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Clipper Logistics plc  -  CLG   

Preliminary Results

Released 07:00 30-Jul-2018

RNS Number : 0854W
Clipper Logistics plc
30 July 2018
 

 

FOR IMMEDIATE RELEASE

30 July 2018

Clipper Logistics plc

Preliminary Results for the year ended 30 April 2018

 

Clipper Logistics plc ("Clipper", the "Group", or the "Company"), a leading provider of value-added logistics solutions, e-fulfilment and returns management services to the retail sector, is pleased to announce its Preliminary Results for the year ended 30 April 2018.

Financial Highlights for the year ended 30 April 2018

·    

Group revenue increased by 17.6% from £340.1 million to £400.1 million.

·    

Group EBIT1 increased by 16.3% from £17.9 million to £20.9 million.

·    

Group profit for the financial year increased by 14.6% from £12.5 million to £14.3 million.

·    

Earnings per share increased by 13.6% to 14.2p (2017: 12.5p).

·    

Cash generated from operations was £24.5 million (2017: £25.7 million).

·    

Dividend per share increased by 16.7% to 8.4p (2017: 7.2p).

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.

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

Operational Highlights for the year ended 30 April 2018

·    

Commenced significant new contracts with high profile retailers including Edinburgh Woollen Mill, River Island, M&S and ASOS.

·    

Acquired RepairTech Limited in June 2017. This was immediately earnings-enhancing and successfully amalgamated with Servicecare to create a new Technical Services operation.

·    

Acquired Tesam Distribution Limited in May 2017. This was immediately earnings-enhancing and successfully integrated into UK logistics by the year end.

·    

Successfully opened our first facility in Poland where we have already secured three new contract wins.

·    

Significant growth in activity with many of our customers including Asda, Morrisons, Philip Morris, Wilko and s.Oliver.

·    

Commenced our first cross-border Technical Services operation, leveraging our existing UK relationship with Amazon to perform a similar operation for Amazon in Germany.

·    

Development of a Team Clipper cultural programme enabling staff to understand their contribution to the success of the business and designed to augment continuous improvement, communication and engagement.

·    

Launched our Fresh Start programme, working alongside a number of charity partners with the aim of providing work and career opportunities for those who may otherwise have challenges entering the job market.

·    

Our commercial vehicles business continues to perform strongly.

Post Year End Highlights

·    

Commenced a large e-fulfilment operation for boohoo.com subsidiary Pretty Little Thing.

·    

Committed to a new site at Crick, UK in order to handle the increased scope of Halfords operations. We have committed to an additional site in Poznan, Poland to house one of the three new contracts secured in the year ended 30 April 2018, with construction scheduled for completion in 2018.

Steve Parkin, Executive Chairman of Clipper commented:

"The Group is proud of its historical track record of delivering significant organic revenue growth and integrating strategic, value-additive acquisitions.  Our latest set of full year results show continued strong EBIT growth, growth achieved through remaining true to each of our core strategic principles: expanding the customer base, developing complementary services for customers, continuing to expand in Europe and identifying and seeking targeted, complementary acquisitions. We are excited by the new people initiatives we have launched in the year, including Team Clipper and Fresh Start, the former demonstrating our commitment to our people and the latter demonstrating our commitment to Corporate Social Responsibility. We are conscious of the wider forces affecting the UK retail sector; whilst this means that we have to bring an element of caution into our planning, recent contract wins, together with a strong pipeline of new business activity and the further evolution of our Click and Collect proposition, leave the Group well positioned to achieve further growth both in the UK and internationally."

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




Buchanan:

+44 (0) 20 7466 5000

David Rydell


Stephanie Watson


Chairman's Statement

As Chairman of Clipper Logistics plc, I am pleased to present our 2018 financial results following the fourth anniversary of our listing on the Main Market of the London Stock Exchange in June 2014.

 

The financial year ended 30 April 2018 has seen a continuation of our historic track record of achieving significant organic revenue growth, complemented by the addition of strategic, value-enhancing acquisitions.

The Group is focused on developing innovative, cost-effective solutions that address the needs of our blue-chip client base, predominantly in the retail sector. We continue to invest in quality people to implement sector-leading projects, and this, together with our ability to identify key trends and developments in the sectors we serve, means that we are confident in our ability to continue this momentum.

The Group has achieved another strong financial performance in the year under review, and has commenced significant new contracts with high profile retailers including Edinburgh Woollen Mill, River Island, M&S and ASOS, for whom we have introduced returns management services in Poland. In addition, we have seen significant growth in activity with many of our customers including Asda, Morrisons, Philip Morris, Wilko, Zara and s.Oliver. Further, our commercial vehicles business continues to perform strongly.

During the year, we announced the acquisition of Tesam Distribution Limited in May 2017, and the acquisition of RepairTech Limited in June 2017. Both of these acquisitions have been immediately earnings-enhancing. These acquisitions demonstrate our ability to identify complementary businesses that extend the breadth of both our customer base and our service offerings, and enhance returns to shareholders. I would like to welcome the colleagues and management of both businesses to the Group.

We will continue to identify key trends in the sectors we serve, and develop new services, processes and solutions that address the needs and challenges of our customers. Clipper's unique understanding of the dynamics of the retail sector, and in particular the e-commerce sector including returns management and click and collect, provides the Group with exceptionally strong strategic positioning for the future.

In the logistics sector, we have a high proportion of revenue from open book or minimum volume guarantee contracts, whilst in the commercial vehicles sector much of our profit and cash streams come from servicing and parts activities which are extremely stable. These contract mechanics provide a good degree of protection to the Group's earnings and cashflows.

Consequently, the Group is well positioned to continue to deliver strong returns to our shareholders, despite the challenges that some parts of the retail sector are experiencing.

We are mindful of the wider economic climate, and in particular of the headwinds facing our customers in the retail sector. We continue to monitor the situation closely and engage with our customers to find new ways to pro-actively assist them.

Group results

Group revenue increased by 17.6% to £400.1 million for the year ended 30 April 2018 (2017: £340.1 million), and Group EBIT increased by 16.3% to £20.9 million (2017: £17.9 million).

Diluted earnings per share were 14.1 pence for the year ended 30 April 2018 (2017: 12.3 pence), an increase of 14.6%.

Basic earnings per share were 14.2 pence (2017: 12.5 pence), an increase of 13.6%.

Net debt was £31.7 million at the year end (2017: £25.1 million), in line with our expectations. We continue to invest in capital projects to support both new contracts and growth of existing contracts, much of which involves a commitment from customers to reimburse this capital over the duration of the contract. Net debt is defined as borrowings, less cash, cash equivalents and non-current financial assets (see note 20).

