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Clipper Logistics plc  -  CLG   

Final Results

Released 07:00 28-Jul-2017

RNS Number : 3667M
Clipper Logistics plc
28 July 2017
 

Clipper Logistics plc

Final Results for the year ended 30 April 2017

 

Clipper Logistics plc ("Clipper", "the Group", or "the Company"), a leading provider of value-added logistics solutions and e-fulfilment and returns management services to the retail sector, is pleased to announce its Full Year Results for the year ended 30 April 2017.

 

Financial Highlights for the year ended 30 April 2017

·    

Group revenue increased by 17.2% from £290.3 million to £340.1 million.

·    

Group EBIT1 increased by 21.8% from £14.7 million to £17.9 million.

·    

Group profit after tax for the financial year increased by 20.6% from £10.3 million to £12.5 million.

·    

Earnings per share increased by 20.5% to 12.5p (2016: 10.3p).

·    

Cash generated from operations increased by 25.2% from £20.5 million to £25.7 million.

·    

Dividend per share increased by 20.0% to 7.2p (2016: 6.0p).

 

1 Group EBIT is defined as operating profit, including the Group's share of operating profit in equity-accounted investees, before amortisation of intangible assets arising on consolidation and any exceptional or non-recurring items.

Percentages are calculated based on the underlying numbers as presented in the Financial Statements, not on the rounded figures above.

 

Operational Highlights for the year ended 30 April 2017

·    

Entered into a joint venture with John Lewis, Clicklink Logistics Limited, which operates a shared user, retailer- focused Click and Collect solution to capitalise on rapid transition to in-store collections.

·    

Significant new contracts commenced with high profile retailers, including those with Halfords, Inditex, John Lewis and Links of London.

·    

The full year benefit was realised from contracts that went live during the previous year with Browns, M&Co, Pep&Co and Ireland's largest retailer.

·    

Organic growth in activities with ASOS, Morrisons, Wilko and Zara.

·    

Clipper's returns management services brand Boomerang saw another successful year with approximately 89% of product successfully returned to prime stock at first pass.

·    

Maintained excellent service levels throughout the 2016 Black Friday to Cyber Monday peak trading period.

·    

Developed our business in mainland Europe with the commencement of operations for Smiffys and Westwing.

·    

Strengthened the team with key strategic appointments of a Chief Operating Officer, a Group Human Resources Director, an Engineering and Technology Director and a new Managing Director in Germany.

 

Post Year End Highlights

·    

Completed the acquisitions of Tesam Distribution Limited and RepairTech Limited, both of which will be immediately earnings-enhancing, and will extend the breadth of our service offering.

·    

Further bolstered the senior management team with the appointment of a new Senior Operations Director in UK Logistics.

·    

Strong pipeline of new business opportunities with existing new customers.

 

Steve Parkin, Executive Chairman of Clipper commented:

"The Group is proud of its track record of consistently developing effective solutions to address the changing needs of retailers in today's continually evolving consumer landscape.  Our latest set of full year results reflects the trust and confidence that our customers have in our ability to enable them to achieve their service proposition to their own customers, through the provision of relevant and cost-effective services. Clipper's strategy of driving organic growth and seeking targeted, complementary acquisitions continues to enhance shareholder value.

 

As we move into our new financial year, we have a strong pipeline of new business opportunities, and we look forward to updating shareholders as these crystallise over the coming months. Clicklink, our Click and Collect solution owned jointly with John Lewis, now provides a multi-user platform which is gaining significant traction with other retailers. In addition, the recent acquisitions of Tesam and RepairTech broaden both our customer base and our suite of services, and will be immediately earnings-enhancing."

 

Forward looking statements

This announcement contains forward looking statements. These have been made by the Directors in good faith using information available up to the date on which they approved this report. The Directors can give no assurance that these expectations will prove to be correct. Due to the inherent uncertainties, including both business and economic risk factors underlying such forward looking statements, actual results may differ materially from those expressed or implied by these forward looking statements. Except as required by law or regulation, the Directors undertake no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.

 

ENQUIRIES

Clipper:

+44 (0)11 3204 2050

Steve Parkin, Executive Chairman  


Tony Mannix, Chief Executive Officer


David Hodkin, Chief Financial Officer




Bell Pottinger LLP:

+44 (0) 20 3772 2500

David Rydell


Dan de Belder     


 

Chairman's Statement

As Chairman of Clipper Logistics plc, I am pleased to present our 2017 financial results following the third anniversary of our listing on the Main Market of the London Stock Exchange in June 2014.

 

Our third year as a listed company has seen a continuation of our historical track record of achieving significant organic growth. Our focus on delivering cost-effective, innovative solutions to our blue-chip client base, predominantly in the retail sector, and our continued investment in quality people to implement sector-leading projects, mean that we are confident in our ability to continue this momentum.

 

The Group has achieved a strong financial performance for the year under review, and has seen significant new contracts commence with high profile retailers, including those with Halfords and Links of London. In addition, our commercial vehicles division continues to perform very well.

 

We have formalised our joint venture with John Lewis, for the provision of a dedicated Click and Collect service focused on addressing the specific requirements of retailers. The joint venture entity, Clicklink Logistics Limited, is owned on a 50/50 basis by John Lewis and Clipper, and during the year Clicklink has extended its service coverage to the entire Waitrose estate. We are extending the service to other retailers on a shared-user platform, and initial indications of uptake are encouraging.

 

Following the end of the financial year, we announced the acquisition of Tesam Distribution Limited (in May 2017), and the acquisition of RepairTech Limited (in June 2017). Both these acquisitions are expected to be immediately earnings-enhancing, and demonstrate our ability to target acquisitions which extend the breadth of both our customer base and our service offering, and enhance returns to our shareholders. I would like to take this opportunity to welcome the colleagues and management teams of both businesses to the Group. 

 

Our goal remains the identification of key trends in the sectors we serve, and the development of new services, processes and solutions that address the challenges faced by our customers. Our unrivalled understanding of the dynamics of the whole retail sector, and in particular e-retail and multi and omni-channel retailing, provides the Group with exceptionally strong strategic positioning for the future.

 

We remain confident of our ability to evolve and develop, and to continue to deliver strong returns to our shareholders.

 

Group results

Group revenues increased by 17.2% to £340.1 million for the year to 30 April 2017 (2016: £290.3 million) and Group EBIT increased by 21.8% to £17.9 million (2016: £14.7 million).

 

Diluted earnings per share were 12.3 pence for the year to 30 April 2017 (2016: 10.3 pence), an increase of 19.4%.

 

Basic earnings per share were 12.5 pence (2016: 10.3 pence), an increase of 20.5%.

 

Net debt was £25.1 million at the year end (2016: £18.8 million), in line with our expectations, after planned investment in capital projects to support new contracts (much of which involves a back-to-back commitment from customers to reimburse this capital over the duration of their contract). Net debt is defined as borrowings, less cash, cash equivalents and non-current financial assets (see note 20 to the Financial Statements). 

 

People and Board

Clipper Logistics plc is led by an excellent management team that has been at the core of the business for many years.

 

The team has a well-established track record of identifying areas for innovation and value-added services within the sectors we serve, and for delivering on commitments to our customers.

 

I would like to take this opportunity to thank all the employees of the Group for their commitment and contribution to the Group's performance.

 

Sean Fahey has decided to retire from the Group and stepped down as a director with effect from 28 April 2017. I would particularly like to thank Sean for his significant contribution to the growth of the Group over the last 25 years. 

 

Governance 

The Group is proud of its commitment to high levels of corporate governance. Alongside the executive management team of Tony Mannix (CEO), David Hodkin (CFO) and me, the Company benefits from the combined experience of its Non-Executive Directors: Ron Series (appointed Senior Independent Non-Executive Director in July 2017), Stephen Robertson and Mike Russell. 

 

Paul Hampden Smith was Senior Independent Non-Executive Director during the year ended 30 April 2017, but stood down on 12 July 2017.

 

Dividends

The Board is recommending a final dividend of 4.8 pence per share, making a total dividend in respect of the year ended 30 April 2017 of 7.2 pence per share (2016: 6.0 pence), an increase of 20.0%.

 

The proposed final dividend, if approved by shareholders, will be paid on 29 September 2017 to shareholders on the register at the close of business on 8 September 2017.

 

Outlook

The Group continues to be one of the leading providers of value-added logistics and e-fulfilment solutions to the retail sector in the UK. The further development of our new Click and Collect proposition, together with recent contract wins and a strong new business pipeline, place the Group in an excellent position to achieve further growth, both in the UK and internationally. 

 

In addition, the acquisitions of Tesam Distribution Limited and RepairTech Limited after the end of the financial year are expected to be immediately earnings-enhancing in the year to 30 April 2018.

 

I look forward to working with all of the Group's stakeholders as we continue to develop the business.

 

Operating and Financial Review

 

Overview of results

The Group continued to make excellent progress in the financial year to 30 April 2017.

 

Group revenue

Within the value-added logistics services segment, the Group benefited from:

·    

the full-year impact of contract wins secured in the previous financial year including: Browns, M&Co, Pep&Co and Ireland's largest retailer, although this is partly offset by the full-year impact of the losses of Claire's Accessories, Atterley Road and Michael Lewis in the previous financial year;

·    

organic growth and new business activities on existing contracts, including ASOS, John Lewis pre-retail activities, Morrisons, Wilko and Zara, in part driven by the ongoing shift in retail trends towards online trading which continues to bring particularly strong organic growth to e-fulfilment customers;

·    

the part-year impact of operations commenced during the year to 30 April 2017, including Halfords, Inditex, Links of London, Kidly, Pretty Green, SilkFred, Smiffys and Westwing, and significant changes to the services provided to John Lewis out of the new Ancillary Distribution Centre in Northampton. These are partly offset by the part-year impact of the loss of the Ted Baker contract. The full-year impact of these activities will be realised in the year to 30 April 2018, together with the part-year impacts of contracts either recently commenced or currently in the pipeline and due to go live during the remainder of calendar year 2017 and early calendar year 2018; and

·    

a significant increase in Click and Collect revenues. In the first half of the year, the geographical coverage of the collaboration with John Lewis increased from circa 33% of Waitrose stores to 100% by August 2016. On 1 November 2016, the Click and Collect activity was transferred to Clicklink Logistics Limited ("Clicklink"), a joint venture with John Lewis. The joint venture is equity accounted and the revenue is no longer consolidated into the Group total. However, in the second half of the year, Clipper did provide resources to Clicklink which are recharged and are included in Group revenue. The equity accounting treatment is explained later in this review. 

