
Net effect of shares issued and purchased during the year
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at the end of the year
Effect of share options on issue
2014
millions
2013
millions
116.0
0.1
116.1
116.1
10.3
126.4
115.5
0.3
115.8
115.8
4.3
120.1
An alternative earnings per share number is set out below, being before amortisation of acquired intangibles and, where applicable, exceptionals plus related tax,
since the Directors consider that this provides further information on the underlying performance of the Group:
Underlying earnings per share
– basic
– diluted
Underlying earnings are determined as follows:
Profit for the year attributable to equity shareholders of Wincanton plc
Net gain on changes to pension arrangements
Amortisation of acquired intangibles
Tax impact of above items
Underlying earnings
2014
pence
16.6
15.3
2014
£m
27.4
(15.8)
6.5
1.2
19.3
2013
restated
pence
13.3
12.8
2013
restated
£m
10.1
–
7.3
(2.0)
15.4
Note
3
9
8. Dividends
Under Adopted IFRS dividends are only provided in the financial statements when they become a liability of the Company. No dividends have been paid in the current or prior year.
The Directors do not recommend the payment of a final dividend for the year ended 31 March 2014 (2013: £nil).
74 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the consolidated financial statements continued
9. Goodwill and intangible assets
Cost
At 1 April 2012
Effect of movements in foreign exchange
Additions
Disposals
At 31 March 2013
At 1 April 2013
Effect of movements in foreign exchange
Disposals
At 31 March 2014
Amortisation and impairment losses
At 1 April 2012
Charge for year
Disposals
At 31 March 2013
At 1 April 2013
Charge for year
At 31 March 2014
Carrying value
At 1 April 2012
At 31 March 2013 and 1 April 2013
At 31 March 2014
Note
Goodwill
£m
Acquired
intangibles
£m
Computer
software costs
£m
79.8
0.1
–
–
79.9
79.9
(0.1)
–
79.8
(2.5)
–
–
(2.5)
(2.5)
–
(2.5)
77.3
77.4
77.3
66.5
–
–
–
66.5
66.5
–
–
66.5
(37.2)
(7.3)
–
(44.5)
(44.5)
(6.5)
(51.0)
29.3
22.0
15.5
2, 3, 7
38.3
–
0.8
(0.4)
38.7
38.7
–
(0.1)
38.6
(21.7)
(2.1)
0.1
(23.7)
(23.7)
(2.2)
(25.9)
16.6
15.0
12.7
2014
£m
2.2
6.5
8.7
Total
£m
184.6
0.1
0.8
(0.4)
185.1
185.1
(0.1)
(0.1)
184.9
(61.4)
(9.4)
0.1
(70.7)
(70.7)
(8.7)
(79.4)
123.2
114.4
105.5
2013
£m
2.1
7.3
9.4
2013
£m
57.2
20.2
77.4
The carrying value of acquired intangibles relates entirely to customer relationships £15.5m (2013: £22.0m).
The total amortisation charge of £8.7m (2013: £9.4m) is recognised in the income statement as follows:
Within cost of sales
– computer software amortisation
Within administrative expenses
– amortisation of acquired intangibles
Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating units (CGUs) which are in line with the Group’s reported operating segments, as per the table below.
– Contract logistics
– Specialist businesses
2014
£m
57.1
20.2
77.3
The recoverable amount of a CGU is determined based on value in use calculations. These calculations are cash flow projections based on the financial budgets
and forecasts approved by the Board for the forthcoming financial year and 24 months beyond. The financial budgets and forecasts have been set on a contract
by contract basis, taking account of prior year results and expected developments. Cash flows beyond those 12-month and further 24-month periods are extrapolated
to perpetuity using the estimated growth rates and underlying inflation rates stated below, which do not exceed the long term average growth and inflation rates
in the specific geographical area where the CGU operates.
Key assumptions used for value in use calculations:
Estimated growth rate
Underlying inflation rate
Discount rate
Contract
logistics
%
1.9%
2.2%
10.1%
Specialist
businesses
%
1.9%
2.2%
10.1%
Strategic report
Governance
Accounts
75
9. Goodwill and intangible assets (continued)
Management determined the growth rates and underlying inflation rates based on expectations for market development and these are consistent with external
forecasts and historical trends. The discount rates are pre-tax and reflect the relevant risks. The value in use has been determined in a similar manner as in 2013. The
key assumptions for 2014 are disclosed in the table above, in 2013 these rates were; estimated growth rate 1.8%; underlying inflation rate 2.2%; and discount rate 9.9%.
In addition to the impairment testing described above the Directors have considered the market capitalisation of the Company when carrying out the impairment
review and are satisfied that there are valid, short term reasons which undervalue the current share price. As a result they do not believe that the present low level of
market capitalisation of the Group makes it necessary to impair the goodwill.
Sensitivity to changes in assumptions
The estimated recoverable amounts for both the Contract logistics and the Specialist businesses CGUs exceed their respective carrying amounts by approximately
£500m and £145m (2013: £430m and £140m respectively). Management believe no reasonably possible change in the key assumptions would cause the carrying
amount to exceed the recoverable amount.
10. Property, plant and equipment
Cost
At 1 April 2012
Effect of movements in foreign exchange
Additions
Disposals
At 31 March 2013
At 1 April 2013
Effect of movements in foreign exchange
Additions
Disposals
At 31 March 2014
Depreciation and impairment losses
At 1 April 2012
Effect of movements in foreign exchange
Charge for year
Disposals
At 31 March 2013
At 1 April 2013
Effect of movements in foreign exchange
Charge for year
Disposals
At 31 March 2014
Carrying amount
At 1 April 2012
At 31 March 2013 and 1 April 2013
At 31 March 2014
Note
Property
£m
Plant and
equipment
£m
61.7
–
–
(3.3)
58.4
58.4
–
–
(8.4)
50.0
(33.2)
–
(1.9)
2.2
(32.9)
(32.9)
–
(2.8)
3.2
(32.5)
28.5
25.5
17.5
175.9
0.2
10.0
(22.5)
163.6
163.6
(0.2)
7.9
(8.5)
162.8
(119.9)
(0.1)
(13.2)
17.2
(116.0)
(116.0)
0.2
(10.4)
7.6
(118.6)
56.0
47.6
44.2
2, 3
Total
£m
237.6
0.2
10.0
(25.8)
222.0
222.0
(0.2)
7.9
(16.9)
212.8
(153.1)
(0.1)
(15.1)
19.4
(148.9)
(148.9)
0.2
(13.2)
10.8
(151.1)
84.5
73.1
61.7
Included in the total carrying amount of property, plant and equipment is £2.7m (2013: £3.0m) in respect of assets held under finance leases, and in cost is £1.5m
(2013: £1.9m) in respect of capitalised finance costs.
The carrying amount of property comprises:
Freehold
Short leasehold
2014
£m
14.1
3.4
17.5
2013
£m
21.2
4.3
25.5
76 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the consolidated financial statements continued
11. Investments in subsidiaries
The significant subsidiaries as at 31 March 2014 in the Wincanton group of companies, based on the scale of their activities, are as follows:
Principal activity
% of equity held
Country of incorporation
Wincanton Holdings Limited
Wincanton Group Limited
Wincanton UK Limited1
Wincanton Ireland Limited
Risk Underwriting (Guernsey) Limited
1 Direct subsidiary of Wincanton plc.
Contract logistics services
Contract logistics services
Intermediate holding company
Contract logistics services
Captive insurer
100
100
100
100
100
England and Wales
England and Wales
England and Wales
Republic of Ireland
Guernsey
12. Interests in jointly controlled entities
Included in the consolidated financial statements of the Group are the following amounts in respect of the Group’s proportionate share of the assets, liabilities and
revenue and expenses of the jointly controlled entity:
Current assets
Net assets
13. Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Employee benefits
Pension provisions
Other deferred tax assets
Other deferred tax liabilities1
2014
£m
3.3
0.4
22.2
1.9
(3.8)
24.0
Assets
2013
£m
3.6
–
34.2
1.0
(5.9)
32.9
2014
£m
(1.0)
–
–
–
–
(1.0)
Liabilities
2013
£m
(0.2)
–
–
–
(0.8)
(1.0)
1 Other deferred tax liabilities consist primarily of deferred tax on acquired intangibles.
Unrecognised deferred tax assets and liabilities
Deferred tax asset on losses carried forward
2014
£m
0.1
0.1
2014
£m
2.3
0.4
22.2
1.9
(3.8)
23.0
2014
£m
3.1
3.1
2013
£m
–
–
Net
2013
£m
3.4
–
34.2
1.0
(6.7)
31.9
2013
£m
2.7
2.7
Deferred tax assets have not been recognised in respect of losses carried forward due to the uncertainty of their utilisation in the relevant companies.