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 proven track record of identifying key trends within the sectors we serve, and developing relevant cost-effective solutions that address those needs.

Further, we have a proven ability to identify strategic acquisitions that enhance Group performance and shareholder value.

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

Governance

The executive management team comprises Tony Mannix (Chief Executive Officer), David Hodkin (Chief Financial Officer) and myself, and the Group benefits from the combined experience of Ron Series (Senior Independent Director), Stephen Robertson and Mike Russell, our Non-Executive Independent Directors.

Paul Hampden Smith stood down from the role of Senior Independent Director on 12 July 2017.

Dividends

The Board is recommending a final dividend of 5.6 pence per share, making a total dividend in respect of the year ended 30 April 2018 of 8.4 pence (2017: 7.2 pence), an increase of 16.7%.

The proposed final dividend, if approved by shareholders, will be paid on 1 October 2018 to shareholders on the register at the close of business on 7 September 2018.

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. Recent contract wins, together with a strong pipeline of new business activity and the further evolution of our Click and Collect proposition, place the Group in an excellent position to achieve further growth both in the UK and internationally. Indeed, Clipper's approach of adopting a hands-on, long-term and pro-active relationship with its retail clients allows it to continue to grow during these changing retail market conditions.

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

Steve Parkin

Executive Chairman

Operating and Financial Review

Overview of Group performance for the year ended 30 April 2018

The Group continued to make good progress in the financial year ended 30 April 2018.

Group revenue

Group revenue increased by 17.6% to £400.1 million, with strong growth in all business areas:

Revenue

Unaudited Year ended
30 April
2018

£m

 

Year ended
30 April
2017

£m

 

% change

E-fulfilment & returns management services

159.4

129.9

+22.7%

Non e-fulfilment logistics

139.1

121.9

+14.1%

Total value-added logistics services

298.5

251.8

+18.6%

Commercial vehicles

103.6

91.5

+13.2%

Inter-segment sales

(2.0)

(3.2)

 

Group revenue

400.1

340.1

+17.6%

Percentages are calculated on the underlying numbers as presented in the preliminary results, not on the rounded figures in the table above.

 

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

·    

the full-year impact of operations commenced during the year ended 30 April 2017, including: British American Tobacco (for Vype), Halfords, Inditex, Links of London, Kidly, Pretty Green, Secret Sales, SilkFred, Smiffys, Thread 35 and Westwing; and significant changes to the services provided to John Lewis. These are partly offset by the full-year impact of the Hobbycraft and Ted Baker contracts, which ceased during the year ended 30 April 2017, and incremental operational costs resulting from growth and start-up on a small number of contracts which have since been renegotiated to give more favourable terms to Clipper going forwards;

·    

volume growth and extension of services on existing contracts, including Antler, ASOS returns, Asda, Bench, Browns, Haddad, Morrisons, Philip Morris, Wilko and Zara in the UK, and s.Oliver in Germany, in part driven by particularly strong organic growth in the e-fulfilment market due to the ongoing shift in retail trends towards online trading, whilst contract packing opportunities in the tobacco sector have declined;

·    

the part-year impact of operations commenced during the year ended 30 April 2018, including: Crosswater, Edinburgh Woollen Mill, M&S returns operations and River Island in the UK; ASOS returns in Poland; and Superdry and Urban Outfitters in the Clicklink joint venture. The impact of these activities will not be fully realised until the year ending 30 April 2019;

·    

significant growth in the current period from the acquisitions of Tesam and RepairTech, completed in May 2017 and June 2017 respectively; and

·    

a contribution from property related advisory services, an area that will continue to deliver returns as the Group leverages its growing property portfolio.

 

Revenue growth in commercial vehicles was driven by:

·    

a £12.5 million (22%) increase in new vehicle sales. The number of new units sold actually decreased by 11% year-on-year, but the average selling price for the vehicles increased by 37% due to the product mix of vehicles sold; and

·    

a slight (3%) decrease in aftersales revenues, comprising servicing, body shop and parts sales.

Group EBIT

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

EBIT

Unaudited

Year ended
30 April
2018

£m

Year ended
30 April
2017

£m

 

% change

E-fulfilment & returns management services

11.9

10.2

+16.0%

Non e-fulfilment logistics

14.8

12.4

+18.9%

Central logistics overheads

(5.7)

(4.8)

 

Total value-added logistics services

21.0

17.8

+17.6%

Commercial vehicles

2.5

2.3

+4.6%

Head office costs

(2.6)

(2.2)

 

Group EBIT

20.9

17.9

+16.3%

Percentages are calculated on the underlying numbers as presented in the Preliminary results, 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 further below.

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 16.3% to £20.9 million for the year ended 30 April 2018, primarily as a result of the revenue drivers mentioned above. EBIT grew in all business areas.

A more detailed discussion by operating segment is included later in this narrative.

Net interest charges

Net interest charges for the year ended 30 April 2018 increased by 20.8% to £2.0 million (2017: £1.6 million), the increase being attributable to the increased average net debt following the two acquisitions earlier in the year.

PBTA

PBTA is defined as profit before income tax, before amortisation of intangible assets arising on consolidation. Whilst not considered a KPI by management, this measure is used by market analysts. PBTA was £19.1 million for the year ended 30 April 2018, an increase of 17.4% (2017: £16.2 million).

Taxation

The effective rate of taxation of 20.5% (2017: 22.3%) is higher than the average standard UK rate of corporation tax applicable in the year of 19.0% (2017: 19.9%) principally due to certain expenditure incurred which is disallowable for tax purposes and the higher effective rate of tax to which the German and Polish businesses are subject.

Profit after tax

The profit after tax for the year ended 30 April 2018 was £14.3 million (2017: £12.5 million), an increase of 14.6%.

Earnings per share

Earnings per share were 14.2 pence for the year ended 30 April 2018 (2017: 12.5 pence). Adjusted to remove amortisation of intangible assets arising on consolidation, earnings per share were 15.2 pence (2017: 12.6 pence).

Current trading and outlook

In the year ending 30 April 2019, we expect:

·    

revenue to benefit from the full-year effects of:


·    

the two acquisitions completed in the year ended 30 April 2018; and


·    

the contracts brought on line in the year ended 30 April 2018. As noted previously, the Group secured a number of significant contract wins in the year ended 30 April 2018.