 

Revenue growth in commercial vehicles was driven by:

·    

a £5.5 million (10.8%) increase in new vehicle sales. The number of new units sold increased by 12.3% year-on-year, but the average selling price fell slightly by 1.3% due to the mix of vehicles sold; and

·    

a £0.4 million increase in aftersales revenues, comprising servicing, body shop and parts sales.

 

Group revenue increased by 17.2% to £340.1 million, with strong growth in all business areas:

 

 

Revenue

Year to

30 April 2017

£m

Year to

30 April 2016

£m

 

%

Change

E-fulfilment & returns management services

129.9

97.6

+33.0%

Total value-added logistics services

251.8

206.0

+22.2%

Commercial vehicles

91.5

85.6

+6.9%

Inter-segment sales

(3.2)

(1.3)


Group revenue

340.1

290.3

+17.2%

Percentages are calculated based on the underlying numbers as presented in the Financial Statements, not on the rounded figures in the table above.

 

Group EBIT

 

The Group grew EBIT strongly in all segments and business activities:

 

 

EBIT

Year to

30 April 2017

£m

Year to

30 April 2016

£m

 

%

Change

E-fulfilment & returns management services

10.2

8.3

+23.4%

Non e-fulfilment logistics

12.4

10.7

+15.7%

Central logistics overheads

(4.8)

(4.7)

 

Total value-added logistics services

17.8

14.3

+24.6%

Commercial vehicles

2.3

2.3

+3.5%

Head office costs

(2.2)

(1.9)

 

Group EBIT

17.9

14.7

+21.8%

Percentages are calculated based on the underlying numbers as presented in the Financial Statements, not on the rounded figures in the table above.

 

EBIT is the primary Key Performance Indicator ("KPI") by which the management team assesses corporate performance. EBIT is assessed against Board approved budgets. A further KPI is net debt, which is discussed on page 33 of the Company's 2017 Annual Report and Accounts (available to download from www.clippergroup.co.uk/report-accounts/).

 

EBIT margin (%) is not considered by the Directors to be a key metric since the high proportion of open book and minimum volume guarantee contracts within the UK logistics division distorts reported margins. This is due to an element of management fees on certain contracts being relatively fixed in the short term, so that an increase in revenue in periods of increased activity will not necessarily give rise to a proportionate increase in profit, resulting in lower reported margins. Conversely in periods of reduced activity levels, reported margins would typically increase. Similarly, revenue derived from minimum volume guarantee contracts is fixed at a minimum level, so that a shortfall in activity levels would give rise to a lower cost base, and a higher reported margin. In addition, within the commercial vehicles segment, the level of high value, relatively low margin new vehicle sales also distorts reported margins. 

 

Accordingly, EBIT is a more relevant measure of financial performance than EBIT margin (%).

 

Group EBIT increased by 21.8% to £17.9 million for the year ended 30 April 2017. The Group expects to achieve further EBIT growth in the coming financial year due to the full-year benefits of contracts brought on line in the year to 30 April 2017, the commencement of activities on further new contracts, organic growth, a strong new business pipeline and the impact of post-year end acquisitions. The acquisitions of Tesam Distribution Limited ("Tesam") and RepairTech Limited ("RepairTech") were completed shortly after the year end (see note 29 to the Group Financial Statements).

 

E-fulfilment & returns management services include the receipt, warehousing, stock management, picking, packing and despatch of products on behalf of customers to support their online trading activities, as well as a range of ancillary support services including returns management, branded as Boomerang, under which returns of products are managed on behalf of retailers. E-fulfilment EBIT also includes the contribution from Click and Collect activities. In the first half of the year under review, this activity was a profit centre within the Clipper entity and so was directly consolidated into Group EBIT. The activity was transferred to the Clicklink joint venture on 1 November 2016 and so the Group's share of Clicklink's profits was equity accounted in the second half of the year. Under equity accounting, the Group recognises its share of the post tax profit of the entity as one figure in the income statement. RepairTech, acquired on 15 June 2017, will be consolidated into the E-fulfilment & returns management services business activity from that date.

 

Non e-fulfilment operations include receipt, warehousing, picking, packing and distribution of products on behalf of customers. Within this business activity, the Group handles high value products, including tobacco, alcohol and designer clothing, and also undertakes traditional retail support services including processing, storage and distribution of products, particularly fashion, to high street retailers. Tesam will be consolidated into the Non e-fulfilment business activity from the date of acquisition, 24 May 2017.

 

Central logistics overheads include the costs of the directors of the logistics business, the project delivery and IT support teams, sales and marketing, accounting and finance, and human resources, that cannot be allocated in a meaningful way to business units. There has been additional investment in such resources during the year ended 30 April 2017, as mentioned in the 2016 Annual Report, particularly in operational delivery and automation. The central logistics overheads have increased in the year due to share based payment charges. In the year, the reporting structure within the central logistics management team has been enhanced, preparing the business for future growth. Whilst incremental investment is likely to be required in the logistics overheads base as the business continues to grow, we do not expect significant stepped increases in the overheads base in the foreseeable future, other than in respect of share based payment charges (see below).

 

The commercial vehicles business, Northern Commercials (Mirfield) Limited, operates Iveco and Fiat commercial vehicle dealerships from six locations, together with three sub-dealerships. It sells new and used vehicles, provides servicing and repair facilities, and sells parts. Vehicles sold and serviced range from small light commercial vans, through to articulated tractor units.

 

Head office costs represent the cost of the Executive Chairman, Chief Financial Officer, Deputy Chief Financial Officer, Group General Counsel, Non-Executive Directors and plc compliance costs. The year-on-year increase in head office costs is attributable to incremental share based payment charges and the costs associated with the acquisition of Tesam.

 

Share based payment charges totalling £0.8 million (2016: £0.5 million) have been charged to central logistics overheads, commercial vehicles and head office costs as appropriate in respect of the Sharesave Plan and the Performance Share Plan ("PSP") (see note 23 to the Group Financial Statements). Since listing on the London Stock Exchange in June 2014, the Group invites certain employees to participate in an annual iteration of the PSP and all employees to participate in an annual iteration of the Sharesave Plan. Each scheme vests over a three year period. As a result, the year ended 30 April 2017 included a full year of charges in respect of options granted in the year ended 30 April 2015 and the year ended 30 April 2016, together with a part year of charges in respect of options granted in the year ended 30 April 2017; the prior year only incurred a full year of charges in respect of options granted in the year ended 30 April 2015 and part year charges in respect of options granted in the year ended 30 April 2016.

 

Net interest charges

Net interest charges for the year to 30 April 2017 increased by 16.1% to £1.6 million (2016: £1.4 million), the increase being attributable to an increase in assets financed under hire purchase contracts in the value-added logistics services operating segment.

 

Taxation

The effective rate of taxation of 22.3% (2016: 21.2%) is higher than the average standard UK rate of corporation tax applicable in the year of 19.9% (2016: 20.0%) principally due to certain expenditure incurred which is disallowable for tax purposes and the higher rate of effective tax to which the German business is subject. 

 

Profit after tax

The profit after tax for the year to 30 April 2017 was £12.5 million (2016: £10.3 million), an increase of 20.6%. 

 

Earnings per share

Earnings per share were 12.5 pence for the year to 30 April 2017 (2016: 10.3 pence).

 

Capital expenditure and fixed assets

Of total tangible and intangible fixed asset additions of £20.2 million (2016: £16.2 million), £19.4 million (2016: £15.5 million) related to the logistics services segment and £0.8 million (2016: £0.7 million) related to the commercial vehicles segment. A large proportion of expenditure in the year ended 30 April 2017 was incurred at the Northampton shared-use facility where John Lewis is the anchor customer. Capital expenditure of £1.5 million was incurred on the Click and Collect collaboration with John Lewis in the first half of the year when this operation sat within the Clipper entity. On 1 November 2016, when the operation was transferred into Clicklink, those assets acquired earlier in the year were sold by Clipper to Clicklink at their fair value, accounting for £1.2 million of the £2.3 million proceeds from sale of non-current assets in the year.

 

Clipper's outstanding capital expenditure commitment at 30 April 2017 was £4.7 million, significantly reduced from the equivalent figure of the prior year (2016: £16.7 million).

 

Cash flow

Cash generated from operations was £25.7 million (2016: £20.5 million), an increase of 25.2%. 

 

The Group's business model gives rise to high levels of cash generation. In the UK logistics business, Clipper is typically paid in the month in which services are delivered on open book and minimum volume guarantee contracts, giving rise to a typically negative investment in working capital, whilst in the commercial vehicles business working capital is substantially funded by the manufacturer through stocking facilities for new vehicles, and trade credit terms for parts supplied. Net cash generated from working capital in the year ended 30 April 2017 was £2.0 million (2016: £0.6 million).

 

£1.95 million was subscribed for share capital on the formation of the Clicklink joint venture in the year ended 30 April 2017 (2016: £nil). A further £1.45 million loan was advanced to Clicklink on its formation. This loan is disclosed as a non-current financial asset (see note 27 to the Group Financial Statements).

 

No deferred consideration was paid in the year (2016: £2.2 million).

 

There has been significant investment in the fixed assets base this year, as noted above, particularly on open-book contracts. However, providing the commercial terms are acceptable, Clipper typically funds a significant proportion of such capital expenditure using hire purchase and finance leases, and so not all of the fixed asset investment actually results in a cash outflow. Cash capital expenditure, including intangible assets, for the year ended 30 April 2017 was £4.6 million compared to £5.9 million in the year ended 30 April 2016.

 

In line with the stated dividend payment policy, a final dividend for the year ended 30 April 2016 of £4.0 million (4.0 pence per share) and an interim dividend of £2.4 million (2.4 pence per share) for the year ended 30 April 2017 were paid in the year to 30 April 2017. These compare to a final dividend for the year ended 30 April 2015 of £3.2 million (3.2 pence per share) and an interim dividend of £2.0 million (2.0 pence per share) for the year ended 30 April 2016, both paid in the year to 30 April 2016.

 

Net debt

In addition to EBIT, net debt is considered a KPI for the Group. As with EBIT, net debt is assessed against Board-approved budgets.