Movement in deferred tax assets and liabilities during the current year
Property, plant and equipment
Employee benefits
Pension provisions
Other deferred tax assets
Other deferred tax liabilities
At
1 April 2013
£m
Recognised
in income
£m
Other
movements
£m
At
31 March 2014
£m
3.4
–
34.2
1.0
(6.7)
31.9
(1.1)
0.4
(5.9)
0.8
2.9
(2.9)
–
–
(6.1)
0.1
–
(6.0)
2.3
0.4
22.2
1.9
(3.8)
23.0
Strategic report
Governance
Accounts
77
14. Inventories
Raw materials and consumables
15. Trade and other receivables
Trade receivables
Less: provision for doubtful debts
Net trade receivables
Other receivables
Prepayments and accrued income
2014
£m
6.4
6.4
2014
£m
81.8
(0.2)
81.6
2.4
51.4
2013
£m
7.1
7.1
2013
£m
81.5
(0.3)
81.2
3.7
59.7
135.4
144.6
All receivables are due within one year, except for other receivables of £1.5m (2013: £2.1m) in respect of amounts recoverable from customers and others under
contracts of more than one year, and prepayments and accrued income of £nil (2013: £0.5m).
Movement in the provision for doubtful debts
At 1 April
Impairment losses recognised on receivables
Amounts written off as uncollectable
Impairment losses reversed
At 31 March
Ageing of trade receivables and the associated provision for doubtful debts at the balance sheet date
Current
1 month overdue
2 months overdue
3+ months overdue
Gross
£m
78.7
2.6
0.3
0.2
81.8
2014
Provision
£m
–
–
–
(0.2)
(0.2)
2014
£m
0.3
–
–
(0.1)
0.2
Gross
£m
76.4
3.4
0.9
0.8
81.5
2013
£m
0.9
(0.5)
0.1
(0.2)
0.3
2013
Provision
£m
–
–
–
(0.3)
(0.3)
The standard period of credit on sales is up to 30 days. Interest is chargeable on overdue amounts. The Group only provides for doubtful debts where, in the opinion
of management, the amount is no longer recoverable. The amount of the provision is management’s estimate of the irrecoverable amount.
16. Cash and cash equivalents
Cash at bank and in hand
Restricted cash deposits held by the Group’s captive insurer
Cash and cash equivalents
Details of the Group’s treasury policies are set out in note 25.
2014
£m
115.7
16.2
131.9
2013
£m
88.2
15.0
103.2
78 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the consolidated financial statements continued
17. Borrowings and other financial liabilities
Current
Bank loans and overdrafts
Finance lease liabilities
Other financial liabilities
Non-current
Bank loans1
Finance lease liabilities
Other financial liabilities
1 Bank loans include the US$ private placement as swapped into sterling.
The Group’s finance lease liabilities are payable as follows:
Less than 1 year
Between 1 and 5 years
Over 5 years
Minimum lease
payments
£m
0.3
0.4
1.9
2.6
Interest
£m
(0.2)
(0.3)
(1.6)
(2.1)
2014
Principal
£m
0.1
0.1
0.3
0.5
Minimum lease
payments
£m
2.0
0.6
2.1
4.7
The following are the contractual maturities of financial liabilities, including interest payments on finance leases only:
At 31 March 2014
2014
£m
10.5
0.1
1.5
12.1
184.0
0.4
0.3
184.7
Interest
£m
(0.5)
(0.5)
(1.7)
(2.7)
Non-derivative financial liabilities
Bank loans and overdrafts
Unsecured bond issues – US$ private placement1
Finance leases
Trade and other payables
Derivative financial liabilities
US$/GBP fixed to floating swap – asset1
US$/GBP fixed to floating swap – liability
Forward foreign exchange contracts
Interest rate swaps
At 31 March 2013
Non-derivative financial liabilities
Bank loans and overdrafts
Unsecured bond issues – US$ private placement1
Finance leases
Trade and other payables
Derivative financial liabilities
US$/GBP fixed to floating swap – asset1
US$/GBP fixed to floating swap – liability
Forward foreign exchange contracts
Interest rate swaps
Carrying
amount
£m
Contractual
cash flows
£m
Less than
1 year
£m
Between
1 and 5 years
£m
140.1
55.8
0.5
322.9
(54.9)
53.5
0.3
1.5
519.7
140.1
54.2
2.6
322.9
(54.2)
53.5
0.3
1.5
520.9
10.0
–
0.3
322.9
–
–
0.2
1.3
334.7
73.8
54.2
0.4
–
(54.2)
53.5
0.1
0.2
128.0
Carrying
amount
£m
Contractual
cash flows
£m
Less than
1 year
£m
Between
1 and 5 years
£m
150.3
63.3
2.0
312.3
(62.0)
53.5
0.1
3.6
523.1
150.3
59.4
4.7
312.3
(59.4)
53.5
0.1
3.6
524.5
10.3
–
2.0
312.3
–
–
0.1
1.6
326.3
65.0
59.4
0.6
–
(59.4)
53.5
–
2.0
121.1
1 Contractual cash flows denominated in foreign currencies are translated at the year end exchange rate. Carrying amounts are stated at fair value.
2013
£m
10.7
1.5
1.7
13.9
194.4
0.5
2.0
196.9
2013
Principal
£m
1.5
0.1
0.4
2.0
Over
5 years
£m
56.3
–
1.9
–
–
–
–
–
58.2
Over
5 years
£m
75.0
–
2.1
–
–
–
–
–
77.1
Strategic report
Governance
Accounts
79
18. Trade and other payables
Current
Trade payables
Other taxes and social security
Other payables
Accruals and deferred income
19. Provisions
At 1 April 2013
Effect of movements in foreign exchange
Provisions used during the year
Unwinding of discount
Provisions made during the year
At 31 March 2014
Current
Non-current
2014
£m
81.4
36.1
40.8
164.6
322.9
Other
provisions
£m
1.1
–
–
–
–
1.1
1.1
–
1.1
2013
£m
90.2
19.3
55.1
147.7
312.3
Total
£m
81.2
(0.1)
(19.4)
2.0
9.6
73.3
23.9
49.4
73.3
Note
Insurance
£m
Property
£m
5
37.9
–
(9.2)
0.5
9.6
38.8
12.1
26.7
38.8
42.2
(0.1)
(10.2)
1.5
–
33.4
10.7
22.7
33.4
The Group owns 100% of the share capital of a captive insurer which insures certain of the risks of the Group. The insurance provisions in the above table are held in
respect of outstanding insurance claims, the majority of which are expected to be paid within one to seven years. The discount unwinding arises primarily on the
employers’ liability policy which is discounted over a period of seven years at a rate based on the Bank of England base rate.
The property provisions are determined on a site by site basis, as the best estimate of the expected costs of empty and under-utilised properties, including
dilapidations. The provisions are utilised over the relevant lease term, with the majority expected to be utilised over the next three years. Where significant, amounts
have been discounted at a rate based on the Group’s cost of debt.
20. Capital and reserves
Share capital
Allotted, called up and fully paid
In issue at 1 April and 31 March
2014
millions
121.7
Ordinary shares
2013
millions
121.7
The number of shares detailed above differs from those in note 7 as a result of the inclusion, in the above total, of the shares held within an Employee Benefit Trust
(EBT) and also the effect of weighting for the purpose of the earnings per share calculations.
The holders of ordinary shares are entitled to receive dividends as declared from time to time. At general meetings of shareholders each shareholder (or appointed
proxy) present in person is entitled to vote, on a show of hands has one vote, and on a poll has one vote per share. In respect of the Company’s shares that are held
by the EBT (see over), all rights are suspended until these shares are reissued.
During the current and prior year no new shares were issued under any of the share-based payment schemes. During the year ended 31 March 2002, the Company
established a Capital Redemption Reserve of £49,998 on redemption of redeemable preference shares.
Merger reserve
The merger reserve arose from the original acquisition of the then Wincanton group of companies by Wincanton plc, on the demerger from the previous parent in
May 2001, which was accounted for under merger accounting principles.
