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Consumer products General merchandise Grocery Home and DIY eCommerce Service at the heart of our success Construction Defence Energy Fleet maintenance Transport services Annual Report and Accounts 2017 CONTENTS Inside this report STRATEGIC REPORT Group at a glance 1 Chairman’s review 2 Our business 4 The Group continues to Business model 12 Strategy 14 perform robustly and KPIs 15 deliver strong service Chief Executive’s statement 16 Financial review 20 levels for customers Risk report 24 Corporate Responsibility report 28 Adrian Colman Chief Executive GOVERNANCE CHIEF EXECUTIVE’S STATEMENT Board of Directors 34 p16 Chairman’s introduction 36 Corporate Governance report 37 Nomination Committee report 40 Audit Committee report 41 DIRECTORS’ REMUNERATION REPORT Committee Chairman’s Annual Statement 44 Annual Report on Remuneration 45 Directors’ Remuneration Policy 54 DIRECTORS’ REPORT Directors’ report 60 Statement of Directors’ responsibilities 62 INDEPENDENT AUDITOR’S REPORT Independent auditor’s report 64 OUR BUSINESS OUR BUSINESS ACCOUNTS RETAIL & CONSUMER p4 INDUSTRIAL & TRANSPORT p8 Consolidated income statement 68 Consolidated statement of comprehensive income 69 Consolidated balance sheet 70 Consolidated statement of changes in equity 71 Consolidated statement of cash flows 72 Notes to the consolidated financial statements 73 Wincanton plc Company balance sheet 100 Wincanton plc Company statement of changes in equity 101 Notes to the Wincanton plc Company financial statements 102 Additional information 104 Shareholder information 105 BUSINESS MODEL CORPORATE RESPONSIBILITY Directors and advisers 106 p12 REPORT p28 Glossary 107 STRATEGIC REPORT Strategic reportStrategic Group at a glance Governance Service lies at the heart of what makes Wincanton special. Whether we are ensuring safe and effective operations today or creating the supply chain of the future, we work tirelessly to enable great businesses to become even greater. Across the UK and Ireland, we deliver the highest standards Directors’ remuneration report of service, excellence and innovation in order to help customers respond to changing market dynamics – and to reap the rewards of a more agile and effective supply chain. KEY STATISTICS (AS AT 31 MARCH 2017) Directors’ report Employees Locations Vehicles responsible for Warehousing space 17,500 200+ 3,600 6.6m sqft FINANCIAL HIGHLIGHTS report auditor’s Independent Revenue Underlying operating profit1 Underlying operating profit margin1 £1,118.1m £52.1m 4.7% -2.6% +2.4% +30bps -1.3% (excluding WRM) +7.0% (excluding WRM) +40bps (excluding WRM) Accounts Net debt1 Operating profit Operating profit margin £24.3m £56.0m 5.0% -38.5% -31.2% -210bps Underlying earnings per share1 Basic earnings per share Dividend per share 27.7p 34.2p 9.1p +15.9% -32.5% +65.5% 1 See page 23 for further information on the Alternative Performance Measures (APMs), including definitions and a reconciliation of APMs to statutory measures. Wincanton plc Annual Report and Accounts 2017 1 STRATEGIC REPORT CHAIRMAN’S REVIEW Making good progress Strong positive cash generation enables us to lift our final dividend Steve Marshall Chairman Wincanton plc 2 Annual Report and Accounts 2017 Strategic reportStrategic Governance INTRODUCTION DIVIDEND OUTLOOK Directors’ remuneration report The year ended 31 March 2017 represented The Board are pleased to be recommending The Group remains well positioned in its a further year of good progress for Wincanton. an increased final dividend of 6.1p per Ordinary chosen markets and continues to perform The focus of the Board and the Executive Share for the year ended 31 March 2017 robustly and deliver strong service levels for Management Team is on positioning the Group (2016: 5.5p). This reflects the Group’s strong customers. To date the Group has experienced to deliver long term organic growth, whilst operating profits and dividend policy outlined no significant impact from the Brexit vote also meeting its obligations to all stakeholders. to shareholders last year when we resumed in June 2016, and we believe the Group can This will be achieved by maintaining and dividend payments. The proposed annual adequately manage any future uncertainty deepening strong working partnerships dividend is covered 3.0 times by underlying that arises during the Brexit process. with our customers. earnings. The Board’s progressive dividend Directors’ report Robust cash generation supports limited policy is unchanged. The success of an outsourcing business model scale investments in skills and technology such as ours is driven by providing great capabilities to both protect and grow the customer service and value, maintaining high KEY PRIORITIES AND PROSPECTS business for the longer term without