 

The Group had £25.1 million of net debt outstanding at 30 April 2017 (2016: £18.8 million) (see note 20 to the Group Financial Statements), in line with the Board's expectations. The increase in net debt compared with the prior year was driven primarily by the need to invest in capital assets to service significant new contracts. Where an open book customer has a strong credit rating, Clipper will often fund the initial capital requirements on the condition that the customer commits to repaying us over the term of the contract, together with finance charges and a management fee. 

 

The Group opened the year with £6.1 million of bank loans. The Group repaid £6.0 million of bank loans in the year, but took out £2.0 million of funding loans in respect of capital expenditure. The Group ends the year with £2.1 million of bank loans. Net bank debt at 30 April 2017 was £2.1 million (2016: £7.9 million).

 

Logistics

 

E-fulfilment & returns management growth

Clipper's ability and agility, particularly in respect of omni-channel, multi-channel, returns management, Click and Collect and mechanisation already mentioned in this Annual Report, have enabled the Group to significantly grow revenues and earnings, and to once again outperform market growth (the UK e-commerce market grew by 17% in the calendar year 2016). Revenues from e-fulfilment & returns management services increased by 33.0% from £97.6 million for the year to 30 April 2016 to £129.9 million for the year to 30 April 2017, with EBIT growing by 23.4% from £8.3 million to £10.2 million over the same period. This is a particularly pleasing performance as two of the principles underpinning the Group's core strategies are to be a market leader in the e-commerce sector, and to be a thought leader in the provision of value-added services across the sector. 

 

Organic growth in activities with ASOS, Morrisons, Wilko and Zara, the full-year impact of those operations commenced in the year ended 30 April 2016 - Browns, Click and Collect (including Clicklink), Pep&Co and Ireland's largest retailer - and the new operations commenced in the year ended 30 April 2017 - Inditex, John Lewis returns and forward orders activity, Kidly, SilkFred, Smiffys and Westwing - have all contributed favourably to the growth in this business activity year-on-year. Partly offsetting this is the full-year impact of contract losses of Claire's Accessories and Atterley Road in the previous financial year.

 

This business activity saw the launch of a collaboration with John Lewis in September 2015 providing John Lewis with a Click and Collect service which is absolutely focused on the requirements of the retailer: it is fully integrated with the retailer systems, has full track-and-trace, has timed delivery schedules and provides ease of same-day returns through Boomerang. The operation comprises automated parcel sortation and transport distribution services, and initially served 115 Waitrose stores, 33% of the total Waitrose store estate. The remaining 67% of the Waitrose store estate was added from August 2016. This operation was transferred into Clicklink, a joint venture entity, on 1 November 2016 in order to formalise the arrangement and to enable the opening up of the network to third party customers. Clicklink has already commenced performing certain activities for other third party customers and these income streams are expected to increase significantly over the coming months as Clicklink is in advanced discussions with a number of customers.

 

Despite the increasingly challenging logistics demands of the Black Friday to Cyber Monday weekend in the UK outlined previously, Clipper delivered another successful 2016 Black Friday to Cyber Monday trading period for its clients and maintained excellent service levels throughout. In order to mitigate some of the labour challenges around this weekend, one of the roles of Clipper's new Engineering and Technology Director is to increase Clipper's investment in automation, thereby decreasing Clipper's reliance on agency labour providers through the peak trading period.

 

Clipper had been providing e-commerce fulfilment services to Tesco in a property leased by Tesco in Daventry. As a result of space elsewhere in its property portfolio, Tesco opted to relocate the activity into its Fenny Lock site from August 2016. The compensation received for the early termination of our contract means Clipper's profit and loss account for the year ended 30 April 2017 was not adversely impacted by this. The Daventry lease has now been assigned to Clipper and the Group fulfils the new Halfords contract out of this site.

 

In this business activity, since the year end on 30 April 2017:

·    

Wilko has committed to taking incremental space at Ollerton, Browns has committed to taking incremental space at Enfield, and Smiffys has committed to taking incremental space at Kempen;

·    

agreement has been reached with M&S to provide certain services out of Clipper's Ollerton facility;

·    

ASOS has signed up for certain services out of Clipper's Poznan facility in Poland; and RepairTech has been acquired. The key management team has been retained and will continue to manage the operations.

 

Non e-fulfilment logistics is central to the Group's future strategy too

The Group will continue to develop and deliver truly value-added services to address the needs of retailers in traditional bricks and mortar logistics, including receipt of inbound product, storage, store-readiness of product, and distribution to retail destinations. This business activity also includes transport and high value logistics activities. 

 

Revenue from non e-fulfilment operations grew by 12.5% for the year ended 30 April 2017, from £108.4 million to £121.9 million, with EBIT increasing by 15.7%, from £10.7 million to £12.4 million.

 

Within non e-fulfilment, the full-year effect of the contracts secured in the prior year with M&Co and Pep&Co, contributed to revenue and EBIT growth, as did organic growth on existing contracts with Haddad, John Lewis pre-retail activities, M&S, and Philip Morris. The transport operations at Rotherham and tobacco contract packing operations at Brighouse also performed particularly strongly, partly as a result of one-off Tobacco Product Directive work. This strong business growth was partly offset by the part-year impact of the loss of the Hobbycraft and Ted Baker contracts, lost during the year to April 2017 and the full-year effect of the loss of the Michael Lewis and H&M contracts, lost in the prior year.

 

Additionally, in the year to 30 April 2017 operations began:

·    

on a forward orders activity for John Lewis in the new Northampton Ancillary Distribution Centre;

·    

on new storage activities for Halfords, with subsequent agreement reached on a new eight year contract for warehousing activities, including e-commerce; and

·    

under new contracts with Links of London and Pretty Green.

 

In this business activity, since the year end on 30 April 2017 we have commenced a new transport activity with Crosswater.

 

Tesam, acquired shortly after the year end, will be reported within this business activity from the year ending 30 April 2018. The key management team has been retained and will continue to manage the operations.

 

Investment in key personnel

The Group differentiates itself by providing consultancy-led, value-added services to its actual and prospective client base. Clipper is now established as a thought leader within the logistics sector, and this is evidenced both by customers' buy-in to Clipper's innovative approach, and by brand health reviews conducted by an independent market research consultancy.

 

The Group is central to the achievement by its customers of their own objectives and goals.

 

Accordingly, the Group invests in recruiting, training and developing people who are specialists in their relevant fields. These include information technology, solution design, facilities specification, implementation and management, e-commerce and returns management, and project management specialists.

 

In the year ended 30 April 2017, there were significant changes to the senior team within the logistics business including the appointment of a new Chief Operating Officer, a new Group Human Resources Director and an Engineering and Technology Director (all non-statutory director roles) and a new Managing Director in Germany. Since the year end, the Group has further bolstered its senior management team with the appointment of a new Senior Operations Director in UK Logistics following the retirement of the incumbent. The appointment of a new Managing Director at Servicecare took effect in April 2016. These strategic appointments have been implemented to improve the service offering to existing customers and to deliver new opportunities to meet the growth aspirations of the Board.

 

The Group has a Senior Leadership Development Programme to enhance the skills of its senior team, and to assist with succession planning.

 

 

Commercial vehicles

The commercial vehicles business delivered EBIT of £2.3 million in the year to 30 April 2017 (2016: £2.3 million), an increase of 3.5% on the previous year.

 

Northern Commercials operates from six dealership locations and has three sub-dealers. Main dealerships are located in Brighouse, Manchester, Northampton, Dunstable, Tonbridge and Brighton. Thus, the business operates across the north of England and into Wales, through the midlands, and into the south-east.

 

The business sold 2,012 new vehicles in the year to 30 April 2017 (2016: 1,792), and 393 used vehicles (2016: 443). However, due to a change in mix of vehicles sold, the average selling price of a new vehicle in the year to 30 April 2017 was £28,225 compared to £28,608 in the prior year, a decrease of 1.3%. Conversely, the average selling price of a used vehicle was £10,794 compared to £10,653 in the prior year, an increase of 1.3%. Servicing saw increases in revenue between the year ended 30 April 2016 and the year ended 30 April 2017, with a 4.0% increase in the number of hours sold, and parts sales increased by 2.0%.

 

Key customers of Northern Commercials include Access Hire Nationwide, Allied Bakeries, Asda, Clancy Docwra, Dawson Rental, Leeds Commercial, Ryder, Variety Club (the Children's Charity), and many other household names.

 

The business is measured by manufacturers on certain key performance measures throughout the year:

·    

Through its Product Improvement Publications, Iveco notifies dealers of certain recall improvements. The dealer is then measured on the proportion of those recall improvements which have been actioned as vehicles pass through the workshop. Northern Commercials successfully actioned 93.3% of recall improvements in the year, compared to the Iveco-set target of 80%.

·    

MOT pass rate at Northern Commercials' dedicated Test station in Brighouse of 100% (target: 98%).

·    

Assistance Non-Stop: Northern Commercials averaged 41 minutes to arrive in providing breakdown assistance compared to a network target of 48 minutes.

·    

Dealers are set a target of five days per annum for technician training. Northern Commercials was fully compliant in the year.

 

Current trading and outlook

As noted previously, the Group secured a number of significant contract wins in the two years ended 30 April 2017, the full-year benefit of which will not be realised until the years to 30 April 2018 and 30 April 2019. 

 

Looking ahead to the 2018 financial year, there is a strong new business pipeline in the Group. Since the year end, additional contracts have been won within both E-fulfilment & returns management services and Non e-fulfilment logistics, both in the UK and Europe, through a focus on retail specialisms and provision of cost-effective, value-added solutions. These contract wins will more than compensate for the contract losses mentioned earlier in this report. Shareholders will be updated once these new contracts have been agreed.

 

Recent key appointments leave the Group ideally positioned to proactively and reactively scale-up its activities as necessary. The recent management changes have already seen us able to cross-fertilise Clipper's, Servicecare's and Germany's customers and activities and will allow us to generate further synergistic opportunities in the future.

 

The recent acquisitions of Tesam and RepairTech are expected to be immediately earnings enhancing. Across the two acquisitions, there is significant customer overlap with the existing Clipper Group portfolio and so the Group expects to enhance its reputation with these customers, and also to leverage existing customers with additional service lines.

 

The commercial vehicles business is expected to continue its steady growth in profitability in the year to 30 April 2018.

 

The Board is confident in the Group's prospects for the full year ahead. Current trading is in line with the Directors' strategic plan, and the Board is confident of achieving another period of excellent financial performance in the year to 30 April 2018.