Hedging reserve
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a highly probable forecast transaction, the effective part of the gain
or loss on the derivative is recognised directly in equity within the hedging reserve. When the forecast transaction that was being hedged is realised the cumulative
gain or loss on the derivative is recognised in the income statement in the same period.
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations as well as from any
translation of liabilities that hedge the Company’s net investment in foreign subsidiaries.
80 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the consolidated financial statements continued
20. Capital and reserves (continued)
IFRS 2 reserve
Since 1 April 2004, the IFRS 2 reserve comprises the charges made to the income statement in respect of share-based payments under the Group’s equity compensation schemes.
Own shares
The own shares reserve comprises the cost of the Company’s shares held by the Employee Benefit Trust (EBT) established in Jersey and managed on its behalf by
independent trustees. At 31 March 2014, the number of the Company’s shares held by the EBT had decreased to 5,612,710 (2013: 5,772,484) due to the settlement
of options exercised. The EBT has waived the right to receive dividends in respect of these shares. The average cost of the shares held is 266p each (2013: 265p)
and at 31 March 2014, the market value of the shares held was £6.3m (2013: £2.5m).
All of the shares in the EBT are held in respect of the Group’s various equity compensation schemes (see note 24) and at 31 March 2014 there were 1,375,582
(2013: 1,527,352) shares held in respect of vested options.
21. Capital commitments
Capital commitments for the Group at the end of the financial year for which no provision has been made, are as follows:
Contracted
22. Operating leases
Leases as lessee
2014
£m
2.5
2.5
2013
£m
1.1
1.1
The Group leases warehousing facilities, commercial vehicles and other logistics equipment for use in its operations. Typical lease periods for new warehouse rental
contracts are between three and ten years although older rental contracts are for longer periods with intervening break clauses. The average period for vehicles and
equipment is five years. The amounts charged to the income statement in the current and prior years are given in note 3.
The total future minimum lease payments under non-cancellable operating leases fall due for repayment as follows:
Less than 1 year
Between 1 and 5 years
More than 5 years
Plant and
equipment
£m
22.5
43.8
1.7
68.0
2014
Land and
buildings
£m
30.6
73.2
142.5
246.3
Plant and
equipment
£m
21.7
37.6
1.4
60.7
2013
Land and
buildings
£m
34.4
88.0
146.6
269.0
Wherever possible these commitments are mitigated through contractual commitments from customers for whom the properties are occupied and/or vehicles and
plant are rented. The degree of mitigation can be banded according to the nature of the contract between the Group and its customers. This includes ‘back-to-back’
leases which are fully underwritten by customers throughout the life of the lease and multi-user locations where, although there is no specific matching of lease and
contract terms, there are varying degrees of contract backing and therefore mitigation is spread across a number of customers.
A summary of leases by customer contract type is shown in the following table:
Element of lease underwritten by customer contract
Element of lease where the period of the lease extends beyond the current maturity
of the customer contract
Multi-user locations where mitigation is spread across a number of customers
Leases with limited or no mitigation
Covered by property provision
Plant and
equipment
£m
44.8
5.9
14.4
2.9
68.0
–
68.0
2014
Land and
buildings
£m
31.9
8.4
135.0
46.7
222.0
24.3
246.3
Plant and
equipment
£m
23.1
15.4
20.1
2.1
60.7
–
60.7
2013
Land and
buildings
£m
32.4
27.8
148.5
27.1
235.8
33.2
269.0
Strategic report
Governance
Accounts
81
23. Employee benefits
The employee benefit liabilities of the Group consist primarily of the post-retirement obligations of the Group’s pension arrangements. In addition frozen holiday pay
obligations exist in respect of a limited number of employees. These two elements are analysed in the table below and the pension arrangements discussed in detail:
Holiday pay
Pension schemes (see below)
These employee benefits are split as follows:
Current
Non-current
Pension schemes
2014
£m
0.3
110.9
111.2
0.3
110.9
111.2
2013
£m
0.3
148.7
149.0
0.3
148.7
149.0
Employees of Wincanton participated in both funded and unfunded pension arrangements in the UK and Ireland during the year ended 31 March 2014 details of
which are given below.
The principal Wincanton Scheme in the UK (the Scheme) is a funded arrangement which has three defined benefit sections and two defined contribution sections,
called the Wincanton Retirement Savings Section and the Wincanton Pension Builder Plan. The employees of Wincanton Ireland Limited are eligible to participate in
a separate funded defined contribution scheme. Assets of these pension arrangements are held in separate Trustee administered funds independent of Wincanton.
The pension cost in relation to the defined benefit sections of the Scheme is assessed in accordance with the advice of a qualified actuary using the projected unit
method. The weighted average duration of the defined benefit obligation is around 18.5 years.
On 16 October the Group announced that it was entering into consultation with the active members of the defined benefit sections of the Scheme over the
proposal to close these sections of the Scheme to future accrual. Following the conclusion of the consultation process, these sections were closed to future accrual
on 31 March 2014. This means that no future service benefit will accrue but pensions built up to the date of closure will be preserved. The closure to future accrual
has resulted in a one off non-cash curtailment gain of £15.0m being recorded, being the actuarially determined estimate of the present value of the funding cost
which will no longer be incurred. This arises as members are no longer entitled to pension benefits linked to future salary increases.
The Group has also recently launched a Pension Increase Exchange (PIE) project where current members and retiring members may elect to take a higher initial
pension payment in exchange for foregoing certain rights to future pension increases. This project has resulted in a reduction in the defined benefit obligations of
£5.2m which has been reported as a one off, non-cash past service credit.
The latest formal valuation of the Scheme was carried out as at 31 March 2011 by the Scheme actuary, Hymans Robertson. It was agreed between the Trustee and
the Group in June 2012 and submitted to the Pension Regulator. As a result, the Group, in consultation with the Scheme actuary agreed to leave the terms of the
additional cash contribution unchanged from that previously agreed. Accordingly the additional cash contribution the Group makes to the Scheme in order to
address the past service deficit will increase by RPI each year through to 2022/23. The contribution in the year was £14.1m (2013: £13.6m).
In the year commencing 1 April 2014 the Group contributions are expected to be the incremental cash contribution of £14.4m increased by RPI as set out in the
triennial valuation as at 31 March 2011. In addition, some administration costs of the Scheme will be borne by the Group, these are expected to total £0.7m.
Previously, a small number of employees, who were subject to the statutory earnings cap on pensionable earnings prior to 6 April 2006, were entitled to participate
in an unfunded unapproved arrangement in addition to accruing benefits from the Scheme, however there have been no active members of this arrangement
throughout the year ended 31 March 2014.
The defined benefit sections of the Scheme expose the Group to various risks: longevity risk (members living longer than expected), inflation and interest rate risk
(higher or lower than expected), and market (investment) risk (lower returns than expected). The Trustee and Group have taken steps to mitigate these risks through
the use of:
(cid:2)(cid:3) bespoke longevity tables tailored to the membership of the Scheme;
(cid:2)(cid:3) hedging instruments within the investment portfolio; and
(cid:2)(cid:3) reducing investment risk when pre-determined funding levels are reached.
The Group has also taken steps to reduce risk and the build-up of further risk, as mentioned above, by closing the defined benefit section to future benefit accrual
thereby preventing the build-up of further liabilities and the risk associated with these and undertaking a pension increase exchange exercise reducing the Group’s
exposure to inflation risk
The Group is not exposed to any unusual, entity specific or scheme specific risks.
82 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the consolidated financial statements continued
23. Employee benefits (continued)
The assets and liabilities of the defined benefit sections of the Group are calculated in accordance with IAS 19 Employee Benefits (Revised) and are set out in
the tables below.
The calculations under IAS 19 are based on actuarial assumptions which are the best estimates chosen from a range of possible assumptions about the long-term
future which, unless by chance, will not necessarily be borne out in practice. The fair value of the assets, which are not intended to be realised in the short term, may
be subject to significant change before the year realised, and the present value of the liabilities are derived from cash flow projections over long periods and are thus
inherently uncertain.
