Wincanton loses HMRC contract, warns on profits

Wincanton shares tumbled on Tuesday after it issued a profit warning and said it had lost a contract with HM Revenue and Customs.

The company said HMRC had decided to move to another supplier for the provision of logistics services to support UK customs arrangements at inland border facilities and that the contract will be transferred by June.

Wincanton said it was "extremely disappointed" to lose this business but remains a strategic government commercial partner with major contracts with HMRC, Defra, the Department for Health and Social Care and the Cabinet Office.

The company also warned that FY24 pre-tax profit was set to be "materially" lower than current market consensus of £63m. This was put down not just to the contract loss but also to a "more challenging" external environment in the coming financial year, and an accelerated reduction in consumer spending and customer volumes.

Ahead of its results for the year to the end of March 2023, Wincanton said it has continued to trade in line with expectations and expects to deliver revenue growth of around 3% and pre-tax profit growth of over 5%.

"This financial performance is despite the headwinds of inflation, labour supply shortages and consumer spending downturn," it said.

At 1030 GMT, the shares were down 24% at 231.40p.

Numis, which rates the shares at 'buy', cut its price target to 365p from 550p after the update. The broker reduced its full-year pre-tax profit forecast by around 20% to £51m and its FY24 earnings per share estimate was brought down to 30.4p from 37.5p.

"The short-term issues should not detract from the investment proposition," Numis said. "The pipeline of new activity remains strong, and a net cash position provides scope for investment in both organic and value-accretive M&A, and we believe there are significant opportunities in robotics and automation which should ultimately embed its position with customers.

"In addition, free cash flow could be boosted by a reduction in future pension contributions, with the deficit significantly reduced relative to the existing payment schedule."