 

By order of the Board

Steve Parkin, Executive Chairman

27 July 2017

 

 

Directors' Statement on the Basis of Preparation - Announcement

Whilst the financial information included in this announcement has been prepared on the basis of the requirements of IFRSs in issue, as adopted by the European Union and effective at 30 April 2017, this statement does not itself contain sufficient information to comply with IFRS.

 

These financial results do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Group Income Statement, Group Statement of Comprehensive Income, Group Statement of Financial Position, Group Statement of Changes in Equity, and Group Statement of Cash Flows, and selected notes for the year ended 30 April 2017 have been extracted from the Group's audited Financial Statements for the year then ended.

 

The financial information contained within the preliminary announcement for the year ended 30 April 2017 was approved by the Board on 27 July 2017. Statutory accounts for the year ended 30 April 2017 were approved on the same date and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on these Financial Statements. Their report was unqualified and did not contain a statement under s.498 (2) or (3) of the Companies Act 2006.

 

Statement of Directors' Responsibilities in respect of the Annual Report and Accounts

The Directors are responsible for preparing the Annual Report and the Group and Parent Company Financial Statements in accordance with applicable law and regulations.

 

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 IFRS as adopted by the EU and applicable law and have elected to prepare the Parent Company Financial Statements in accordance with UK Accounting Standards, including FRS 101 Reduced Disclosure Framework.

 

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 the period. In preparing each of the Group and Parent Company Financial Statements, the Directors are required to: 

·    

select suitable accounting policies and then apply them consistently; 

·    

make judgements and estimates that are reasonable and prudent; 

·    

for the Group Financial Statements, state whether they have been prepared in accordance with IFRS as adopted by the EU; 

·    

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 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.

 

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 complies 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.

 

Directors' Responsibility Statement

We confirm that to the best of our knowledge:

·    

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

·    

the Strategic Report and Directors' Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

 

Group Income Statement

For the year ended 30 April


Note

2017
Group
£'000

2016
Group
£'000

Revenue

3

340,127

290,325

Cost of sales


(241,097)

(205,742)

Gross profit


99,030

84,583

Other net gains

6

405

263

Administration and other expenses


(81,964)

(70,315)

Operating profit before share of equity-accounted investees, net of tax

4

17,471

14,531

Share of equity-accounted investees, net of tax


217

-

Operating profit

6

17,688

14,531

EBIT


17,928

14,718

Less: amortisation of other intangible assets

4

(177)

(187)

         share of tax and finance costs of equity-accounted investees

4

(63)

-

Operating profit

6

17,688

14,531





Finance costs

8

(1,657)

(1,413)

Finance income

9

21

4

Profit before income tax


16,052

13,122

Income tax expense

10

(3,586)

(2,786)

Profit for the financial year


12,466

10,336





Basic earnings per share

11

12.5p

10.3p

Diluted earnings per share

11

12.3p

10.3p

 

 

Group Statement of Comprehensive Income

For the year ended 30 April


Note

2017
Group
£'000

2016
Group
£'000

Profit for the financial year


12,466

10,336

Other comprehensive expense for the year, net of tax:




To be reclassified to the income statement in subsequent periods:




Exchange differences on retranslation of foreign operations


(57)

(6)

Total comprehensive income for the financial year


12,409

10,330

 

Group Statement of Financial Position

At 30 April


Note

2017
Group
£'000

2016
Group
£'000

Assets:




Non-current assets




Goodwill


23,252

23,252

Other intangible assets


1,498

1,646

Intangible assets

12

24,750

24,898

Property, plant and equipment

14

38,899

25,564

Interest in equity-accounted investees

15

2,167

-

Non-current financial assets

27

1,450

-

Deferred tax assets

10

353

-

Total non-current assets


67,619

50,462

Current assets




Inventories

16

29,972

26,252

Trade and other receivables

17

47,728

39,816

Current tax assets


-

36

Cash and cash equivalents

18

862

715

Total current assets


78,562

66,819

Total assets


146,181

117,281

Equity and liabilities:




Current liabilities




Trade and other payables

19

85,068

72,183

Financial liabilities: borrowings

20

7,389

6,553

Derivative financial instruments


-

10

Short-term provisions

21

127

109

Current income tax liabilities


2,187

1,747

Total current liabilities


94,771

80,602

Non-current liabilities




Financial liabilities: borrowings

20

19,973

12,931

Long-term provisions

21

1,367

769

Deferred tax liabilities

10

-

202

Total non-current liabilities


21,340

13,902

Total liabilities


116,111

94,504

Equity shareholders' funds




Share capital

22

50

50

Share premium


80

56

Currency translation reserve


(33)

24

Other reserve


84

84

Merger reserve


6,006

6,006

Share based payment reserve


2,038

783

Retained earnings


21,845

15,774

Total equity attributable to the owners of the Company


30,070

22,777

Total equity and liabilities


146,181

117,281

 

Group Statement of Changes in Equity

For the year ended 30 April


Share
capital
Group
£'000

 Share premium Group
£'000

Currency translation reserve
Group
£'000

 Other
reserve
Group
£'000

 Carried forward
Group
 £'000

Balance at 1 May 2015

50

48

31

84

213

Profit for the year

-

-

-

-

-

Other comprehensive income/(expense)

-

-

(7)

-

(7)

Equity settled transactions

-

-

-

-

-

Share issue

-

8

-

-

8

Dividends

-

-

-

-

-

Balance at 30 April 2016

50

56

24

84

214

Profit for the year

-

-

-

-

-

Other comprehensive income/(expense)

-

-

(57)

-

(57)

Equity settled transactions

-

-

-

-

-

Share issue

-

24

-

-

24

Dividends

-

-

-

-

-

Balance at 30 April 2017

50

80

(33)

84

181

 

 


Brought forward
Group
£'000

Merger reserve
Group
£'000

Share based payment reserve
Group
£'000

Retained earnings Group
£'000

Total
Group
£'000

Balance at 1 May 2015

213

6,006

139

10,637

16,995

Profit for the year

-

-

-

10,336

10,336

Other comprehensive income/(expense)

(7)

-

-

1

(6)

Equity settled transactions

-

-

644

-

644

Share Issue

8

-

-

-

8

Dividends

-

-

-

(5,200)

(5,200)

Balance at 30 April 2016

214

6,006

783

15,774

22,777

Profit for the year

-

-

-

12,466

12,466

Other comprehensive income/(expense)

(57)

-

-

-

(57)

Equity settled transactions

-

-

1,255

5

1,260

Share issue

24

-

-

-

24

Dividends

-

-

-

(6,400)

(6,400)

Balance at 30 April 2017

181

6,006

2,038

21,845

30,070

 

Group Statement of Cash Flows

For the year ended 30 April


Note

2017
Group
£'000

2016
Group
£'000

Profit before tax from operating activities


16,052

13,122

Adjustments to reconcile profit before tax to net cash flows:




- Depreciation and impairment of property, plant and equipment

6

4,725

4,580

- Amortisation and impairment of intangible assets

6

548

466

- Gain on disposal of property, plant and equipment

6

(260)

(37)

- Share of equity-accounted investees, net of tax

15

(217)

-

- Consideration received

21

557

-

- Exchange differences


(238)

(82)

- Finance costs

8 & 9

1,636

1,409

- Movement in derivative financial instruments

6

(10)

(60)

- Amortisation of grants

6

-

(1)

- Share based payments charge

23

832

454

Working capital adjustments:




- (Increase)/decrease in trade and other receivables and prepayments


(7,895)

(6,372)

- (Increase)/decrease in inventories


(3,049)

(3,677)

- Increase/(decrease) in trade and other payables


12,989

10,694

Operating activities:




- Cash generated from operations


25,670

20,496

- Interest received


3

4

- Interest paid


(1,606)

(1,362)

- Income tax paid


(3,234)

(2,063)

Net cash flows from operating activities


20,833

17,075

Investing activities:




- Purchase of property, plant and equipment


(4,028)

(5,383)

- Proceeds from sale of property, plant and equipment


2,112

238

- Purchase of intangible assets


(551)

(546)

- Proceeds from sale of intangible assets


167

-

- Investment in joint venture

15

(1,950)

-

- Acquisition of subsidiary undertaking net of cash acquired

28

(2,212)

Net cash flows from investing activities


(4,250)

(7,903)

Financing activities:




- Drawdown of bank loans


6,442

- Debt issue costs paid


(232)

- Finance leases advanced in respect of prior year purchases of property, plant and equipment


4,879

207

- Shares issued

22

24

8

- Dividends paid

7

(6,400)

(5,200)

- Non-current financial assets advanced


(1,450)

-

- Repayment of bank loans


(5,995)

(10,141)

Net cash flows from financing activities


(14,619)

(12,128)

Net increase/(decrease) in cash and cash equivalents


1,964

(2,956)

Cash and cash equivalents at start of year


(1,102)

1,854

Cash and cash equivalents at end of year

18

862

(1,102)

 

Notes to the Group Statement

 

1. General information

 

The results comprise those of Clipper Logistics plc and its subsidiaries for the year ended 30 April 2017 and does not constitute the Group's statutory accounts for the years ended 30 April 2017 or 2016, but is derived from those accounts. Both the Company Financial Statements and the Group Financial Statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("IFRSs").

 

Statutory accounts for the years ended 30 April 2017 and 30 April 2016 have been reported on by the auditors who issued an unqualified opinion in respect of both periods and the auditors' reports for 2017 and 2016 did not contain statements under 498(2) or 498(3) of the Companies Act 2006.

 

Statutory accounts for the year ended 30 April 2016 have been filed with the Registrar of Companies. The statutory accounts for the year ended 30 April 2017, which were approved by the Board on 27 July 2017, will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

 

The Group Financial Statements for the year ended 30 April 2017 were authorised for issue by the Board of Directors on 27 July 2017 and the Group Statement of Financial Position was signed on the Board's behalf by David Hodkin.

 

Clipper Logistics plc (the "Company") and its subsidiaries (together the "Group") provide value-added logistics and other services to predominantly the retail sector and also operate as distributors of commercial vehicles.

 

The Company is limited by share capital, incorporated and domiciled in the United Kingdom. The address of its registered office is Clipper Logistics Group, Gelderd Road, Leeds, LS12 6LT.

 

2. Summary of significant accounting policies

 

The results for the year have been prepared on a basis consistent with the accounting policies set out in Clipper's Annual Report and Accounts for the year ended 30 April 2016.