Present value of unfunded defined benefit obligations
Present value of funded defined benefit obligations
Fair value of Scheme assets
Net defined benefit liability
2014
£m
(1.4)
(887.8)
778.3
(110.9)
2013
£m
(1.6)
(891.0)
743.9
(148.7)
The movement in the above net defined benefit liability in the year was primarily the result of the changes to the Scheme as detailed above and the increase in the
market value of assets inclusive of the further additional cash contributions being made. The net defined benefit liability, after taking into account the related deferred
tax asset, is £88.7m (2013: £114.5m).
Movements in the present value of the net defined benefit liability
31 March 2014
Opening position
Included in Income statement:
Current service cost
Administration costs
Past service credit, including curtailment gain
Interest on the net defined benefit liability
Cash:
Employer contributions
Employee contributions
Benefits paid
Included in Other comprehensive income:
Changes in financial assumptions
Experience
Return on assets excluding amounts included in net financing costs
Closing defined benefit liability
31 March 2013 (restated)
Opening position
Included in Income statement:
Current service cost
Administration costs
Interest on the net defined benefit liability
Cash:
Employer contributions
Employee contributions
Benefits paid
Included in Other comprehensive income:
Changes in financial assumptions
Experience
Return on assets excluding amounts included in net financing costs
Closing defined benefit liability
Assets
743.9
–
(2.3)
–
33.3
23.8
0.1
(28.5)
–
–
8.0
778.3
Obligations
Net liability
Unfunded
arrangements
(891.0)
(147.1)
(1.6)
Total
net liability
(148.7)
(9.7)
–
20.2
(39.7)
–
(0.1)
28.5
5.9
(1.9)
–
(9.7)
(2.3)
20.2
(6.4)
23.8
–
–
5.9
(1.9)
8.0
–
–
–
–
0.2
–
–
–
–
–
(9.7)
(2.3)
20.2
(6.4)
24.0
–
–
5.9
(1.9)
8.0
(887.8)
(109.5)
(1.4)
(110.9)
Assets
657.0
Obligations
Net liability
(773.9)
(116.9)
–
(2.1)
32.8
25.3
0.1
(27.1)
–
–
57.9
743.9
(10.6)
–
(38.3)
–
(0.1)
27.1
(95.5)
0.3
–
(891.0)
(10.6)
(2.1)
(5.5)
25.3
–
–
(95.5)
0.3
57.9
(147.1)
Unfunded
arrangements
(1.3)
–
–
(0.1)
–
–
–
(0.2)
–
–
(1.6)
Total
net liability
(118.2)
(10.6)
(2.1)
(5.6)
25.3
–
–
(95.7)
0.3
57.9
(148.7)
Strategic report
Governance
Accounts
83
23. Employee benefits (continued)
Where benefits are paid in respect of unfunded arrangements these costs are met by the employer and are included within employer contributions in the
table above.
The amounts recognised in the income statement comprise current service cost, administration costs, past service credit and interest on the net defined benefit
liability. These charges/(credits) are included in the following lines in the income statement:
Cost of sales
Administrative expenses
Within underlying operating profit
Net pension gain
Financing costs
Recognised in Income statement
The market value of the Scheme assets held at the end of the year were as follows:
Equities and synthetic equities
Property funds
Hedge funds
Other growth assets
Corporate bonds
Multi asset credits
Index-linked gilts (LDI portfolio collateral)
Other
Notional exposure for synthetic equities/LDI hedging arrangements
All equities, bonds and funds have quoted prices in active markets.
Note
3
5
2014
£m
10.2
1.9
12.1
(20.2)
6.4
(1.7)
2014
£m
288.5
35.2
62.4
60.7
158.0
57.1
267.5
21.3
(172.4)
778.3
2013
restated
£m
10.2
2.5
12.7
–
5.6
18.3
2013
£m
276.8
54.9
58.9
62.6
281.3
–
81.3
41.5
(113.4)
743.9
The synthetic equities provide exposure to the UK, North America, Europe, Asia-Pacific and Japan. The LDI portfolio currently hedges c. 30% of the defined benefit
scheme’s inflation and interest rate risk (relative to pension liabilities measured on a gilts basis) through holding a combination of index-linked gilts, interest rate
and inflation swaps, gilt total return swaps, gilt repos, and cash.
Liability for defined benefit obligations
The principal actuarial assumptions for the Scheme and for the UK unfunded arrangement at the balance sheet date were as follows:
Discount rate
Price inflation rate – RPI
Price inflation rate – CPI
Pensionable salaries rate
Rate of increase of pensions in payment and deferred pensions
– for service to 31 March 2006
– for service from 1 April 2006
2014
%
4.50
3.25
2.25
n/a
3.10
2.10
Following closure of the defined benefit section of the Scheme to future accrual with effect from 31 March 2014 the assumption regarding the increase
in pensionable salaries is not applicable.
The assumptions used for mortality rates for members of these arrangements at the expected retirement age of 65 years are as follows:
Male aged 65 today
Male aged 45 today
Female aged 65 today
Female aged 45 today
2014
Years
20.6
23.2
22.8
25.6
2013
%
4.50
3.25
2.25
3.25
3.10
2.35
2013
Years
20.5
23.2
22.7
25.2
84 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the consolidated financial statements continued
23. Employee benefits (continued)
Sensitivity table
The sensitivity of the present value of the Scheme obligations to changes in the key actuarial assumptions are set out in the following table. The illustrations consider
the result of only a single assumption changing with the others assumed unchanged, although in reality it is more likely that more than one assumption would
change and potentially the results would offset each other. For example, a fall in interest rates will increase the Scheme obligations, but may also trigger an offsetting
increase in market value of certain Scheme assets.
Discount rate
Price inflation – RPI
Mortality rate
Defined contribution schemes
Change in
assumption
+ 0.1%
+ 0.1%
+ 1 year
Impact on
liability
£m
(15.0)
13.0
20.0
The total expense relating to the Group’s defined contribution schemes in the current year was £10.9m (2013: £7.9m).
Impact of adoption of IAS 19 Employee Benefits (Revised)
The Group adopted IAS 19 Employee Benefits (Revised) from 1 April 2013. This standard has replaced the expected return on scheme assets and interest on scheme
liabilities with a net interest component calculated using the discount rate at the start of the period. In addition, scheme administration costs, which were deducted
from the expected return on scheme assets have been included within operating expenses.
The financial statements for the year ended 31 March 2013 have been restated accordingly. The effect on the financial statements is summarised below.
As reported
£m
Amended return
on assets
£m
Reclassified
admin
charges
£m
31 March 2013
Incorporating
IAS 19 adjustment
£m
Operating profit
Net finance charges
Profit before tax
Tax
Profit for the period
Other comprehensive income:
39.2
(14.4)
24.8
(6.5)
18.3
–
(10.8)
(10.8)
2.6
(8.2)
Remeasurements of defined benefit liability, net of deferred tax
(38.1)
8.2
Earnings per share
Underlying earnings per share
15.8p
20.4p
(1.2)
1.2
–
–
–
–
38.0
(24.0)
14.0
(3.9)
10.1
(29.9)
8.7p
13.3p
Strategic report
Governance
Accounts
85
24. Equity compensation benefits
Employees of the Group currently participate, subject to seniority and length of service, in the Executive Bonus Plan and Special Option Plan. Other schemes in
existence are the Deferred Annual Bonus Scheme, Performance Share Plan and the Executive Share Option Scheme. All of these schemes involve the grant of options
or conditional awards of shares in the Company.
Grants of options are accounted for in accordance with IFRS 2 Share-based Payments, which requires the fair value of services received in return for share options
granted to be recognised in the Income statement over the vesting period. The Group recognised total expenses of £1.4m (2013: £0.6 m) in respect of the costs of
equity-settled and other share-based payment transactions during the year. At the year end liabilities of £1.3m (2013: £0.4m) were included in the balance sheet for
these items.
The fair value of these services is measured by reference to the fair value of the share options granted under each scheme.