·    

to deliver EBIT growth from operations which have either recently commenced, including those with Pretty Little Thing out of our new facility in Sheffield, UK, or those Technical Services activities which have recently commenced in Kempen, Germany, or other known new activities which are at various other stages of planning (including additional volume with Zara) and a new contract with Westwing, which extends significantly the services we are providing for them, although this will not commence until late in calendar year 2018. The annualised impact of these activities will not be fully delivered until the year ending 30 April 2020;

·    

growth with existing customers, either organically - particularly with those in e-commerce - or through new service lines for those customers;

·    

growth from conversion of some of the opportunities on our new business pipeline. There is a strong new business pipeline in the Group. These opportunities will be converted through a focus on retail specialisms and provision of cost-effective, value-added solutions. Some of these new business activities will not reach full-year run-rate until the year ending 30 April 2020 and beyond; and

·    

further revenues and EBIT to be generated from property advisory services.

The organisational structure of the Group has recently been revised, allowing the Group 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 have been 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 ending 30 April 2019.

The Board is confident of continued progress in the year ending 30 April 2019. It notes weaker economic conditions, particularly in certain parts of the retail sector where there are widely reported headwinds.  However, the Group expects to achieve another year of positive momentum with overall growth in revenues and earnings.

Operating segment and business activity overview

Logistics

E-fulfilment & returns management services

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. This business activity also includes:

·    

the contribution from Click and Collect activities;

·    

RepairTech, acquired on 15 June 2017. RepairTech is now fully integrated into the Group and has been amalgamated with Servicecare into the Technical Services division, managed by one management team;

·    

the returns aspects of Tesam, acquired on 24 May 2017; and

·    

our recently commenced Polish operations for Westwing (e-fulfilment) and ASOS (returns).

Clipper's ability and agility, particularly in respect of omni-channel, multi-channel, returns management, Click and Collect and mechanisation already mentioned in this preliminary statement, have enabled the Group to significantly grow revenues and earnings, and to once again outperform market growth (the UK e-commerce market grew by 12% in the calendar year 2017).

Revenues from e-fulfilment & returns management services increased by 22.7% from £129.9 million for the year ended 30 April 2017 to £159.4 million for the year ended 30 April 2018, with EBIT growing by 16.0% from £10.2 million to £11.9 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 e-fulfilment, and to be a thought leader in the provision of value-added services across the sector.

The financial growth in the year ended 30 April 2018 in e-fulfilment & returns management services has been achieved across many service lines and with many customers, for a number of reasons:

·    

operations commenced for new customers in the year ended 30 April 2017 reaching full-year maturity: British American Tobacco (for Vype), Inditex, Kidly, Secret Sales, SilkFred, Smiffys, Thread 35 and Westwing;

·    

the full-year impact of new operations started in the year ended 30 April 2017 for existing customers, including those ancillary distribution activities we started for John Lewis in Northampton, UK;

·    

organic growth with existing customers, including ASOS, Asda, Browns, Morrisons (Nutmeg), s.Oliver, Wilko and Zara, as we and our customers benefit from the continued market growth in the e-commerce sector;

·    

newly commenced activities in 2018, including an additional ASOS returns facility in Poland, M&S returns, River Island, Superdry and Urban Outfitters. These recently commenced operations are anticipated to reach full run-rate in the year ending 30 April 2019; and

·    

those stepped increases in e-fulfilment and returns revenues as a result of the Tesam and RepairTech acquisitions.

Since the year end, a new operation has commenced with Pretty Little Thing, albeit slightly later than expected, another is due to commence with Westwing shortly and Zara has announced its intention to transfer a significant additional activity into Clipper.

Non e-fulfilment logistics

Non e-fulfilment logistics operations include receipt of inbound product, warehousing, picking, packing and distribution of products on behalf of customers in traditional bricks and mortar retail. 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 as well as property-related advisory services linked to optimising the Group's warehousing arrangements. Non e-fulfilment aspects of the Tesam operation are consolidated into the non e-fulfilment business activity from the date of acquisition, 24 May 2017. The integration of Tesam into Clipper has now been completed and it is now managed in exactly the same way as any other site within the logistics division.

Revenue from non e-fulfilment operations grew by 14.1% for the year ended 30 April 2018, from £121.9 million to £139.1 million, with EBIT increasing by 18.9%, from £12.4 million to £14.8 million. This growth has been achieved as result of:

·    

the full-year effect of the activities commenced in the prior year with Halfords, Links of London, Pretty Green and John Lewis;

·    

organic volume growth and extensions to service offerings with existing customers, including Antler, Asda, Haddad, Morrisons and Philip Morris;

·    

part-year contributions from new activities commenced in the current year, including Crosswater and Edinburgh Woollen Mill. These activities will contribute a full year of performance to the year ending 30 April 2019;

·    

disposals of property, plant and equipment;

·    

those part-year contributions from non e-fulfilment activities at Tesam; and

·    

a significant contribution to revenue and EBIT from property related advisory services, an area that will continue to deliver returns as the Group leverages its growing property portfolio.

The growth has been partly offset by:

·    

the full-year impact of the Hobbycraft and Ted Baker contracts which ceased in the prior year;

·    

organic decline in tobacco contract packing revenues; and

·    

incremental operational costs resulting from growth and start-up on a small number of contracts which have since been renegotiated to give more favourable terms to Clipper going forwards.

Already in the year ending 30 April 2019, we have secured an extension to our contract with Halfords in terms of both contract length and the scope of activities. We shall be performing these new activities from a newly-leased warehouse facility in Crick, UK.

Central logistics overheads

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.

Central logistics overheads grew by £0.9 million (17.7%), from £4.8 million in the year ended 30 April 2017 to £5.7 million in the year ended 30 April 2018.

We have directed additional strategic investment to the logistics overheads base in the year ended 30 April 2018, particularly in solutions delivery. Also, the central logistics overheads have risen in the year due to increased share based payment charges (see below). In the prior year the reporting structure within the central logistics management team was strengthened, preparing the business for future growth, and so there is a full-year impact of this cost in the current year; organisational improvements have continued in the current year with the streamlining of the Technical Services division and the restructuring of the Business Solutions team. Whilst some 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, and we expect those stepped increases in share based payment charges experienced in recent years to slow as a result of these costs having now reached full run-rate (see further below).

Commercial vehicles

The commercial vehicles business, Northern Commercials (Mirfield) Limited, operates Iveco and Fiat commercial vehicle dealerships 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.

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.

Key customers of Northern Commercials include Access Hire Nationwide, Allied Bakeries, 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.

·    

The MOT pass rate at Northern Commercials' dedicated Test station in Brighouse is 99.4% (target: 98.0%).

·    

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

The commercial vehicles business delivered EBIT of £2.5 million in the year ended 30 April 2018 (2017: £2.3 million), an increase of 4.6% on the previous year.