 

In the current year, amendments to IAS 1, 16, 27, 28 & 38; IFRS 10 & 11 and those arising from the annual improvements to IFRSs 2012-2014 cycles have been adopted. There has been no material impact, although there have been some minor changes to disclosure.

 

3. Revenue

 

Revenue recognised in the income statement is analysed as follows:


2017

Group

£'000

2016

Group

£'000

E-fulfilment and returns management services

129,854

97,598

Non e-fulfilment logistics

121,930

108,390

Value-added logistics services

251,784

205,988

Commercial vehicles

91,515

85,642

Inter-segment sales

(3,172)

(1,305)

Revenue from external customers

340,127

290,325

 

Geographical information - revenue from external customers:


2017

Group

£'000

2016

Group

£'000

United Kingdom

302,730

264,219

Germany

16,103

14,234

Rest of Europe

21,294

11,872

Revenue from external customers

340,127

290,325

 

Geography is determined by the location of the end customer.

 

The Group has one customer that in the year ended 30 April 2017 accounted for greater than 10% of the total Group revenue. For completeness, the comparative 2016 figure is shown, although it constituted less than 10% of Group revenue in that year.

 

The revenue all arose in the value-added logistics services segment as follows:


2017

Group

£'000

2016

Group

£'000

Revenue from largest single customer in 2017

35,179

17,390

 

4. Segment information

 

For the Group, the Chief Operating Decision Maker ("CODM") is the main Board of Directors. The CODM monitors the operating results of each business unit separately for the purposes of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss, both before and after exceptional or discontinuing items. This measurement basis excludes Group-wide central services and financing costs which are not allocated to operating segments.

 

For management purposes, the Group is organised into two main reportable segments:

·    

Value-added logistics services; and

·    

Commercial vehicles, including sales, servicing and repairs.

 

Within the value-added logistics services segment, the CODM also reviews performance of three separate business activities:

·    

E-fulfilment & returns management services; 

·    

Non e-fulfilment logistics; and

·    

Central logistics overheads, being the costs of support services specific to the value-added logistics services segment, but which are impractical to allocate between the sub-segment activities.

 

These three separate business activities comprise one segment, having similar economic characteristics in terms of profitability and costs, customers and operating environment.

 

Inter-segment transactions are entered into under normal commercial terms and conditions and on an arm's length basis that would also be available to unrelated third parties.

The following tables present profit information for continuing operations regarding the Group's business segments for the two years ended 30 April 2017:

 

Earnings before interest & tax ("EBIT"):


2017
Group
£'000

2016
Group
£'000

E-fulfilment & returns management services

10,232

8,291

Non e-fulfilment logistics

12,431

10,742

Central logistics overheads

(4,832)

(4,718)

Value-added logistics services

17,831

14,315

Commercial vehicles

2,342

2,263

Head office costs

(2,245)

(1,860)

Group EBIT

17,928

14,718

 

Amortisation of other intangible assets:


2017
Group
£'000

2016
Group
£'000

E-fulfilment & returns management services

(156)

(156)

Non e-fulfilment logistics

(21)

(31)

Central logistics overheads

-

-

Value-added logistics services

(177)

(187)

Commercial vehicles

-

-

Head office costs

-

-

Group total

(177)

(187)

 

Share of tax and finance costs of equity-accounted investees:


2017
Group
£'000

2016
Group
£'000

Net finance costs

(9)

-

Income tax expense

(54)

-

Group total 

(63)

-

 

Operating profit and profit before income tax:


2017
Group
£'000

2016
Group
£'000

Operating profit:



E-fulfilment & returns management services

9,796

8,135

Non e-fulfilment logistics

12,410

10,711

Central logistics overheads

(4,832)

(4,718)

Value-added logistics services

17,374

14,128

Commercial vehicles

2,342

2,263

Head office costs

(2,245)

(1,860)

Group operating profit before share of equity-accounted investees

17,471

14,531

Share of equity-accounted investees, net of tax

217

-

Operating profit

17,688

14,531

Finance costs

(1,657)

(1,413)

Finance income

21

4

Profit before income tax

16,052

13,122

 

The segment assets and liabilities at the balance sheet date are as follows:

At 30 April 2017:

Segment
assets
£'000

Segment liabilities
£'000

Value-added logistics services

99,077

(46,442)

Commercial vehicles

45,889

(40,120)

Segment assets/(liabilities)

144,966

(86,562)

Unallocated assets/(liabilities):



- Cash and cash equivalents

862

-

- Financial liabilities

-

(27,362)

- Deferred tax

353

-

- Income tax assets/(liabilities)

-

(2,187)

Total assets/(liabilities)

146,181

(116,111)

 

At 30 April 2016:

Segment
assets
£'000

Segment
liabilities
£'000

Value-added logistics services

73,858

(39,288)

Commercial vehicles

42,672

(33,773)

Segment assets/(liabilities)

116,530

(73,061)

Unallocated assets/(liabilities):



- Cash and cash equivalents

715

(1,817)

- Financial liabilities

-

(17,677)

- Deferred tax

-

(202)

- Income tax assets/(liabilities)

36

(1,747)

Total assets/(liabilities)

117,281

(94,504)

 

Capital expenditure, depreciation and amortisation by segment in the year ended 30 April was as follows: 

 

Capital expenditure:


2017
Group
£'000

2016
Group
£'000

Value-added logistics services

19,386

15,500

Commercial vehicles

851

661

Total

20,237

16,161

 

Capital expenditure comprises additions to property, plant and equipment (note 14) and intangible assets (note 13).

 

Depreciation:


2017
Group
£'000

2016
Group
£'000

Value-added logistics services

4,012

3,883

Commercial vehicles

713

697

Total

4,725

4,580

 

Amortisation:


2017
Group
£'000

2016
Group
£'000

Value-added logistics services

539

447

Commercial vehicles

9

19

Total

548

466

 

Non-current assets held by each geographical area are made up as follows:


2017
Group
£'000

2016
Group
£'000

United Kingdom

62,409

46,194

Germany

4,617

4,268

Rest of Europe

240

-

Deferred taxation assets

353

-

Total

67,619

50,462

 

5. Staff costs


2017
Group
£'000

2016
Group
£'000

Wages and salaries

84,462

72,662

Social security costs

7,791

6,766

Pension costs for the defined contribution scheme

1,474

1,371

Share based payments

832

454

Total

94,559

81,253

 

The average monthly number of employees during the year was made up as follows:


2017
Group
Number

2016
Group
Number

Warehousing

2,402

2,097

Distribution

416

406

Service and maintenance

396

387

Administration

526

490

Total

3,740

3,380

 

Key management compensation (including Executive Directors):


2017
Group
£'000

2016
Group
£'000

Wages and salaries

2,680

2,589

Social security costs

370

378

Pension costs for the defined contribution scheme

336

398

Share based payments

793

381

Total

4,179

3,746

 

Directors' emoluments:


2017
Group
£'000

2016
Group
£'000

Aggregate emoluments excluding share based payments on unvested awards

1,309

1,259

Pension costs for the defined contribution scheme

48

86

Total

1,357

1,345

 

The number of Directors who were accruing benefits under a Group Pension Scheme is as follows:


2017
Group
Number

2016
Group
Number

Defined contribution plans

3

3

 

6. Group operating profit

 

This is stated after charging:


2017
Group
£'000

2016
Group
£'000

Depreciation of property, plant and equipment - owned assets

2,023

2,484

Depreciation of property, plant and equipment - leased assets

2,702

2,096

Amortisation of intangible assets (included within administration and other expenses)

548

466

Total depreciation and amortisation expense

5,273

5,046




Operating lease rentals:



- Vehicles, plant and equipment

8,876

7,808

- Land and buildings

18,069

15,474




Auditor's remuneration:



KPMG LLP:



- Group audit fees

142

125

- Other services

-

-

Ernst & Young LLP:



- Group audit fees

-

30

- Other services

-

-

Total auditor's remuneration:



- Audit of the Group Financial Statements

60

60

- Audit of the subsidiaries

82

95

- Non-audit fees

-

-

Total fees paid to the Group's auditors

142

155

 

Operating profit is stated after crediting:


2017
Group
£'000

2016
Group
£'000

Other net gains:



- Profit on sale of property, plant and equipment

260

37

- Dealership contributions

135

165

- Fair value adjustment to derivative financial instruments

10

60

- Amortisation of grants

-

1

Total net gains

405

263

 

 

7. Dividends 


2017
Group
£'000

2016
Group
£'000

Final dividend for the prior year of 4.0 pence (2016: 3.2 pence) per share

4,000

3,200

Interim dividend for the year of 2.4 pence (2016: 2.0 pence) per share

2,400

2,000

Total dividends paid

6,400

5,200

Proposed final dividend for the year ended 30 April 2017 of 4.8 pence (2016: 4.0 pence) per share 

4,813

4,000

 

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these Financial Statements. The proposed dividend is payable to all shareholders on the Register of Members on 8 September 2017. The payment of this dividend will not have any tax consequences for the Group.

 

8. Finance costs


2017
Group
£'000

2016
Group
£'000

On bank loans and overdrafts

438

533

On hire purchase agreements

766

394

Amortisation of debt issue costs

97

78

Commercial vehicle stocking interest

299

370

Other interest payable

57

38

Total interest expense for financial liabilities measured at amortised cost

1,657

1,413

 

9. Finance income


2017
Group
£'000

2016
Group
£'000

Bank interest

-

3

Other interest

3

1

Amounts receivable from related parties

18

-

Total interest income for financial assets measured at amortised cost

21

4

 

10. Income tax expense

 

(a) Tax charged in the income statement:


2017
Group
£'000

2016
Group
£'000

Current income tax:



UK and foreign corporation tax

3,620

3,066

Amounts under/(over) provided in previous years

90

(28)

Total income tax on continuing operations

3,710

3,038

Deferred tax:



Origination and reversal of temporary differences

(144)

(231)

Amounts under/(over) provided in previous years

48

21

Impact of change in tax laws and rates

(28)

(42)

Total deferred tax

(124)

(252)

Tax expense in the income statement on continuing operations

3,586

2,786

 

(b) Tax relating to items charged or credited to other comprehensive income:

There are no tax consequences of any of the items included in other comprehensive income.