The number of options outstanding and exercisable in respect of each scheme at 31 March 2014 is as follows:
Executive Bonus Plan
July 2012
July 2013
Special Option Plans
July 2012
January 2013
July 2013
September 2013
November 2013
Deferred Annual Bonus Scheme
June 2010
Executive Share Option Schemes
December 2004
December 2005
December 2006
Total number of share options
Outstanding
Exercisable
Option price
pence/share
Date normally
exercisable
339,284
1,263,873
154,826
–
1,603,157
154,826
10,793,686
1,059,322
5,868,259
128,395
114,993
17,964,655
–
–
–
–
–
–
–
–
2013-2022
2014-2023
36
71
68
101
124
2015-2022
2016-2023
2017-2024
2017-2024
2017-2024
315,231
315,231
315,231
315,231
–
2011-2014
195,000
264,173
446,352
195,000
264,173
446,352
905,525
905,525
20,788,568
1,375,582
269
335
347
2007-2014
2008-2015
2009-2016
The number and weighted average exercise price of all share options extant under the above schemes are as follows:
Outstanding at beginning of period
Granted during the period
Lapsed during the period
Exercised during the period
Outstanding at the end of the period
Exercisable at the end of the period
2014
Options
Weighted average
pence
14,221,634
7,375,520
(648,812)
(159,774)
20,788,568
1,375,582
55
58
40
–
57
215
Options
13,259,312
14,944,408
(13,478,802)
(503,284)
14,221,634
1,530,085
2013
Weighted average
pence
83
37
102
–
55
210
The weighted average share price at the date of exercise for share options exercised during the period was 107p (2013: 57p). The options outstanding at 31 March 2014
had a range of exercise prices of between nil and 347p and a weighted average remaining contractual life of eight years.
The number of nil cost options awarded under the terms of the Executive Bonus Plan are calculated with reference to the 30-day average quoted market price of the
Company’s shares for the year ending 31 March of the financial year immediately preceding the date of award. Awards made under the Special Option Plan, Deferred
Annual Bonus Scheme, Performance Share Plan and Executive Share Option Scheme are granted based on the average quoted market price of the Company’s shares
for a period of up to three business days immediately prior to the date of grant. Upon exercise, all options granted under these schemes are equity-settled.
86 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the consolidated financial statements continued
24. Equity compensation benefits (continued)
The terms and conditions of the grants to date under these schemes are as follows:
Executive Bonus Plan
The Group introduced the Executive Bonus Plan during the year ended 31 March 2012. The award is made part in cash, part in deferred shares and for the years
ending 31 March 2013 and 31 March 2014 will be settled 50% : 50%. 50% of the balance of the participants’ Plan account is paid at the end of each Plan year subject
to non-market performance conditions.
The Bonus Plan operates for a fixed four year period. At the end of that period the balance of a participants’ Plan account will be payable.
Grant
date
July 2012
July 2013
Number of
options granted
Vesting
conditions
591,401
1,263,873
The Scheme is subject to a performance requirement based on a percentage of the profit
target. Where a forfeiture threshold operates the participant will receive no contribution into
their plan account for that Plan year and 50% of their Plan account balance, not yet paid,
will be forfeited. Additionally participants must be employed by the Company at the point
the award vests.
Contractual
life years
10
Total
1,855,274
The grants made under this scheme have non-market based performance conditions. As the grant is at nil cost, the fair value is equivalent to the option value
(i.e. the 30 day average price of the Company’s shares for the period ending 31 March of the relevant financial year of award).
Special Option Plan
Under the Special Option Plan, the Executive Directors and certain senior managers were granted long term incentive awards.
Grant
date
September 2011
July 2012
January 2013
July 2013
September 2013
November 2013
Total
Number of
options granted
Vesting
conditions
3 years of service plus an EPS underpin where the Company’s EPS must not reduce over
the 3-year vesting period. In addition it is subject to a performance requirement based on
average absolute TSR growth over 3 years (the option starts to vest at >10% per annum
with 100% of the option vesting for 22% per annum).
6,060,549
13,293,685
1,059,322
5,868,259
128,395
114,993
26,525,203
Contractual
life years
10
The grant made under this Plan has an absolute TSR growth performance condition with an attaching EPS underpin. The EPS requirement is a non-market based
performance condition and as such is not accounted for in the fair value calculation. The TSR requirement is a market based performance condition and the fair value
is calculated by applying a discount to the option value. The discount is calculated using a Monte-Carlo pricing model and is the expected outcome of meeting the
performance condition. The fair value is determined on assumptions at the date of the award.
Share price at grant (pence)
Exercise price (pence)
Risk- free rate (%)
Expected volatility (%)
Expected life (years)
Dividend yield (%)
Fair value (pence)
November 2013
grant
September 2013
grant
July 2013
grant
January 2013
grant
July 2012
grant
September 2011
grant
125.3
123.9
1.7
45.5
5
–
39.0
103.3
101.3
1.7
46.3
5
–
33.0
66.0
67.7
1.3
46.4
5
–
20.0
68.8
70.8
1.1
45.0
5
–
19.9
33.0
36.0
0.7
43.2
5
–
8.6
78.0
90.6
1.5
40.0
5
5.8
9.5
Strategic report
Governance
Accounts
87
24. Equity compensation benefits (continued)
Deferred Annual Bonus Scheme
The Group introduced a Deferred Annual Bonus Scheme in 2010 to replace a cash only bonus scheme. The Deferred Annual Bonus Scheme was effective for the year
ended 31 March 2010. Under the Scheme a proportion of each participant’s annual bonus was granted as nil cost options.
Grant
date
June 2010
Number of
options granted
2,232,603
Total
2,232,603
Vesting
conditions
50% will vest subject to 1 year’s service from date of grant and the remaining 50% will vest
subject to 2 years’ service from date of grant. UK tax approved options were also granted at
the same date, see Executive Share Option Schemes (ESOS). If these options are exercised
the ESOS options will lapse, and vice versa.
Contractual
life years
4
The grants made under this scheme have non-market based performance conditions. As the grant is at nil cost, the fair value is equivalent to the option value
(i.e. the average price of the Company’s shares for the three days prior to the grant date).
Performance Share Plan
Grant
date
Number of
options granted
Vesting
conditions
June 2009
July 2010
1,839,003
1,862,831
Total
3,701,834
3 years of service plus (a) 50% will vest subject to the Company’s underlying EPS performance
over 3 years (maximum vesting is achieved if the cumulative annual underlying EPS is 72.4p
(July 2010) or 70p (June 2009)), and (b) 50% will vest subject to the Company’s TSR
performance over 3 years relative to the TSR of constituents of the FTSE 250 index at
the date of grant (‘FTSE 250 constituents’) (maximum vesting is achieved if TSR performance
is in the upper quartile of the FTSE 250 constituents).
Contractual
life years
3½
The grants under the Performance Share Plan (PSP) are made in two parts based on EPS and TSR performance and a separate fair value is required for each part: the
EPS requirement is a non-market based performance condition. As the grant is at nil cost the fair value is equivalent to the option value (i.e. the average share price of
the Company for the three days prior to the grant date); and the TSR requirement is a market based performance condition and the fair value is calculated by applying
a discount to the option value. The discount is calculated using a Monte-Carlo pricing model and is the expected outcome of meeting the performance criteria.
For the June 2009 PSP grant the fair value is 132p and for the July 2010 grant the fair value is 151p determined from the following variables:
Weighted average price at grant date
Expected volatility
Expected life
Risk-free rate
July 2010 grant
June 2009 grant
221 pence
198 pence
42.6%
3 years
1.29%
42.5%
3 years
2.36%
88 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the consolidated financial statements continued
24. Equity compensation benefits (continued)
Executive Share Option Schemes
Grant
date
Number of
options granted
Vesting
conditions
December 2002
1,621,000
March 2004
December 2004
December 2005
December 2006
June 2010
250,000
3,136,630
3,184,581
2,925,065
1,009,452
Total
12,126,728
3 years of service plus average annual growth rate for underlying EPS of RPI +3% in any
3 consecutive years of the 5 years following the grant (starting with the year including
the grant).
3 years of service plus average annual growth rate for underlying EPS of RPI + 3% in the
3 consecutive years following the grant (starting with the year including the grant).
3 years of service. The options are UK tax approved and conditional on the Deferred Annual
Bonus Scheme (DABS) options granted at the same date. If these options are exercised the
DABS options will lapse, and vice versa.
Contractual
life years
10
10
4
The grants made under these schemes all have non-market based performance conditions which are taken into account in the fair value calculation using a Binomial
pricing model. The contractual life of the options and the expectation of early exercises are incorporated into the model. Expected volatility is based on a three year
average of the historic share price volatility.