The business sold 1,786 new vehicles in the year ended 30 April 2018, 226 fewer than in the prior year (2017: 2,012), and 358 used vehicles (2017: 393), 35 fewer than in the prior year. However, due to a change in mix of vehicles sold, there was a 37% increase in the average selling price of new vehicles in the year ended 30 April 2018, being £38,799 compared with £28,225 in the prior year. Likewise, the average selling price of a used vehicle was £11,497 compared with £10,794 in the prior year, an increase of 7%. Servicing saw a 2% increase in revenue from the year ended 30 April 2017 to the year ended 30 April 2018, bodyshop revenues were down 3% and parts revenues were down 6%.

Head office costs

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, together with the costs of the new Group office at Central Square, Leeds.

Head office costs grew by £0.3 million (14.4%), from £2.2 million in the year ended 30 April 2017 to £2.6 million in the year ended 30 April 2018. The year-on-year increase in head office costs is attributable to three main factors: the overhead of the new Central Square office, share based payment charges (see below) and the costs associated with the acquisition of the two new subsidiaries.

Share based payment charges

Share based payment charges totalling £1.2 million (2017: £0.8 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). 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 2018 share based payment charges include:

·    

nine months of charges in respect of options granted in the year ended 30 April 2015;

·    

a full year of charges in respect of options granted in the years ended 30 April 2016 and 2017; and

·    

three months of charges in respect of options granted in the year ended 30 April 2018.

The prior year share based payment charge was not at full run-rate as it only effectively included 27 months of charges, being:

·    

a full year of charges in respect of options granted in the years ended 30 April 2015 and 2016; and

·    

three months of charges in respect of options granted in the year ended 30 April 2017, and the charge benefited from a release of accruals made in prior years in respect of certain leavers from the PSP pool.

Balance sheet and cash flow

Capital expenditure and fixed assets

Of total tangible and intangible fixed asset additions of £13.0 million (2017: £20.2 million), £12.3 million (2017: £19.4 million) related to the logistics services segment, and £0.7 million (2017: £0.9 million) related to the commercial vehicles segment. Approximately £7.7 million of the additions were purchased in cash and £5.3 million through finance leases. Notable asset purchases in the year ended 30 April 2018 included new mezzanine floors at Ollerton and Northampton, site set up costs in Poland, the fit out of the new Central Square office and investments in the accounting and multi-user warehouse management systems. A large proportion of expenditure in the year ended 30 April 2017 was incurred at the Northampton shared-use facility.

In the year ended 30 April 2018, we disposed of assets with a net book value of £4.5 million, on which we generated a profit on disposal of £2.2 million. Substantially all of the £4.5 million net book value related to the disposal of a freehold property which the Group had acquired earlier in the period as part of the purchase of Tesam. In the prior year, £1.2 million of the £2.3 million proceeds from sale of non-current assets related to sales from Clipper to Clicklink on formation of the joint venture entity.

Clipper's outstanding capital expenditure commitment at 30 April 2018 was £17.9 million, significantly increased from the equivalent figure of the prior year (2017: £4.7 million), reflecting the continued growth in new and existing customer contracts.

Cash flow

Cash generated from operations was £24.5 million (2017: £25.7 million).

The business continues to be highly cash generative. Under the UK logistics business model, 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 invested in working capital in the year ended 30 April 2018 was £3.2 million (2017: net cash generated from working capital of £2.0 million).

There are a number of cash flows disclosed outside of cash flow from operations which occur regularly, although the magnitude of these can change significantly year-on-year. These cash flows include dividends, drawdown and repayment of bank loans, sales and purchase of fixed assets (including repayments on assets purchased under finance leases), corporation tax payments and interest payments. Taking each of these in turn:

·    

Dividends paid in the year ended 30 April 2018 amounted to £7.6 million, an increase of 19.1% on the prior year (2017: £6.4 million), and in line with our stated dividend policy.

·    

Cash flows arising from the drawdown and repayments of bank loans were an £8.2 million inflow in the year ended 30 April 2018 (2017: £6.0 million outflow), the drawdown being used to fund the acquisitions of Tesam and RepairTech (see below).

·    

Cash purchases of fixed assets amounted to £7.7 million in the year ended 30 April 2018 (2017: £4.6 million), with a further £7.4 million cash used to repay finance leases (2017: £5.7 million). Sales of fixed assets generated £6.7 million in the year ended 30 April 2018 (2017: £2.3 million), as we realised cash on the sale of freehold property, as detailed above.

·    

Corporation tax of £4.0 million was paid in the year ended 30 April 2018 (2017: £3.2 million), the increase being driven by the overall increased profitability of the Group.

·    

Interest paid increased by £0.3 million to £1.9 million in the year ended 30 April 2018 (2017: £1.6 million), primarily due to increased borrowing levels following the two acquisitions in the year.

Whilst the timing and magnitude of dividends, tax payments and interest payments can be predicted with relative certainty, the timing of drawdowns on bank loans and fixed asset-related cash flows is much more dependent on specific one-off projects, and so can quite easily fall into one financial period or the next.

Overall cash flow for the year ended 30 April 2018 was also impacted by three significant non-ordinary course cash flows: firstly, there was the acquisition of Tesam for a cash consideration of £9.6 million (net of cash acquired); secondly, there was the acquisition of RepairTech for a cash consideration of £2.2 million (net of cash acquired); and thirdly, there was the raising of £1.6 million of cash from share issues in the year ended 30 April 2018:

·    

Having passed our three year anniversary of listing on the London Stock Exchange ("Listing") in the year ended 30 April 2018, the first of our Sharesave share schemes vested (these vest over a three year period). As a result, there were 981,217 shares issued in the year to employees, generating £1.4 million.

·    

A further £0.25 million was generated when Numis Securities Limited, Clipper's corporate broker, exercised share options issued to it on Listing.

Significant one-off cash flows which arose in the prior year (ended 30 April 2017) but which did not recur in the year ended 30 April 2018 included £1.95 million subscribed for share capital on the formation of the Clicklink joint venture and a £1.45 million loan advanced to Clicklink on its formation. The loan was increased by £0.5 million in the year ended 30 April 2018 to support the working capital growth requirements of Clicklink. This loan is disclosed as a non-current financial asset (see note 27).

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 £31.7 million of net debt outstanding at 30 April 2018 (2017: £25.1 million) (see note 20), an increase of £6.6 million, in line with the Board's expectations. The increase in net debt was driven primarily by the acquisitions of Tesam and RepairTech which together required £11.8 million (net of cash acquired), although this was partly offset by £6.7 million of proceeds from the sale of fixed assets.

It is also worth noting that 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 this over the term of the contract, together with finance charges and a management fee. At 30 April 2018, Clipper has £22.4 million of capital contracted to be recovered from open book customers over the remaining term of the customer contracts.