 

(c) Reconciliation of income tax charge:

The income tax expense in the income statement for the year differs from the standard rate of corporation tax in the UK. The differences are reconciled below:


2017
Group
£'000

2016
Group
£'000

Profit before taxation from continuing operations

16,052

13,122

Standard rate of corporation tax in UK

19.92%

20.00%

Tax on profit on ordinary activities at standard rate

3,198

2,624




Share of equity-accounted investees, already net of tax

(43)

-

Expenses not allowable for tax purposes

212

169

Tax under/(over) provided in previous years

138

(7)

Difference in tax rates overseas

109

42

Utilisation of previously unrecognised tax losses

-

-

Deferred tax rate difference

(28)

(42)

Total tax expense reported in the income statement

3,586

2,786

 

(d) Deferred tax in the income statement:


2017
Group
£'000

2016
Group
£'000

Deferred tax on accelerated capital allowances

152

(123)

Deferred tax on other temporary differences

(276)

(129)

Total

(124)

(252)

 

The UK corporation tax rate reduced from 20% to 19% with effect from 1 April 2017. Legislation to reduce the rate to 17% with effect from 1 April 2020 was substantively enacted at 30 April 2017. A rate of 17% (2016: 18%) has been applied in the measurement of the Group's UK deferred tax assets and liabilities in the year.

 

(e) Deferred tax in the statement of financial position:


2017
Group
£'000

2016
Group
£'000

Deferred tax liabilities:



Accelerated capital allowances

(512)

(356)

Other timing differences

(204)

(213)

Deferred tax asset:



Share based payments

873

309

Provisions and other timing differences

196

58

Net deferred tax asset (liability)

353

(202)

 

(f) Deferred tax movement:


Group
£'000

At 1 May 2015

(642)

Credited to income statement

252

Credited to share based payment reserve

190

Foreign currency adjustment

(2)

At 30 April 2016

(202)

Credited to income statement

124

Credited to share based payment reserve

429

Foreign currency adjustment

2

At 30 April 2017

353

                                                                                                             

11. Earnings per share

 

Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the potentially dilutive instruments into ordinary shares.

 

The following reflects the income and share data used in the earnings per share computation:


2017
Group
£'000

2016
Group
£'000

Profit attributable to ordinary equity holders of the Company

12,466

10,336

 


2017
Group

2016
Group

Basic weighted average number of shares (thousands)

100,011

100,000

Basic earnings per share

12.5p

10.3p

Diluted weighted average number of shares (thousands)

101,710

100,823

Diluted earnings per share

12.3p

10.3p

 

 

12. Intangible assets


Goodwill
Group
£'000

Contracts
and licences
Group
£'000

Computer
software
Group
£'000

Total
Group
£'000

Cost:





At 1 May 2015

23,252

1,933

1,514

26,699

Additions

-

98

448

546

Disposals

-

-

-

-

Foreign currency adjustment

-

-

5

5

At 30 April 2016

23,252

2,031

1,967

27,250

Additions

-

-

551

551

Disposals

-

-

(263)

(263)

Foreign currency adjustment

-

7

16

23

At 30 April 2017

23,252

2,038

2,271

27,561






Accumulated amortisation:





At 1 May 2015

-

786

1,094

1,880

Charge for the year

-

187

279

466

Disposals

-

-

-

-

Foreign currency adjustment

-

1

5

6

At 30 April 2016

-

974

1,378

2,352

Charge for the year

-

177

371

548

Disposals

-

-

(96)

`(96)

Foreign currency adjustment

-

2

5

7

At 30 April 2017

-

1,153

1,658

2,811






Net book value:





At 1 May 2015

23,252

1,147

420

24,819

At 30 April 2016

23,252

1,057

589

24,898

At 30 April 2017

23,252

885

613

24,750

 

The average remaining useful life of contracts and licences at 30 April 2017 is 5.4 years (2016: 6.5 years)

 

13. Impairment test for goodwill

 

The carrying amount of goodwill has been allocated to each cash generating unit ("CGU") as follows:


2017
Group
£'000

2016
Group
£'000

Value-added logistics services

17,326

17,326

Commercial vehicles

5,926

5,926

Total

23,252

23,252

 

A CGU 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. The recoverable amount of a CGU is determined based on value-in-use calculations.

 

The value-in-use calculations have used pre-tax cash flow projections based on the Board approved business plans for the three years ending 30 April 2020. 

 

The business plans for the value-added logistics services segment take into account the annualised impact of contract wins in the year ended 30 April 2017 as well as confirmed new and ceasing contracts. The key judgement is the assumed new contract wins during the business plan period, which has been based on historical experience. 

 

Subsequent cash flows are extrapolated using an estimated long-term growth rate of 2.5% (2016: 2.5%) to 2027 (2016: 2026). The cash flows have then been discounted using a pre-tax risk adjusted discount rate of between 9 and 11% (2016: 9 and 11%). The forecasts of foreign operations are translated at the exchange rate ruling at the year end. 

 

The Directors have concluded that no reasonably foreseeable change in the key assumptions would give rise to an impairment.

 

14. Property, plant and equipment 


Leasehold
property
Group
£'000

Motor
vehicles
Group
£'000

Plant, machinery, fixtures & fittings
Group
£'000

Total
Group
£'000

Cost:





At 1 May 2015

3,851

3,836

26,224

33,911

Additions

391

1,875

13,349

15,615

Disposals

(16)

(680)

(259)

(955)

Foreign currency adjustment

5

68

209

282

At 30 April 2016

4,231

5,099

39,523

48,853

Additions

198

777

18,711

19,686

Disposals

(142)

(1,123)

(3,429)

(4,694)

Foreign currency adjustment

6

129

232

367

At 30 April 2017

4,293

4,882

55,037

64,212






Accumulated depreciation:





At 1 May 2015

1,759

1,965

15,572

19,296

Charge for the year

313

784

3,483

4,580

Disposals

(16)

(488)

(250)

(754)

Foreign currency adjustment

5

34

128

167

At 30 April 2016

2,061

2,295

18,933

23,289

Charge for the year

353

861

3,511

4,725

Disposals

(142)

(794)

(1,907)

(2,843)

Foreign currency adjustment

5

26

111

142

At 30 April 2017

2,277

2,388

20,648

25,313






Net book value:





At 1 May 2015

2,092

1,871

10,652

14,615

At 30 April 2016

2,170

2,804

20,590

25,564

At 30 April 2017

2,016

2,494

34,389

38,899

 

Included within property, plant and equipment are amounts held under finance lease contracts. At 30 April 2017, the net book value of these assets was £27,314,000 (30 April 2016: £10,638,000). Total additions include £13,697,000 (2016: £8,172,000) under finance lease contracts.

 

Additions to plant, machinery, fixtures & fittings include £1,824,000 (2016: £2,823,000) in respect of assets in the course of construction.

 

15. Investment in equity-accounted investees


2017
Group
£'000

2016
Group
£'000

Brought forward

-

-

Subscription for share capital

1,950

-

Share of profit after tax for the period

217

-

Carried forward

2,167

-

 

The Company owns 50% of the issued capital and voting rights of Clicklink Logistics Limited ("Clicklink"), a company incorporated in Great Britain and registered in England and Wales. Clicklink provides services in respect of the sortation, fulfilment and delivery of one-man orders to Click and Collect customer collection points in the United Kingdom. On 1 November 2016 the Company subscribed for 1,000,000 A ordinary shares of £1 each in Clicklink, for aggregate consideration of £1,950,000. Clicklink commenced trading on 1 November 2016 and has a 31 January financial period end.

 

Summarised financial information from Clicklink's audited accounts for the 13 week trading period ended 31 January 2017 is set out below:


31 January

2017
£'000

Current assets

7,874

Non-current assets

4,677

Current liabilities

(5,312)

Non-current liabilities

(2,905)

Equity attributable to owners of the company

4,334

 


13 weeks ended 

31 January

2017
£'000

Revenue

6,624

Operating profit

560

Interest payable and similar charges

(18)

Income tax expense

(108)

Profit for the period

434

 

16. Inventories


2017
Group
£'000

2016
Group
£'000

Component parts and consumable stores

4,459

4,319

Commercial vehicles

3,225

3,768

Commercial vehicles on consignment

22,288

18,165

Total inventories net of provision for obsolescence

29,972

26,252

 

See below for the movements in the provision for obsolescence:


Group
£'000

At 1 May 2015

17

Charged for the year

39

Utilised

(47)

At 30 April 2016

9

Charged for the year

114

Utilised

(36)

At 30 April 2017

87

 

The cost of inventories recognised as an expense amounted to £91,072,000 (2016: £ 82,398,000).

 

Included within commercial vehicles is £768,000 (2016: £930,000) relating to assets held under hire purchase agreements.

 

17. Trade and other receivables


2017
Group
£'000

2016
Group
£'000

Trade receivables

24,297

19,316

Less: provision for impairment of receivables

(340)

(328)

Trade receivables - net

23,957

18,988

Other receivables

2,708

2,971

Amounts receivable from related parties (see note 27)

522

-

Prepayments and accrued income

20,541

17,857

Total trade and other receivables

47,728

39,816

 

See note 26 on credit risk of trade receivables, which explains how the Group manages and measures credit quality of trade receivables that are neither past due nor impaired.

 

See below for the movements in the provision for impairment:


Group
£'000

At 1 May 2015

256

Charged for the year

124

Foreign currency adjustment

2

Utilised

(54)

At 30 April 2016

328

Charged for the year

227

Foreign currency adjustment

1

Utilised

(216)

At 30 April 2017

340

 

Concentrations of credit risk with respect to trade receivables are limited due to the Group's customer base being large, unrelated and blue chip. Due to this, management believes there is no further credit risk provision required in excess of normal provision for doubtful receivables. The average credit period taken on sale of goods or services is 22 days (2016: 20 days).

 

An impairment review has been undertaken at the balance sheet date to assess whether the carrying amount of financial assets is deemed recoverable. The primary credit risk relates to customers which have amounts due outside of their credit period. A provision for impairment is made when there is objective evidence of impairment which is usually indicated by a delay in the expected cash flows or non-payment from customers.