25. Financial instruments
Financial risk management and treasury policies
The Group, through its activities, is exposed to a range of financial risks. Financial risks are managed through the Group’s centralised treasury function which acts
within clearly defined policies approved by the Board. These policies are designed to reduce the financial risks faced by the Group relating to liquidity risk, market risk
(being interest rates, equity prices and currency exchange rate exposure) and credit risk. Transactions of a speculative nature are not permitted and the treasury
function does not operate as a profit centre.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s policy on funding capacity is to ensure that there
is always sufficient long term funding and short term facilities in place to meet foreseeable peak borrowing requirements.
The Group has £304m (2013: £314m) of core committed funding of which £194m was drawn at 31 March 2014 (2013: £204m), leaving headroom of £110m
(2013: £110m). The Group also has overdraft and other uncommitted facilities. Within the £304m (2013: £314m) of core committed facilities there is £194m (2013: £204m)
in the form of bonds and term loans which must be drawn. At certain points in the working capital cycle this results in the Group having cash which is held in short
term interest-bearing deposits. The Group also holds cash deposits within its captive insurer; these deposits have a mix of maturities, none of which is greater than
12 months. The Group’s net debt at the balance sheet date was:
Total borrowings and other financial liabilities
Cash and cash equivalents
Net debt
See note 17 for further analysis of the contractual maturities of the financial liabilities.
Note
17
16
2014
£m
196.8
(131.9)
64.9
2013
£m
210.8
(103.2)
107.6
Strategic report
Governance
Accounts
89
25. Financial instruments (continued)
Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates will affect the Group’s income or the value of its holdings of
financial instruments.
Interest rate risk
The Group maintains a policy of using derivatives to achieve an appropriate balance between fixed, capped, and floating interest profiles, so as to limit the exposure
to the cash cost of servicing its debt.
The majority of the Group’s drawn debt at 31 March 2014 was at floating rates. At 31 March 2014 the Group had in place £75m of three and five year sterling interest
rate swaps (maturing 2016 and 2019) with effective rates of between 0.7% and 3.7% and the net fair value of the financial instruments used to manage interest rates
at the year end was £(1.5)m (2013: £(3.6)m).
Sterling
Bank loans and overdrafts
Finance leases
Other financial liabilities
Borrowings
Cash
Net debt
Interest rate swap
Net debt
Euro
Cash
Net cash
Total net debt
Floating
rate
£m
194.5
–
1.8
196.3
(131.3)
65.0
(75.0)
(10.0)
(0.6)
(0.6)
(10.6)
Fixed
rate
£m
–
0.5
–
0.5
–
0.5
75.0
75.5
–
–
75.5
2014
Total
£m
194.5
0.5
1.8
196.8
(131.3)
65.5
–
65.5
(0.6)
(0.6)
64.9
Floating
rate
£m
205.1
–
3.7
208.8
(100.2)
108.6
(70.0)
38.6
(3.0)
(3.0)
35.6
Fixed
rate
£m
–
2.0
–
2.0
–
2.0
70.0
72.0
–
–
72.0
2013
Total
£m
205.1
2.0
3.7
210.8
(100.2)
110.6
–
110.6
(3.0)
(3.0)
107.6
Interest rate sensitivity
The following table demonstrates the sensitivity to a change in interest rates of 1% on the Group’s profit before tax and on its equity. The impact has been calculated
by applying the change in interest rates to the weighted average interest rate during the year, and applying this rate to the average borrowings during the year.
A variation of 1% represents management’s view of a reasonably possible change in interest rates. Any impact on equity excludes the possible effect which a change
in interest rates may have on the present value of the Group’s pension obligations, the effects of which are set out in note 23.
Sterling
1.0% increase in rates
1.0% decrease in rates
Effect
on profit
before tax
£m
(1.7)
1.7
2014
Effect
on equity
£m
(1.7)
1.7
Effect
on profit
before tax
£m
(2.0)
2.0
2013
Effect
on equity
£m
(2.0)
2.0
The methods and assumptions used to calculate the possible effect of a change in interest rates are consistent with those used in the prior year. Including the
interest rate swap of £75.0m (2013: £70.0m) within the average borrowings effect of a 1% increase in rates on profit before tax and on equity is £(0.9)m (2013: £(1.3)m)
and the effect of a 1% decrease in rates on profit before tax and equity is £0.9m (2013: £1.3m).
Currency risk and sensitivity
The Group is a largely UK based business with a small proportion of the Group’s activities denominated in euro. The only non-sterling activity is in Ireland. In order to
protect the sterling value of the balance sheet, the Group finances its investment in Ireland by borrowing in euros. Transactional exposure is minimal as the vast
majority of transactions are denominated in the relevant functional currency of the operation concerned.
The Group’s committed facilities include $87.2m (2013: $87.2m) of US private placements. The principal has been swapped into sterling, and all future cash flows
are fully hedged; the fair value of the US$ principal and the US$/GBP swaps move in line with each other, so there is no resulting adjustment to the Group’s
income statement.
Operation foreign exchange risk, where purchases or sales are made in non-operational currency are hedged on an ad hoc basis by buying or selling the relevant
currency on a forward basis if the amounts involved are material.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally
from the Group’s receivables from customers.
The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Deposits are only made with pre-approved counterparties.
Credit evaluations are performed on all customers requiring credit. The Group does not generally require collateral in respect of financial assets. At the balance sheet
date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset,
including derivative financial instruments, in the balance sheet of £270.8m (2013: £250.1m). See note 15 for further analysis of trade receivables and the associated
doubtful debt provisions held.
90 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the consolidated financial statements continued
25. Financial instruments (continued)
Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, in order to provide optimal returns for shareholders, and to
maintain an efficient capital structure.
In doing so, the Group’s strategy is to retain appropriate levels of liquidity headroom to ensure financial stability and flexibility. To achieve this strategy and maintain
this position, the Group regularly monitors key credit metrics such as net debt to EBITDA, interest cover and fixed charge cover. In addition the Group ensures a
combination of short term liquidity headroom with a diverse long term debt maturity profile. As at the balance sheet date the Group’s average debt maturity profile
was two years.
In order to maintain or realign the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new
shares, or sell assets to reduce debt.
Fair values
The fair values of the Group’s financial assets and liabilities, together with the carrying amounts shown in the balance sheet are given in the following table:
Trade receivables
Other receivables
Cash and cash equivalents
US$ fixed to floating swaps
– Assets
– Liabilities
Forward exchange contracts
Interest rate swaps
Bank loans and overdrafts
Unsecured bond issues – US$ private placement
Finance lease liabilities
Trade and other payables
Unrecognised losses
Carrying amount
£m
Fair value
£m
Carrying amount
£m
2014
81.6
2.4
131.9
54.9
(53.5)
(0.3)
(1.5)
(140.1)
(55.8)
(0.5)
(322.9)
81.6
2.4
131.9
54.9
(53.5)
(0.3)
(1.5)
(140.1)
(55.8)
(0.5)
(322.9)
–
81.2
3.7
103.2
62.0
(53.5)
(0.1)
(3.6)
(150.3)
(63.3)
(2.0)
(312.3)
2013
Fair value
£m
81.2
3.7
103.2
62.0
(53.5)
(0.1)
(3.6)
(150.3)
(63.3)
(2.0)
(312.3)
–
Estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the above table. Under the
disclosure requirements of IFRS 13, all fair value measurements of financial assets and liabilities are considered to be categorised as level 2.
Derivatives
The fair value of forward exchange contracts is calculated as the contractual forward price less the current forward rate. The fair value of interest rates swaps was
determined by discounting the future cash flows at rates determined by year end yield curves.
Interest-bearing loans and borrowings and unsecured bond issues
Fair value is calculated on discounted expected future principal and interest cash flows at market interest rates.
Finance lease liabilities
The fair value is estimated as the present value of future cash flows discounted at market interest rates for homogenous lease agreements.
26. Related parties
Identity of related parties
The Group has a controlling related party relationship with its parent Company Wincanton plc. In addition the Group has related party relationships with its Executive
and non-executive Directors and with its subsidiaries and jointly controlled entities.
Transactions with Executive and non-executive Directors
The interests of the Executive and non-executive Directors in the share capital of the Company, plus full details of the individual Director’s emoluments, bonuses
deferred in shares, share options and pension entitlements are given in the Annual report on remuneration on pages 48 to 55.
The total of short term employee remuneration and benefits receivable by the Directors is set out in note 4.
27. Accounting estimates and judgements
Management discusses with the Audit Committee the development, selection and disclosure of the Group’s critical accounting policies and estimates and the
application of these policies and estimates.