David Hodkin

Chief Financial Officer

 

Director's Statement on the Basis of Preparation - Preliminary Announcement

Whilst the financial information included in this preliminary statement has been prepared on the basis of the requirements of IFRSs in issue, as adopted by the European Union and effective at 30 April 2018, 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 2018 have been extracted from the Group's draft Financial Statements for the year then ended.

The financial information contained within the preliminary announcement for the year ended 30 April 2018 was approved by the Board on 29 July 2018 and has been agreed with the Company's auditor for release.

 

Group Income Statement

For the year ended 30 April

 

Note

Unaudited

2018
Group
£'000

2017
Group
£'000

Revenue

3

400,115

340,127

Cost of sales

 

(283,324)

(241,097)

Gross profit

 

116,791

99,030

Other net gains

6

2,398

405

Administration and other expenses

 

(98,358)

(81,964)

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

4

20,831

17,471

Share of equity-accounted investees, net of tax

 

(889)

217

Operating profit

6

19,942

17,688

EBIT

 

20,854

17,928

Less: amortisation of other intangible assets

4

(1,094)

(177)

share of tax and finance costs of equity-accounted investees

4

182

(63)

Operating profit

6

19,942

17,688

Finance costs

8

(2,014)

(1,657)

Finance income

9

38

21

Profit before income tax

 

17,966

16,052

Income tax expense

10

(3,685)

(3,586)

Profit for the financial year

 

14,281

12,466

Basic earnings per share

11

14.2p

12.5p

Diluted earnings per share

11

14.1p

12.3p

Group Statement of Comprehensive Income

For the year ended 30 April

 

Note

Unaudited

2018
Group
£'000

2017
Group
£'000

Profit for the financial year

 

14,281

12,466

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

 

(106)

(57)

Total comprehensive income for the financial year

 

14,175

12,409

Group Statement of Financial Position

At 30 April

 

Note

Unaudited

2018
Group
£'000

2017
Group
£'000

Assets:

 

 

 

Non-current assets

 

 

 

Goodwill

12

25,951

23,252

Other intangible assets

12

11,267

1,498

Intangible assets

12

37,218

24,750

Property, plant and equipment

14

44,998

38,899

Interest in equity-accounted investees

15

1,278

2,167

Non-current financial assets

27

1,950

1,450

Deferred tax assets

10

-

353

Total non-current assets

 

85,444

67,619

Current assets

 

 

 

Inventories

16

22,099

29,972

Trade and other receivables

17

73,430

47,728

Cash and cash equivalents

18

2,275

862

Total current assets

 

97,804

78,562

Total assets

 

183,248

146,181

Equity and liabilities:

 

 

 

Current liabilities

 

 

 

Trade and other payables

19

102,402

85,068

Financial liabilities: borrowings

20

9,219

7,389

Short-term provisions

21

78

127

Current income tax liabilities

 

2,540

2,187

Total current liabilities

 

114,239

94,771

Non-current liabilities

 

 

 

Financial liabilities: borrowings

20

26,664

19,973

Long-term provisions

21

1,486

1,367

Deferred tax liabilities

10

1,541

-

Total non-current liabilities

 

29,691

21,340

Total liabilities

 

143,930

116,111

Equity shareholders' funds

 

 

 

Share capital

22

51

50

Share premium

 

1,710

80

Currency translation reserve

 

(139)

(33)

Other reserve

 

84

84

Merger reserve

 

6,006

6,006

Share based payment reserve

 

2,745

2,038

Retained earnings

 

28,861

21,845

Total equity attributable to the owners of the Company

 

39,318

30,070

Total equity and liabilities

 

183,248

146,181

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 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

Profit for the year

-

-

-

-

-

Other comprehensive income/(expense)

-

-

(106)

-

(106)

Equity settled transactions

-

-

-

-

-

Share issue

1

1,630

-

-

1,631

Dividends

-

-

-

-

-

Balance at 30 April 2018 (unaudited)

51

1,710

(139)

84

1,706

 

 

Brought forward

Group

£'000

 Merger reserve

Group

£'000

Share based payment reserve

Group

£'000

Retained earnings Group

£'000

 Carried forward

Group

 £'000

Balance at 1 May 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

Profit for the year

-

-

-

14,281

14,281

Other comprehensive income/(expense)

(106)

-

-

-

(106)

Equity settled transactions

-

-

707

357

1,064

Share issue

1,631

-

-

-

1,631

Dividends

-

-

-

(7,622)

(7,622)

Balance at 30 April 2018 (unaudited)

1,706

6,006

2,745

28,861

39,318

.

Group Statement of Cash Flows

For the year ended 30 April

 

Note

Unaudited

2018

Group

£'000

2017

Group

£'000

Profit before tax from operating activities

 

17,966

16,052

Adjustments to reconcile profit before tax to net cash flows:

 

 

 

- Depreciation and impairment of property, plant and equipment

6

6,394

4,725

- Amortisation and impairment of intangible assets

6

1,621

548

- Gain on disposal of property, plant and equipment

6

(2,203)

(260)

- Share of equity-accounted investees, net of tax

15

889

(217)

- Consideration received

21

-

557

- Exchange differences

 

(198)

(238)

- Finance costs

8 & 9

1,976

1,636

- Movement in derivative financial instruments

6

-

(10)

- Share based payments charge

23

1,219

832

Working capital adjustments:

 

 

 

- (Increase) in trade and other receivables and prepayments

 

(23,785)

(7,895)

- Decrease/(increase) in inventories

 

8,816

(3,049)

- Increase in trade and other payables

 

11,801

12,989

Operating activities:

 

 

 

- Cash generated from operations

 

24,496

25,670

- Interest received

 

38

3

- Interest paid

 

(1,932)

(1,606)

- Income tax paid

 

(3,968)

(3,234)

Net cash flows from operating activities

 

18,634

20,833

Investing activities:

 

 

 

- Purchase of property, plant and equipment

 

(6,849)

(4,028)

- Proceeds from sale of property, plant and equipment

 

6,658

2,112

- Purchase of intangible assets

 

(844)

(551)

- Proceeds from sale of intangible assets

 

3

167

- Investment in joint venture

15

-

(1,950)

- Acquisition of subsidiary undertakings net of cash acquired

28

(11,773)

-

Net cash flows from investing activities

 

(12,805)

(4,250)

Financing activities:

 

 

 

- Drawdown of bank loans

 

9,017

-

- Debt issue costs paid

 

(101)

-

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

 

-

4,879

- Shares issued

22

1,631

24

- Dividends paid

7

(7,622)

(6,400)

- Non-current financial assets advanced

27

(500)

(1,450)

- Repayment of bank loans

 

(812)

(5,995)

- Repayment of capital on finance leases

 

(7,366)

(5,677)

Net cash flows from financing activities

 

(5,753)

(14,619)

Net increase in cash and cash equivalents

 

76

1,964

Net cash and cash equivalents at start of year

 

862

(1,102)

Net cash and cash equivalents at end of year

18

938

862

Notes to the UNAUDITED PRELIMINARY RESULTS

1.    General information

The results comprise those of Clipper Logistics plc and its subsidiaries for the year ended 30 April 2018 and does not constitute the Group's statutory accounts for the years ended 30 April 2018 or 2017,

The financial information set out above does not constitute the company's statutory accounts for the years ended 30 April 2018 or 2017.  The financial information for 2017 is derived from statutory accounts for the year ended 30 April 2017 which have been delivered to the registrar of companies.  The auditor has reported on the 2017 accounts: their report was (i) unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their audit report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The statutory accounts for the year ended 30 April 2018, will be finalised on the basis of the financial information presented by the Directors in this unaudited preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

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, 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 2017.