 

The ageing analysis of trade receivables was as follows:


Total

Neither past due nor impaired

Past due but not impaired


£'000

£'000

30-60 days
£'000

60-90 days
£'000

> 90 days
£'000

30 April 2017

23,957

22,245

816

64

832

30 April 2016

18,988

17,216

1,006

231

535

 

18. Cash and cash equivalents


2017
Group
£'000

2016
Group
£'000

Cash and cash equivalents

862

715

Bank overdraft

-

(1,817)

Total cash and cash equivalents

862

(1,102)

 

19. Trade and other payables


2017
Group
£'000

2016
Group
£'000

Trade creditors

28,760

25,984

Consignment inventory payables

29,230

22,859

Amounts payable to related parties (see note 27)

171

-

Other taxes and social security

5,372

3,364

Other creditors

5,103

4,338

Accruals and deferred income

16,432

15,638

Total trade and other payables

85,068

72,183

 

20. Financial liabilities: borrowings


2017
Group
£'000

2016
Group
£'000

Non-current:



Bank loans

1,330

5,113

Obligations under finance leases or hire purchase agreements

18,643

7,818

Total non-current

19,973

12,931

Current:



Bank overdrafts

-

1,817

Bank loans

797

944

Obligations under finance leases or hire purchase agreements

6,592

3,792

Total current

7,389

6,553

Total borrowings

27,362

19,484

Less:       Cash and cash equivalents

862

715

                Loans to related party (see note 27)

1,450

-

Net debt

25,050

18,769

 

The maturity analysis of the bank loans at 30 April is as follows:


2017
Group
£'000

2016
Group
£'000

In one year or less

797

944

Between one and five years

1,330

5,113

After five years

-

-

Total bank loans

2,127

6,057

 

The principal lender has security over all assets of the Group's UK operations. The Group's principal bank facilities total £30,000,000 and consist of:

·    

a Revolving Credit Facility of £20,000,000 repayable in January 2021; interest rate 1.75% above LIBOR. The amount drawn at 30 April 2017 was £nil;

·    

a committed overdraft of £8,000,000. The amount drawn at 30 April 2017 was £nil; and

·    

bonds and guarantees of £2,000,000.

 

Items included within bank loans at 30 April 2017 are as follows:

·    

other bank loans - £2,491,000 repayable in monthly or quarterly instalments over periods between two and 52 months; interest rates fixed at between 3.65% and 4.80%;

·    

unamortised debt issue costs of £364,000 in relation to the principal facilities, which have been deducted from the total outstanding bank loans. 

 

 

The amounts which are repayable under hire purchase or finance lease instalments are shown below:


2017
Group
£'000

2016
Group
£'000

Fixed rate leases:



Minimum lease payments:



In one year or less

6,631

3,241

Between one and five years

19,008

7,244

After five years

-

-


25,639

10,485

Interest:



In one year or less

(830)

(366)

Between one and five years

(1,194)

(483)

After five years

-

-


(2,024)

(849)

Principal of fixed rate leases:



In one year or less

5,801

2,875

Between one and five years

17,814

6,761

After five years

-

-


23,615

9,636

Variable rate leases:



In one year or less

791

917

Between one and five years

829

1,057

After five years

-

-


1,620

1,974

Total

25,235

11,610

 

It is the Group's policy to acquire certain of its property, plant and equipment and inventories under finance leases or hire purchase agreements. The average contract term is 4.5 (2016: 4.0) years. At 30 April 2017 £23,636,000 (2016 £10,878,000) of the Group total of such obligations is denominated in Pounds Sterling and the remainder is denominated in Euros. The interest on the variable rate leases is based on a margin above Bank Base Rate or LIBOR. The Group's obligations under finance leases are secured by the lessor's charge over the assets.

 

21. Provisions


Onerous contracts
Group
£'000

Uninsured
losses

Group
£'000

Dilapidations
Group

£'000

Total
Group
£'000

At 1 May 2015

234

-

606

840

Utilised

(92)

(60)

(92)

(244)

Charged in year

30

60

192

282

At 30 April 2016

172

-

706

878

Utilised

(92)

(145)

(166)

(403)

Consideration received

-

-

557

557

Charged in year

19

145

298

462

At 30 April 2017

99

-

1,395

1,494

 

Provisions have been analysed between current and non-current as follows:


2017
Group
£'000

2016
Group
£'000

Current

127

109

Non-current

1,367

769

Total

1,494

878

 

Onerous contracts

Following a reorganisation of the commercial vehicles business in the year ended 30 April 2013, which included the closure of a depot, the Group was unsuccessful in its efforts to sub-let the closed premises. The Directors therefore made a provision in the year ended 30 April 2014 for the rent that will be payable until the expiry of the lease in September 2018.

 

Uninsured losses

The uninsured losses provision is in respect of the cost of claims (generally for commercial vehicles and employment related) which are either not insured externally or fall below the excess on the Group's insurance policies.

 

Dilapidations

Provisions are established over the life of leases to cover remedial work necessary at termination under the terms of those leases. Two key sites have leases that expire 20 and 11 years from the balance sheet date and a new office lease expires 15 years from the balance sheet date. All other leases expire in 10 years or less.

 

During the year the Company took assignment of a property lease with 8 years remaining and received compensation from the previous tenant, reflecting the agreed value of accrued dilapidation remedial works at the date of handover.

 

22. Share capital


2017
Company
£'000

2016
Company
£'000

Allotted, called up and fully paid:



100,022,968 (2016: 100,005,341) ordinary shares of 0.05p each

50

50

 

During the year the Company issued 17,627 ordinary shares at a price of 140.4p per share to satisfy share options. See note 23 below.

 

23. Share based payments

 

The Clipper Performance Share Plan ("PSP") was approved by shareholders on 29 September 2014. The PSP enables selected directors and employees of the Group to be granted awards in respect of ordinary shares. Share Awards under the PSP will ordinarily be structured as nil cost share options with the vesting of Share Awards being subject to performance conditions measured over a period of at least 3 years. A summary of the principal terms of the PSP, including vesting conditions, is contained in the Directors' Remuneration Report on pages 46 to 59 of the Company's 2017 Annual Report and Accounts (available to download from www.clippergroup.co.uk/report-accounts/).

 

The Clipper Sharesave Plan is a share plan for all UK employees in the Group, and offers them the opportunity to acquire an interest in shares in the Company on favourable terms within the long-standing regime allowed by HMRC legislation. All UK staff are invited to participate on the same terms, and employees who choose to participate are granted an option over shares in the Company, with the exercise of that option being funded by the proceeds of a savings contract taken out by the relevant employee, under which the employee saves a set amount each month over a set period. The options granted in the year were offered with a 3-year savings contract, under which the employee could elect to save between £5 and £500 per month.

 

Option movements and weighted average exercise prices ("WAEP") during the year were as follows:

Date

PSP
Number

WAEP

Sharesave Number 

WAEP

Outstanding 1 May 2015

845,895

nil

1,352,846

140.40p

Granted during the year

519,551

nil

299,609

239.34p

Forfeited during the year

-

-

(127,245)

148.70p

Exercised during the year

-

-

(5,341)

140.40p

Outstanding 30 April 2016

1,365,446

nil

1,519,869

159.21p

Granted during the year

379,848

nil

311,214

303.74p

Forfeited during the year

(151,155)

nil

(141,985)

169.53p

Exercised during the year

-

-

(17,627)

140.40p

Outstanding 30 April 2017

1,594,139

nil

1,671,471

185.44p

 

At 30 April 2017, options over 4,509 (2016: 6,671) of the above shares were exercisable.

 

The fair value of the share options is measured at the grant date, using the Black-Scholes model and taking into account the terms and conditions upon which the instruments were granted.

 

The key inputs to the model are:


2017

Share price at:        27 January 2017

380.00p

                               6 February 2017

374.88p

Expected life of option

3.5 years

Volatility

35%

Dividend yield

1.68-1.71%

 

The expected life of the options has been estimated as 6 months beyond vesting date. As there is little historical data the volatility has been estimated at 35% based on similar quoted companies. The dividend yield is calculated by applying dividends paid in the preceding 12 months to the share price at the grant date.

 

The cost of the options is recognised over the expected vesting period. The total charge for the year ended 30 April 2017 relating to employee share based payment plans was £832,000 (2016: £454,000). The fair value of share options at 30 April 2017 to be amortised in future years was £2,052,000 (2016: £1,958,000).

 

All share based payments in both years are equity settled.

 

24. Commitments and contingencies

Operating lease commitments - land and buildings:


2017
Group
£'000

2016
Group
£'000

Less than one year

19,191

14,981

Between one and five years

66,367

60,549

More than five years

77,567

83,541

Total minimum lease payments

163,125

159,071

 

Operating lease commitments - vehicles, plant and equipment:


2017
Group
£'000

2016
Group
£'000

Less than one year

5,844

4,697

Between one and five years

9,443

9,148

More than five years

11

99

Total minimum lease payments

15,298

13,944

 

25. Capital commitments


2017
Group
£'000

2016
Group
£'000

Authorised and contracted for

2,011

9,467

Authorised, but not contracted for

2,659

7,279

Total capital commitments

4,670

16,746

 

26. Financial instruments and financial risk management objectives and policies

In accordance with IAS 39 (Financial Instruments: Recognition and Measurement) the Group has reviewed all contracts for embedded derivatives that are required to be separately accounted for if they do not meet certain requirements. The Group did not identify any such derivatives.

 

The Group is exposed to a number of different market risks in the normal course of business including credit, interest rate and foreign currency risks.

 

Credit risk

Credit risk predominantly arises from trade receivables and cash and cash equivalents. The Group has a customer credit policy in place and the exposure to credit risk is monitored on an ongoing basis. External credit ratings are generally obtained for customers; Group policy is to assess the credit quality of each customer before accepting any terms of trade.

 

Internal procedures take into account customers' financial positions as well as their reputation within the industry and past payment experience. Cash and cash equivalents and derivative financial instruments are held with AAA or AA rated banks. Financial instruments classified as fair value through profit and loss and available for sale are all publicly traded on the UK London Stock Exchange. Given the high credit quality of counterparties with whom the Group has investments, the Directors do not expect any counterparty to fail to meet its obligations.

 

At 30 April 2017 there were no significant concentrations of credit risk (2016: £nil). The Group's maximum exposure to credit risk, gross of any collateral held, relating to its financial assets is equivalent to their carrying value. All financial assets have a fair value which is equal to their carrying value, as a consequence of their short maturity. The Group did not have any financial instruments that would mitigate the credit exposure arising from the financial assets designated at fair value through profit or loss in either the current or the preceding financial year.

 

Interest rate risk

The Group adopts a policy of ensuring that there is an appropriate mix of fixed and floating rates in managing its exposure to changes in interest rates on borrowings. Interest rate swaps are entered into, where necessary, to achieve this appropriate mix.

 

The interest rate swap taken on by the Company as part of the novation of bank facilities from the former parent on 2 May 2014, expired on 31 October 2016. 