The areas where policy and estimate selection are most critical for the Group are concerned with the accounting for pensions, the determination of provisions,
and the testing of goodwill and acquired intangibles for impairment. Information about the assumptions and risk factors relating to these issues are given in
notes 23, 19 and 9 respectively.
Strategic report
Governance
Accounts
91
Wincanton plc Company balance sheet
At 31 March 2014
Note
2
3
4
5
6
6
6
6
7
2014
£m
108.9
108.9
23.3
88.8
112.1
(31.7)
80.4
189.3
(184.3)
5.0
12.2
12.8
(1.5)
(18.5)
5.0
2013
£m
108.1
108.1
66.7
68.2
134.9
(33.4)
101.5
209.6
(196.4)
13.2
12.2
12.8
(3.6)
(8.2)
13.2
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Hedging reserve
Profit and loss account
Equity shareholders’ funds
The financial statements were approved by the Board of Directors on 4 June 2014 and were signed on its behalf by:
E Born
Chief Executive
A Colman
Group Finance Director
Company Registration Number: 4178808
92 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the Wincanton plc Company financial statements
1. Accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company’s financial
statements.
Basis of preparation
The financial statements have been prepared in accordance with applicable accounting standards (UK Generally Accepted Accounting Practice).
Under Section 408(4) of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss account.
Advantage has been taken of FRS 29 Financial Instruments: Disclosures available to parent companies not to present financial instrument disclosures as the Group
financial statements contain disclosures that comply with the standard.
The Company participates in a Group defined contribution scheme. Obligations for contributions to defined contribution pension schemes are recognised as an
expense in the income statement as incurred.
Investments
Investments in subsidiaries are stated at cost and reviewed for impairment if there are indications that the carrying values may not be recoverable.
Foreign currencies
Transactions in foreign currencies are translated at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are translated to sterling at the foreign exchange rate ruling at that date. Foreign exchange differences arising on such translation
are recognised in the profit and loss account.
Taxation
The charge for taxation is based on the profit for the year and takes into account deferred taxation. Deferred taxation is recognised, without discounting, in respect of
all timing differences between the treatment of certain items for taxation and for accounting purposes that have occurred but not reversed by the balance sheet date,
except as otherwise required by FRS 19 Deferred Tax.
Derivative financial instruments and hedge accounting
The Company uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and
investment activities. In accordance with its treasury policy, the Company does not hold or issue derivative financial instruments for trading purposes. However,
derivatives that do not qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments which are accounted for as trading instruments are recognised initially and subsequently stated at fair value. The gain or loss on
remeasurement to fair value is recognised immediately in the profit and loss account. However, where derivatives qualify for hedge accounting, recognition of any
resultant gain or loss depends on the nature of the item being hedged (see below).
The fair value of interest rate swaps are determined by discounting the future cash flows at rates determined by year end yield curves. The fair value of forward
exchange contracts is calculated as the contractual forward price less the current forward rate.
Fair value hedges
Where a derivative financial instrument is designated as a hedge of the variability in fair value of a recognised asset or liability or an unrecognised firm commitment,
all changes in the fair value of the derivative are recognised immediately in the profit and loss account. The carrying value of the hedged item is adjusted by the
change in fair value that is attributable to the risk being hedged (even if it is normally carried at cost or amortised cost) and any gains or losses on remeasurement are
also recognised immediately in the profit and loss account (even if those gains would normally be recognised directly in reserves). Hedge accounting is discontinued
when the Company revokes the hedging relationship, the hedge instrument expires or is sold, terminated, exercised or no longer qualifies for hedge accounting.
The adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profit or loss from that date.
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a highly probable forecast transaction, the effective part of any gain
or loss on the derivative financial instrument is recognised directly in equity within hedging reserves. The ineffective part of any gain or loss is recognised immediately
within underlying operating profit, or within net financing costs in the case of interest rate swaps designated as cash flow hedges. When the forecast transaction that
was being hedged is realised and affects profit or loss, the cumulative gain or loss on the derivative financial instrument is removed from equity and recognised in
the income statement in the same period. When the forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the
associated cumulative gain or loss is removed from equity and included in the initial cost or other carrying amount of the non-financial asset or non-financial liability.
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction
is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction
takes place. If the hedged transaction is no longer expected to take place, the cumulative gain or loss is removed from equity and recognised immediately in the
income statement.
Hedge of monetary assets and liabilities
Where a derivative financial instrument is used to economically hedge the foreign exchange exposure of a recognised monetary asset or liability, no hedge
accounting is applied and any gain or loss on the hedging instrument is recognised in the profit and loss account.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value, less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings
are stated at amortised cost with any difference between cost and redemption value being recognised in the profit and loss account over the period of the
borrowings on an effective interest basis. Interest-bearing borrowings which are designated hedged items in a fair value hedge arrangement are carried at fair value
(see policy above).
Strategic report
Governance
Accounts
93
1. Accounting policies (continued)
Shares held by Employee Benefit Trust
Shares in the Company held by the Wincanton plc Employee Benefit Trust are shown as a deduction from shareholders’ equity at cost in accordance with UITF
Abstract 38 Accounting for ESOP Trusts.
Share-based payments
Where a parent Company grants rights to its instruments to employees of a subsidiary, and such share-based compensation is accounted for as equity-settled in the
consolidated financial statements of the Group, the subsidiary is required to record an expense for such compensation in accordance with FRS 20 Share-based
Payments, with a corresponding increase recognised in equity as a contribution from the parent. Consequently, in these financial statements, the Company
recognises additions to fixed asset investments with a credit to equity for the same amount.
2. Fixed asset investments
Shares in Group undertakings
Cost
At beginning of year
Additions – share-based payments
At end of year
A list of the significant subsidiaries of Wincanton plc is given in note 11 to the Group financial statements.
3. Debtors
Amounts owed by Group undertakings
Group tax relief receivable
Prepayments and accrued income
All debtors are due within one year, except for prepayments of £nil (2013: £0.5m) and amounts owed by Group undertakings.
4. Creditors: amounts falling due within one year
Bank loans and overdrafts
Other financial liabilities
Accruals and deferred income
5. Creditors: amounts falling due after more than one year
Bank loans and overdrafts
Other financial liabilities
2014
£m
108.1
0.8
108.9
2014
£m
15.6
7.0
0.7
23.3
2014
£m
22.8
1.4
7.5
31.7
2014
£m
184.0
0.3
184.3
2013
£m
107.5
0.6
108.1
2013
£m
58.5
5.8
2.4
66.7
2013
£m
23.1
1.7
8.6
33.4
2013
£m
194.4
2.0
196.4
94 Wincanton plc Annual Report and Accounts 2014
Accounts
Notes to the Wincanton plc Company financial statements continued
6. Capital and reserves
Reconciliation of movement in capital and reserves
Balance at 1 April 2012
Total recognised losses
Own shares disposed of on exercise of options
Balance at 31 March 2013
Balance at 1 April 2013
Total recognised losses
Own shares disposed of on exercise of options
Equity granted to employees of the Company and
subsidiaries
Share
capital
£m
12.2
–
–
12.2
12.2
–
–
–
Share
premium
£m
Hedging
reserve
£m
Reserve for
own shares
£m
Profit and loss account
FRS 20
reserve
£m
Retained
earnings
£m
12.8
–
–
12.8
12.8
–
–
–
(4.1)
0.5
–
(3.6)
(3.6)
2.1
–
–
(16.6)
–
1.3
(15.3)
(15.3)
–
0.4
–
3.5
–
–
3.5
3.5
–
–
0.7
4.2
14.3
(9.4)
(1.3)
3.6
3.6
(11.8)
(0.4)
0.8
(7.8)
Total
equity
£m
22.1
(8.9)
–
13.2
13.2
(9.7)
–
1.5
5.0
Balance at 31 March 2014
12.2
12.8
(1.5)
(14.9)
During the year ended 31 March 2002, the Company established a Capital Redemption Reserve of £49,998 on redemption of redeemable preference shares.
The FRS 20 reserve comprises the charge made to the profit and loss account in respect of share-based payments under the Company’s share option schemes.
Details of the Company’s own shares, held within an Employee Benefit Trust, are given in note 20 to the Group financial statements.