In the current year, amendments to IAS7 and 12 and those arising from the annual improvements to IFRSs 2014-2016 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:

 

Unaudited

2018

Group

£'000

2017

Group

£'000

E-fulfilment & returns management services

159,350

129,854

Non e-fulfilment logistics

139,144

121,930

Value-added logistics services

298,494

251,784

Commercial vehicles

103,598

91,515

Inter-segment sales

(1,977)

(3,172)

Revenue from external customers

400,115

340,127

Non e-fulfilment logistics revenue includes £4,200,000 (2017: £nil) in respect of property-related advisory services.

Geographical information - revenue from external customers:

 

Unaudited

2018

Group

£'000

2017

Group

£'000

United Kingdom

351,409

302,730

Germany

21,059

16,103

Rest of Europe

27,647

21,294

Revenue from external customers

400,115

340,127

Geography is determined by the location of the end customer. In the year ended 30 April 2018 the Group had no customers that accounted for greater than 10% of the total Group revenue (2017: one).

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

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Revenue from largest single customer

Not applicable

35,179

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.

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 2018:

Earnings before interest & tax ("EBIT"):

 

Unaudited

2018

Group

£'000

2017

Group

£'000

E-fulfilment & returns management services

11,874

10,232

Non e-fulfilment logistics

14,786

12,431

Central logistics overheads

(5,688)

(4,832)

Value-added logistics services

20,972

17,831

Commercial vehicles

2,450

2,342

Head office costs

(2,568)

(2,245)

Group EBIT

20,854

17,928

Amortisation of other intangible assets:

 

Unaudited

2018

Group

£'000

2017

Group

£'000

E-fulfilment & returns management services

(462)

(156)

Non e-fulfilment logistics

(632)

(21)

Central logistics overheads

-

-

Value-added logistics services

(1,094)

(177)

Commercial vehicles

-

-

Head office costs

-

-

Group total

(1,094)

(177)

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

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Net finance costs

(35)

(9)

Income tax credit/(expense)

217

(54)

Group total

182

(63)

Operating profit and profit before income tax:

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Operating profit:

 

 

E-fulfilment & returns management services

12,483

9,796

Non e-fulfilment logistics

14,154

12,410

Central logistics overheads

(5,688)

(4,832)

Value-added logistics services

20,949

17,374

Commercial vehicles

2,450

2,342

Head office costs

(2,568)

(2,245)

Operating profit before share of equity-accounted investees

20,831

17,471

Share of equity-accounted investees, net of tax

(889)

217

Operating profit

19,942

17,688

Finance costs

(2,014)

(1,657)

Finance income

38

21

Profit before income tax

17,966

16,052

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

At 30 April 2018 (unaudited):

Segment assets

£'000

Segment liabilities

£'000

Value-added logistics services

142,765

(69,601)

Commercial vehicles

38,208

(34,365)

Segment assets/(liabilities)

180,973

(103,966)

Unallocated assets/(liabilities):

 

 

- Cash and cash equivalents

2,275

-

- Financial liabilities

-

(35,883)

- Deferred tax

-

(1,541)

- Income tax assets/(liabilities)

-

(2,540)

Total assets/(liabilities)

183,248

(143,930)

 

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)

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

Capital expenditure:

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Value-added logistics services

12,313

19,386

Commercial vehicles

725

851

Total

13,038

20,237

Capital expenditure comprises additions to property, plant and equipment (note 14) and intangible assets (note 12).

Depreciation:

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Value-added logistics services

5,701

4,012

Commercial vehicles

693

713

Total

6,394

4,725

Amortisation:

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Value-added logistics services

1,616

539

Commercial vehicles

5

9

Total

1,621

548

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

 

Unaudited

2018
Group
£'000

2017
Group
£'000

United Kingdom

80,789

62,409

Germany

4,103

4,617

Rest of Europe

552

240

Deferred taxation assets

-

353

Total

85,444

67,619

5.    Staff costs

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Wages and salaries

102,032

84,462

Social security costs

9,853

7,791

Pension costs for the defined contribution scheme

1,768

1,474

Share based payments

1,219

832

Total

114,872

94,559

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

 

Unaudited

2018
Group
Number

2017
Group
Number

Warehousing

3,056

2,402

Distribution

468

416

Service and maintenance

447

396

Administration

560

526

Total

4,531

3,740

Key management compensation (including Executive Directors):

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Wages and salaries

2,873

2,680

Social security costs

396

370

Pension costs for the defined contribution scheme

328

336

Share based payments

1,026

793

Total

4,623

4,179

Directors' emoluments:

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Aggregate emoluments excluding share based payments on unvested awards

1,214

1,309

Aggregate gains made by Directors on the exercise of options

72

-

Pension costs for the defined contribution scheme

21

48

Total

1,307

1,357

The number of Directors who were accruing benefits under a Group pension scheme is as follows:

 

Unaudited

2018
Group
Number

2017
Group
Number

Defined contribution plans

2

3

6. Operating profit

This is stated after charging:

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Depreciation of property, plant and equipment - owned assets

2,976

2,023

Depreciation of property, plant and equipment - leased assets

3,418

2,702

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

1,621

548

Total depreciation and amortisation expense

8,015

5,273

Operating lease rentals:

- Vehicles, plant and equipment

10,338

8,876

- Land and buildings

20,940

18,069

Auditor's remuneration:

- Audit of the Group Financial Statements

69

60

- Audit of the subsidiaries

99

82

- Non-audit fees

-

-

Total fees paid to the Group's auditor

168

142

Operating profit is stated after crediting:

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Other net gains:

 

 

- Profit on sale of property, plant and equipment

2,203

260

- Dealership contributions

136

135

- Fair value adjustment to derivative financial instruments

-

10

- Rental income

59

-

Total net gains

2,398

405

7. Dividends

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Final dividend for the prior year of 4.8 pence (2017: 4.0 pence) per share

4,814

4,000

Interim dividend for the year of 2.8 pence (2017: 2.4 pence) per share

2,808

2,400

Total dividends paid

7,622

6,400

Proposed final dividend for the year ended 30 April 2018 of 5.6 pence (2017: 4.8 pence)
per share

5,681

4,813

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 preliminary results. The proposed dividend is payable to all shareholders on the Register of Members on 7 September 2018. The payment of this dividend will not have any tax consequences for the Group.