 

Interest rate sensitivity

The Group's borrowings are largely denominated in Pounds Sterling and the Group is therefore exposed to a change in the relevant interest rate. With all other variables held constant, the impact of a reasonably possible increase in interest rates of 50 basis points (2016: 50 points) on that portion of borrowings affected, would be to reduce the Group's profit before tax by £93,000 (2016: £99,000).

 

Foreign currency risk

The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in currencies other than Pounds Sterling. The currencies giving rise to this risk are primarily the Euro and US dollar. The volume of transactions denominated in foreign currencies is not significant to the Group.

 

The exposure to a short-term fluctuation in exchange rates on the investment in foreign subsidiaries is not expected to have a material impact on the results of the Group.

 

Capital management

The Group's main objective when managing capital is to protect returns to shareholders by ensuring the Group will continue to trade profitably in the foreseeable future. The Group also aims to maximise its capital structure of debt and equity so as to minimise its cost of capital.

 

The Group manages its capital with regard to the risks inherent in the business and the sector within which it operates by monitoring its gearing ratio on a regular basis and adjusting the level of dividends paid to ordinary shareholders.

 

The Group considers its capital to include equity and net debt. Net debt includes short and long-term borrowings (including overdrafts and lease obligations) net of cash and cash equivalents.

 

The Group has not made any changes to its capital management during the year. The Group has no long-term gearing ratio target. Borrowings are taken out to invest in the acquisition of subsidiaries, new sites or depots and are considered as part of that investment appraisal. Key measures monitored by the Group are interest cover and net debt compared to earnings before interest, tax, depreciation and amortisation.

 

In order to achieve the overall objective, the Group's capital management, amongst other things, aims to ensure that it meets financial covenants attached to the borrowings. The Group has satisfied all such financial covenants in both years.


2017
Group
£'000

2016
Group
£'000

EBIT

17,928

14,718

Finance costs (net)

1,636

1,409

Interest cover

11.0

10.4

 


2017
Group
£'000

2016
Group
£'000

EBIT

17,928

14,718

Depreciation and impairment of property, plant and equipment

4,725

4,580

Amortisation and impairment of computer software

371

279

Earnings before interest, tax, depreciation and amortisation (EBITDA)

23,024

19,577

Net debt (note 20)

25,050

18,769

Net debt/EBITDA

1.09

0.96

 

Liquidity risk

Management closely monitors available bank and other credit facilities in comparison to the Group's outstanding commitments on a regular basis to ensure that the Group has sufficient funds to meet the obligations of the Group as they fall due. 

 

The Board receives regular cash forecasts which estimate the cash inflows and outflows over the next 24-36 months, so that management can ensure that sufficient financing can be arranged as it is required. The Group would normally expect that sufficient cash is generated in the operating cycle to meet the contractual cash flows as disclosed above through effective cash management.

 

Maturity of financial liabilities:


Due within one year
£'000

Due between one and two years
£'000

Due between two and five years
£'000

Total
£'000

30 April 2016





Fixed rate borrowings

2,980

2,457

5,279

10,716

Floating rate borrowings

3,573

674

4,982

9,229

Total borrowings

6,553

3,131

10,261

19,945

Trade and other payables

70,388

-

-

70,388

Total financial liabilities

76,941

3,131

10,261

90,333

30 April 2017





Fixed rate borrowings

6,598

6,013

13,496

26,107

Floating rate borrowings

791

695

134

1,620

Total borrowings

7,389

6,708

13,630

27,727

Trade and other payables

81,681

-

-

81,681

Total financial liabilities

89,070

6,708

13,630

109,408

 

Estimation of fair values

The main methods and assumptions used in estimating the fair values of financial instruments are as follows:

·    

derivatives: interest rate swaps are marked to market using listed market prices;

·    

interest-bearing loans and borrowings: fair value is calculated based on discounted expected future principal and interest cash flows; and

·    

trade and other receivables/payables: the notional amount for trade receivables/payables with a remaining life of less than one year are deemed to reflect their fair value.

 


2017
Book value
£'000

2017
Fair value
£'000

2016
Book value
£'000

2016
Fair value
£'000

Non-current financial assets

1,450

1,394

-

-






Current financial assets:





Cash and cash equivalents

862

862

715

715

Trade and other receivables

47,484

47,484

39,816

39,816

Liabilities:





Bank overdraft

-

-

(1,817)

(1,817)

Short-term borrowings

(7,389)

(7,389)

(4,736)

(4,736)

Trade and other payables

(84,824)

(84,824)

(72,183)

(72,183)

Derivative financial instruments

-

-

(10)

(10)

Long-term borrowings

(19,973)

(19,100)

(12,931)

(12,588)

 

Long-term borrowings are classified as Level 2 (items with significant observable inputs) financial liabilities under IFRS 13. Derivative financial instruments consist of interest rate swaps and are classified as Level 2 (items with significant observable inputs) financial liabilities under IFRS 13. There have been no transfers between Level 1 and Level 2 financial instruments during the year.

 

27. Related party disclosures

 

Clicklink Logistics Limited (see note 15) is a supplier of logistics services to the Group. The Group provides certain resources to Clicklink, principally people and vehicles, under the terms of the joint venture agreement. Amounts charged for these resources are included in revenue.

 

Knaresborough Investments Limited, a company controlled by Steve Parkin, receives management and administration services from the Group. 

 

Branton Court Stud LLP, in which Steve Parkin is a partner, receives management and administration services from the Group.

 

Roydhouse Properties Limited is the landlord of two of the Company's leasehold properties and is classed as a related party due to the company having common directors with Clipper Logistics plc.

 

Knaresborough Real Estate Limited, a company owned by Steve Parkin, is the landlord of one of the Group's leasehold properties. Rent payable under the current lease is at the same rate as that with the previous landlord.

 

Southerns Office Interiors Limited supplies office furniture to the Group and is a customer of the commercial vehicles segment. A company owned by Steve Parkin is registered as a person with significant control over Southerns Limited, the ultimate parent of Southerns Office Interiors Limited.

 

Guiseley Association Football Club shares a common director with Clipper Logistics plc. 

 

Harrogate Road Restaurants Limited shares a common director with Clipper Logistics plc.

 

The Group rents an aircraft from South Acre Aviation Limited, a company owned by Steve Parkin. Charges are on an arm's length basis.

 

Key management compensation is disclosed in note 5.

 

Balances owing to or from these related parties at 30 April were as follows:


2017
Group
£'000

2016
Group
£'000

Non-current financial assets:



Clicklink Logistics Limited - interest bearing loan

1,450

-

Trade and other receivables:



Clicklink Logistics Limited - trading balance

282

-

Knaresborough Investments Limited 

115

-

Branton Court Stud LLP

125

-

Trade and other payables:



Clicklink Logistics Limited

135

-

Southerns Office Interiors Limited

36

-

 

The shareholders in Clicklink Logistics Limited have jointly made available to that company a term loan facility of £3,900,000 of which the Company's 50% share is £1,950,000. The facility may be drawn in up to ten loans. Interest on each loan is calculated at a margin above 12 month LIBOR and is payable annually. All loans drawn under the facility are repayable in November 2019.

 

All other balances owing to or from related parties were settled by the end of June 2017.

 

Transactions with these related parties in the year ended 30 April were as follows:

 

 

2017
Group
£'000

2016
Group
£'000

Items credited to the income statement:



Clicklink Logistics Limited - revenue

4,701

-

Clicklink Logistics Limited - finance income

18

-

Knaresborough Investments Limited

150

275

Branton Court Stud LLP

125

-

Southerns Office Interiors Limited

7

-

Harrogate Road Restaurants Limited

2

-

Items charged to the income statement:



Clicklink Logistics Limited

410

-

Knaresborough Investments Limited

5

-

Roydhouse Properties Limited 

888

885

Knaresborough Real Estate Limited 

345

298

Southerns Office Interiors Limited 

47

-

Guiseley Association Football Club

25

50

South Acre Aviation Limited 

7

19

Purchase of non-current assets



Southerns Office Interiors Limited

136

-

Sale of non-current assets



Clicklink Logistics Limited - items previously capitalised by the Company

1,173

-

Clicklink Logistics Limited - items procured but not capitalised by the Company

3,681

-

 

28. Business combinations

 

Servicecare Support Services Limited

On 3 December 2014, the Group acquired 100% of the voting shares of Servicecare Support Services Limited, in exchange for cash consideration. In the year ended 30 April 2016, deferred consideration of £2,212,000 was paid.

 

29. Post balance sheet events

 

Acquisition of Tesam Distribution Limited

On 24 May 2017 the Company acquired the entire issued share capital of Tesam Distribution Limited ("Tesam"). Tesam is a provider of a variety of warehousing and distribution services to the retail sector. The business, which operates from three sites in and around Peterborough totalling more than 1.1m square feet, was established in 1984 and employs around 250 people.

 

In its financial year ended 30 June 2016, Tesam's audited accounts reported revenue of £19.6m, earnings before interest and tax of £1.8m and net assets of £3.1m.

 

The gross consideration paid was £11.75m. However the assets acquired include cash of approximately £3.4m and a freehold property which will be sold post-acquisition and is expected to realise £2.7m net. The net consideration was funded in cash from the Company's existing cash and bank facilities.

 

Exercise of options

On 5 June 2017 the Company's broker Numis Securities Limited ("Numis") exercised the share options ("Options") granted to it pursuant to an Option Deed dated 30 May 2014 which was entered into by the Company and Numis at IPO. Under the terms of the Option Deed, upon the exercise of the Options and the payment of the exercise price of £1 per share, 250,000 new ordinary shares of 0.05p each ("New Shares") were issued to Numis. The New Shares rank pari passu with all existing ordinary shares in issue.

 

Acquisition of RepairTech Limited

On 15 June 2017 the Company acquired the entire issued share capital of RepairTech Limited ("RepairTech"). RepairTech is a specialist provider of consumer electronic repair services based in Southam, Warwickshire.

 

RepairTech was established in 1999 by the current Managing Director, Richard Costello. It is consistently profitable, and reported underlying earnings before interest and tax of £0.6m on revenues of £3.2m in its unaudited financial statements to March 2017.

 

Consideration is £2.5m in cash, with a further £0.5m deferred for 12 months. Assets acquired with the business include net cash balances of approximately £0.3m. The consideration was funded in cash from the Company's existing cash and bank facilities.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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