Allotted, called up and fully paid
In issue at 1 April and 31 March
Ordinary shares
2014
millions
121.7
2013
millions
121.7
As permitted by Section 408 (4) of the Companies Act 2006, the Company has not presented its own profit and loss account. The Directors’ remuneration as disclosed
in note 4 to the Group financial statements is borne by Wincanton plc. The Directors are the only employees of the Company. The Company has taken the exemption
not to disclose non-audit fees incurred as these are included in note 3 to the Group financial statements.
7. Reconciliation of movement in shareholders’ funds
Retained loss for the financial year
Other recognised gains and losses relating to the year
Equity granted to employees of the Company and subsidiaries
Net decrease in shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
2014
£m
(11.8)
2.1
1.5
(8.2)
13.2
5.0
2013
£m
(9.4)
0.5
–
(8.9)
22.1
13.2
Strategic report
Governance
Accounts
95
Additional information
Group five year record
As reported under Adopted IFRS
Revenue
Underlying operating profit4
Net financing costs
Underlying profit before tax4
Profit/(loss) before tax
Underlying profit after tax for the year4
Underlying earnings per share4
Dividend per share
Net debt
2014
£m
1,098.3
48.0
(22.4)
25.6
34.9
19.3
16.6
–
2013
restated1
£m
1,086.8
45.3
(24.0)
21.3
14.0
15.4
13.3
–
(64.9)
(107.6)
2012
restated2
£m
1,202.8
43.8
(15.0)
28.8
(47.4)
19.4
16.9p
–
(114.5)
2011
restated3
£m
1,328.3
46.7
(16.7)
30.0
3.6
22.4
19.6p
–
(160.4)
2010
£m
2,182.9
54.6
(19.9)
34.7
3.0
24.0
20.9p
14.91p
(151.9)
1 Where applicable amounts have been restated for the adoption of IAS 19 Employee Benefits (Revised).
2 Underlying profit after tax and underlying earnings per share have been restated to exclude the results of Culina Logistics Limited which was sold in March 2012.
3 Amounts reported since 2011 (restated) relate to the continuing operations in UK and Ireland only. Amounts for 2010 include the results and balances relating to Mainland Europe
which were disclosed as discontinued operations in 2012 and are therefore not included in the 2011 (restated) figures onwards.
4 Operating profit, and hence profit before and after tax is reported on an underlying basis, i.e. including where applicable, share of results of associates but before amortisation
of acquired intangibles, any impairment of goodwill and acquired intangibles and exceptionals. Underlying earnings per share is calculated on the same basis.
Financial calendar
Annual General Meeting
To be held on 16 July 2014 at the offices of Buchanan Communications, 107 Cheapside, London EC2V 6DN at 1pm
Half year results
Full year results
Annual report
Interim announcement November 2014
Preliminary announcement June 2015
Posted to shareholders at the end of June 2015
96 Wincanton plc Annual Report and Accounts 2014
Accounts
Shareholder information
Annual Report
ShareGift
Copies can be obtained from the Company’s address below.
Share registrar
The Company’s Registrar is Computershare. If you have any questions about your
holding or wish to notify any change in your details, please contact the Registrar
at: Computershare Investor Services plc, The Pavilions, Bridgwater Road, Bristol
BS99 6ZZ. Telephone: 0870 702 0000. Whenever you contact the Registrar, please
quote the full names in which your shares are held. Please advise the Registrar
promptly of any change of address.
Dividend mandates
The Company encourages its shareholders to have future dividends paid directly
into their bank or building society account. To set this up for the shares you hold,
you should contact the Registrar for a dividend mandate form.
Share dealing service
Wincanton shares may be dealt through the Company’s brokers. If you would
like further information, you may contact the brokers at: Postal Dealing Service,
JPMorgan Cazenove Limited, 20 Moorgate, London EC2R 6DA. Telephone:
020 7588 2828. Alternatively please contact your bank, building society or
stockbroker who will be able to assist you in selling your shares.
Share price quotation
The Company’s share price is quoted via the Wincanton website, where it is
regularly updated through the day.
Shareholders’ enquiries
If you have an enquiry about the Company’s business or about something
affecting you as a shareholder (other than queries regarding shareholdings
which are dealt with by Computershare) you are invited to contact the Company
at the address below.
Unsolicited mail
The Company is obliged to make its Register available to other organisations.
Shareholders wishing to limit the amount of unsolicited mail they may receive
as a result should contact the Mailing Preference Service at: DMA House,
70 Margaret Street, London W1W 8SS, or online at www.mpsonline.org.uk
Unsolicited investment advice
Shareholders are advised to be wary of unsolicited mail or telephone calls
offering free advice, to buy shares at a discount or offering free company reports.
If you receive any unsolicited investment advice:
(cid:2)(cid:3) make sure you get the correct name of the person and organisation;
(cid:2)(cid:3) check that they are properly authorised by the FCA before getting involved
by visiting www.fca.org.uk/firms/systems-reporting/register and contacting
the firm using the details on the register;
(cid:2)(cid:3) report the matter to the FCA either by calling 0800 111 6768 or visiting
www.fca.org.uk/consumers;
(cid:2)(cid:3) report suspected fraud and internet crime to the police through Action Fraud,
which you can contact on 0300 123 2040 or visiting
www.actionfraud.police.uk;
(cid:2)(cid:3) if the calls persist, hang up;
(cid:2)(cid:3) inform Computershare’s Compliance Department.
If you deal with an unauthorised firm, you will not be eligible to receive
payments under the Financial Services Compensation Scheme.
More detailed information on this or similar activity can be found on
the FCA website www.fca.org.uk/consumers/scams
If you hold only a few shares and feel that it would be uneconomical or simply
not worthwhile to sell them, you could consider donating your shares to charity
through ShareGift (registered charity 1052686). Donated shares are aggregated
and sold by ShareGift, the proceeds being passed on to a wide range of
UK charities. To find out more visit www.sharegift.org or call 020 7930 3737.
Alternatively contact the Company’s Registrar who can help arrange the transfer
of your shares.
Wincanton plc website
The Wincanton website at www.wincanton.co.uk provides news and information
about the services offered by Wincanton as well as useful information for
investors.
Forward-looking statements
These Annual Report and Accounts and Wincanton’s websites may contain
certain ‘forward-looking statements’ with respect to Wincanton plc and the
Group’s financial condition, results of operations and business, and certain of
Wincanton plc and the Group’s plans, objectives, goals and expectations with
respect to these items.
Forward-looking statements are sometimes, but not always, identified by their
use of a date in the future or such words as ‘anticipates’, ‘aims’, ‘due’, ‘could’,
‘may’, ‘should’, ‘expects’, ‘believes’, ‘intends’, ‘plans’, ‘targets’, ‘goal’ or ‘estimates’.
By their very nature forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to events and
depend on circumstances that will occur in the future. Many of these assumptions,
risks and uncertainties relate to factors that are beyond the Group’s ability to
control or estimate precisely. There are a number of such factors that could cause
actual results and developments to differ materially from those expressed or
implied by these forward-looking statements. These factors include, but are not
limited to, changes in the economies and markets in which the Group operates;
changes in the legal, regulatory and competition frameworks in which the Group
operates; changes in the markets from which the Group raises finance; the
impact of legal or other proceedings against or which affect the Group; changes
in accounting practices and interpretation of accounting standards under IFRS,
and changes in interest and exchange rates.
Any written or verbal forward-looking statements, made in our Annual Report
and Accounts or on Wincanton’s website or made subsequently, which are
attributable to Wincanton plc or any other member of the Group or persons
acting on their behalf are expressly qualified in their entirety by the factors referred
to above. Each forward-looking statement speaks only as of the date of our
Annual Report and Accounts, or on the date the forward-looking statement is
made. Wincanton plc does not intend to update any forward-looking statements.
Secretary and registered office
S Williams
Wincanton plc
Methuen Park
Chippenham
Wiltshire
SN14 0WT
Tel +44 (0)1249 71 00 00
Registered in England & Wales under No. 4178808
Design and production
Radley Yeldar www.ry.com
Printing
CPI Colour
This report is printed on material, which is made from a mixture
of recycled and virgin fibres, sourced from well managed forests
according to the rules of the Forest Stewardship Council.
wincanton.co.uk
Wincanton plc
Methuen Park
Chippenham
Wiltshire SN14 0WT
United Kingdom
Registered in England &
Wales under No. 4178808
Tel +44 (0)1249 71 00 00
Fax +44 (0)1249 71 00 01