8. Finance costs

 

Unaudited

2018
Group
£'000

2017
Group
£'000

On bank loans and overdrafts

547

438

On hire purchase agreements

926

766

Amortisation of debt issue costs

114

97

Commercial vehicle stocking interest

339

299

Invoice discounting

62

-

Other interest payable

26

57

Total interest expense for financial liabilities measured at amortised cost

2,014

1,657

9. Finance income

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Bank interest

2

-

Other interest

1

3

Amounts receivable from related parties

35

18

Total interest income for financial assets measured at amortised cost

38

21

10. Income tax expense

10.1 Tax charged in the income statement:

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Current income tax:

 

 

UK and foreign corporation tax

4,249

3,620

Amounts (over)/under provided in previous years

(230)

90

Total income tax on continuing operations

4,019

3,710

Deferred tax:

 

 

Origination and reversal of temporary differences

(355)

(144)

Amounts (over)/under provided in previous years

(2)

48

Impact of change in tax laws and rates

23

(28)

Total deferred tax

(334)

(124)

Tax expense in the income statement on continuing operations

3,685

3,586

10.2 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.

10.3 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:

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Profit before taxation from continuing operations

17,966

16,052

Standard rate of corporation tax in UK

19.00%

19.92%

Tax on profit on ordinary activities at standard rate

3,414

3,198

 

 

 

Share of equity-accounted investees, already net of tax

169

(43)

Expenses not allowable for tax purposes

194

212

Tax (over)/under provided in previous years

(232)

138

Difference in tax rates overseas

117

109

Deferred tax rate difference

23

(28)

Total tax expense reported in the income statement

3,685

3,586

10.4 Deferred tax in the statement of financial position:

 

Brought

forward

£'000

(Charged)/credited to income statement

£'000

Foreign currency adjustment

£'000

(Charged)/credited to share based payment reserve

£'000

Acquisitions

£'000

 Carried forward

Group

 £'000

Year ended 30 April 2017

 

 

 

 

 

 

Tax effect of temporary differences
due to:

 

 

 

 

 

 

Share based payments

309

135

-

429

-

873

Other timing differences

58

136

2

-

-

196

Deferred tax assets (gross)

367

271

2

429

-

1,069

Intangible assets

(178)

28

-

-

-

(150)

Accelerated capital allowances

(356)

(156)

-

-

-

(512)

Other timing differences

(35)

(19)

-

-

-

(54)

Deferred tax liabilities (gross)

(569)

(147)

-

-

-

(716)

Net deferred tax

(202)

124

2

429

-

353

 

Year ended 30 April 2018 (unaudited)

 

 

 

 

 

 

Tax effect of temporary differences due to:

 

 

 

 

 

 

Share based payments

873

(137)

-

(155)

-

581

Other timing differences

196

131

4

-

70

401

Deferred tax assets (gross)

1,069

(6)

4

(155)

70

982

Intangible assets

(150)

231

-

-

(1,818)

(1,737)

Accelerated capital allowances

(512)

102

-

-

(329)

(739)

Other timing differences

(54)

7

-

-

-

(47)

Deferred tax liabilities (gross)

(716)

340

-

-

(2,147)

(2,523)

Net deferred tax

353

334

4

(155)

(2,077)

(1,541)

The UK corporation tax rate reduced from 20% to 19% with effect from 1 April 2017 and will reduce further to 17% with effect from 1 April 2020. A rate of 17% (2017: 17%) has been applied in the measurement of the Group's UK deferred tax assets and liabilities in the year.

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:

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Profit attributable to ordinary equity holders of the Company

14,281

12,466

 

 

 

 

Unaudited

2018
Group

2017
Group

Basic weighted average number of shares (thousands)

100,338

100,011

Basic earnings per share

14.2p

12.5p

Diluted weighted average number of shares (thousands)

101,358

101,710

Diluted earnings per share

14.1p

12.3p

12. Intangible assets

 

Goodwill
Group
£'000

Contracts,

customer

relationships
and licences
Group
£'000

Computer software
Group
£'000

Total
Group
£'000

Cost:

 

 

 

 

At 1 May 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

Additions

-

-

1,060

1,060

Disposals

-

-

(3)

(3)

Acquisitions

2,699

9,580

740

13,019

Foreign currency adjustment

-

5

21

26

At 30 April 2018 (unaudited)

25,951

11,623

4,089

41,663

 

 

 

 

 

Accumulated amortisation:

 

 

 

 

At 1 May 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

Charge for the year

-

1,094

527

1,621

Disposals

-

-

-

-

Foreign currency adjustment

-

5

8

13

At 30 April 2018 (unaudited)

-

2,252

2,193

4,445

 

 

 

 

 

Net book value:

 

 

 

 

At 1 May 2016

23,252

1,057

589

24,898

At 30 April 2017

23,252

885

613

24,750

At 30 April 2018 (unaudited)

25,951

9,371

1,896

37,218

The average remaining useful life of contracts and licences at 30 April 2018 is 8.5 years (2017: 5.4 years).

13. Impairment test for goodwill

The carrying amount of goodwill has been allocated to each CGU as follows:

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Value-added logistics services

20,025

17,326

Commercial vehicles

5,926

5,926

Total

25,951

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 2021.

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 2018 as well as confirmed new and ceasing contracts. The key judgment 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 3.3% (2017: 2.5%) to 2028 (2017: 2027). The cash flows have then been discounted using a pre-tax risk adjusted discount rate of between 8.5% and 10.3% (2017: 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

 

Freehold property
Group
£'000

Leasehold property
Group
£'000

Motor
vehicles
Group
£'000

Plant, machinery, fixtures & fittings
Group
£'000

Total
Group
£'000

Cost:

 

 

 

 

 

At 1 May 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

Additions

-

3,640

486

7,852

11,978

Acquisitions

3,860

102

80

771

4,813

Disposals

(3,860)

-

(768)

(651)

(5,279)

Foreign currency adjustment

-

7

83

180

270

At 30 April 2018 (unaudited)

-

8,042

4,763

63,189

75,994

 

 

 

 

 

 

Accumulated depreciation:

 

 

 

 

 

At 1 May 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

Charge for the year

34

499

844

5,017

6,394

Disposals

(34)

-

(620)

(170)

(824)

Foreign currency adjustment

-

3

23

87

113

At 30 April 2018 (unaudited)

-

2,779

2,635

25,582

30,996

 

 

 

 

 

 

Net book value:

 

 

 

 

 

At 1 May 2016

-

2,170

2,804

20,590

25,564

At 30 April 2017

-

2,016

2,494

34,389

38,899

At 30 April 2018 (unaudited)

-

5,263

2,128

37,607

44,998

Included within property, plant and equipment are amounts held under finance lease contracts. At 30 April 2018, the net book value of these assets was £28,257,000 (2017: £27,314,000). Total additions include £5,129,000 (2017: £13,697,000) under finance lease contracts.