raising levels of contract retention and renewal and by The Group’s overriding priority will be to the Group’s overall risk profile. securing new contracts to grow the business. oversee further progress in the delivery of the During the coming year the Board expect organic growth trading strategy, as set out in Wincanton to make continued progress. RESULTS the Chief Executive’s statement. This requires targeted investments in people and processes, Underlying earnings per share was up by 15.9% to extend our capabilities in areas directly Steve Marshall Independent auditor’s report auditor’s Independent over the prior year to 27.7p, and has increased relevant to customers in our existing contract Chairman by 108.3% since the year ended 31 March 2013. logistics heartland. The Group now has the Year end net debt at £24.3m (2016: £39.5m) capacity to invest in business development, was once again reduced, cumulatively a 78.8% and is actively doing so; but it remains selective reduction over the same period. The Group’s in its approach, with a risk appetite best existing banking facilities were satisfactorily described as low to moderate. extended during the year to provide an The Board will also be focused on the appropriate level of maturity. forthcoming triennial review of the pension scheme and in agreeing an appropriate PEOPLE AND THE BOARD future funding plan with the Scheme Trustee. Accounts Board membership was unchanged during The Group still has a sizeable pension deficit, the year. Adrian Colman has continued to and so the pension scheme will remain as a strengthen the senior management team, significant stakeholder for many years to come. with a healthy mixture of internal promotions As already noted, talent management is and external appointments; broadening already a key focus, and increasing diversity our talent pool is fundamental to the Group in all its forms will be a priority for the coming delivering on its organic growth strategy year, from the warehouse to the boardroom. and meeting customer expectations. The Board will also ensure that their The contribution of the Group’s 17,500 stewardship obligations, not least in the areas employees is once again recognised. of operational safety, sustainability and financial The Group’s strong reputation for consistent assurance, remain centre stage and in line with operational delivery is above all the product best practice. of their hard work. Wincanton plc Annual Report and Accounts 2017 3 STRATEGIC REPORT OUR BUSINESS Retail & Consumer Addressing over half of the supply chain spend in the UK, our Retail & Consumer operations seamlessly manage the flow of goods from 58% 50% production through to delivery to the store of Group of Group or home, for grocers and general retailers alike. In an increasingly digitised market our systems, people and services underpin many multichannel operations. Revenue Underlying operating profit £649.3m £25.8m WHAT WE DO • eFulfilment.We provide a comprehensive • Asset utilisation. In a competitive • Transformation. We continuously range of services to support today’s environment we work to ensure improve operations and innovate and multichannel retail environment. operations are efficient and assets are transform them through the introduction From order management to delivery utilised. Approaches include collaborative of new technologies and approaches. and assembly of goods in the home we warehousing, shared transport options can streamline the process and deliver as well as re-deploying our own assets customer satisfaction. to support peak trading periods. MARKET SECTORS RETAIL GENERAL MERCHANDISE RETAIL GROCERY CONSUMER PRODUCTS Non-food retailers with store and/or Food retailers serving consumer or trade Manufacturers supplying the retail online activities requiring eFulfilment customers requiring flexible and reliable market with food, or non-food products services to meet the demands of supply chain operations. and looking for closer supply chain a multichannel market. integration and new ways to serve Customers include: their markets. Customers include: • ASDA Customers include: • Argos • Co-op • Britvic • B&Q • Sainsbury’s • GSK • Screwfix • Waitrose • wilko • The Kraft Heinz Company • Nestlé Revenue Revenue Revenue £315.5m £228.7m £105.1m Wincanton plc 4 Annual Report and Accounts 2017 Strategic reportStrategic Our multichannel operations Governance adapt quickly to changing shopping behaviours so that our customers can deliver the right brand experience Directors’ remuneration report CHALLENGES HOW WE ARE RESPONDING Delivering the right brand experience Delivering for our customers We pride ourselves on fulfilling our existing Directors’ report customers’ home delivery needs, alongside SALE building solid solutions that allow both retailers