Additions to plant, machinery, fixtures & fittings include £1,587,000 (2017: £1,824,000) in respect of assets in the course of construction.

15. Investment in equity-accounted investees

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Brought forward

2,167

-

Subscription for share capital

-

1,950

Share of (loss)/ profit after tax for the period

(889)

217

Carried forward

1,278

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 year ended 31 January 2018 is set
out below:

 

31 January
2018
£'000

31 January
2017
£'000

Current assets

6,331

7,874

Non-current assets

4,359

4,677

Current liabilities

(5,001)

(5,312)

Non-current liabilities

(2,962)

(2,905)

Equity attributable to owners of the company

2,727

4,334

 

 

 

 

Year ended
31 January
2018
£'000

13 weeks ended
31 January
2017
£'000

Revenue

19,730

6,624

Operating (loss)/profit

(1,933)

560

Interest payable and similar charges

(70)

(18)

Income tax credit/(expense)

396

(108)

(Loss)/profit for the period

(1,607)

434

16. Inventories

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Component parts and consumable stores

4,901

4,459

Commercial vehicles

3,199

3,225

Commercial vehicles on consignment

13,999

22,288

Total inventories net of provision for obsolescence

22,099

29,972

See below for the movements in the provision for obsolescence:

 

Group
£'000

At 1 May 2016

9

Charged for the year

114

Utilised

(36)

At 30 April 2017

87

Charged for the year

128

Utilised

(103)

At 30 April 2018 (unaudited)

112

The cost of inventories recognised as an expense amounted to £108,599,000 (2017: £91,072,000).

Included within commercial vehicles is £941,000 (2017: £768,000) relating to assets held under hire purchase agreements.

17. Trade and other receivables

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Trade receivables

43,769

24,297

Less: provision for impairment of receivables

(455)

(340)

Trade receivables - net

43,314

23,957

Other receivables

3,461

2,708

Amounts receivable from related parties (see note 27)

5,785

522

Prepayments and accrued income

20,870

20,541

Total trade and other receivables

73,430

47,728

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 2016

328

Charged for the year

227

Foreign currency adjustment

1

Utilised

(216)

At 30 April 2017

340

Charged for the year

328

Foreign currency adjustment

3

Utilised

(216)

At 30 April 2018 (unaudited)

455

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 31 days (2017: 22 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 2018 (unaudited)

43,314

40,748

1,560

595

411

30 April 2017

23,957

22,245

816

64

832

18. Cash and cash equivalents

 

Unaudited

2018
Group
£'000

2017
Group
£'000

Cash and cash equivalents

2,275

862

Bank overdraft

(1,337)

-

Net cash and cash equivalents

938

862

19. Trade and other payables

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Trade payables

33,825

28,760

Consignment inventory payables

18,687

29,230

Amounts payable to related parties (see note 27)

233

171

Other taxes and social security

9,520

5,372

Other payables

5,012

5,103

Deferred consideration for acquisitions

500

-

Accruals and deferred income

34,625

16,432

Total trade and other payables

102,402

85,068

20. Financial liabilities: borrowings

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Non-current:

 

 

Bank loans

9,841

1,330

Obligations under finance leases or hire purchase agreements

16,823

18,643

Total non-current

26,664

19,973

Current:

 

 

Bank loans

887

797

Bank overdraft

1,337

-

Obligations under finance leases or hire purchase agreements

6,995

6,592

Total current

9,219

7,389

Total borrowings

35,883

27,362

Less:

 

 

Cash and cash equivalents (see note 18)

2,275

862

Non-current financial assets (see note 27)

1,950

1,450

Net debt

31,658

25,050

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

 

Unaudited

2018

Group

£'000

2017

Group

£'000

In one year or less

887

797

Between one and five years

9,841

1,330

After five years

-

-

Total bank loans

10,728

2,127

The principal lender has security over all assets of the Group's UK operations. The Group's principal bank facilities were increased in October 2017 and now total £40,000,000 consisting of:

·    

a Revolving Credit Facility of £30,000,000 repayable in January 2021; interest rate 1.75% above LIBOR. The amount drawn at 30 April 2018 was £9,000,000;

·    

a committed overdraft of £8,000,000. The amount drawn at 30 April 2018 was £1,337,000; and

·    

bonds and guarantees of £2,000,000.

In addition to the Revolving Credit Facility above, other items included within bank loans at 30 April 2018 are as follows:

·    

other bank loans - £2,079,000 repayable in monthly instalments over periods between 16 and 60 months; interest rates fixed at between 3.72% and 4.80%; and

·    

unamortised debt issue costs of £351,000 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:

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Fixed rate leases:

 

 

Minimum lease payments:

 

 

In one year or less

6,822

6,631

Between one and five years

16,922

19,008

After five years

-

-

 

23,744

25,639

Interest:

 

 

In one year or less

(738)

(830)

Between one and five years

(853)

(1,194)

After five years

-

-

 

(1,591)

(2,024)

Principal of fixed rate leases:

 

 

In one year or less

6,084

5,801

Between one and five years

16,069

17,814

After five years

-

-

 

22,153

23,615

Variable rate leases:

 

 

In one year or less

911

791

Between one and five years

754

829

After five years

-

-

 

1,665

1,620

Total

23,818

25,235

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 4.7 (2017: 4.5) years. At 30 April 2018 £22,756,000 (2017: £23,636,000) 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.

Changes in liabilities from financing activities:

 

Bank

 loans

£'000

Finance

leases

£'000

Balance at 1 May 2017

2,127

25,235

Changes from financing cash flows

 

 

Drawdown of bank loans

9,017

-

Repayment of bank loans

(812)

-

Payment of finance lease liabilities

-

(7,366)

Debt issue costs paid

(101)

-

Total changes from financing cash flows

8,104

(7,366)

Changes arising from obtaining or losing control of subsidiaries or other businesses

-

-

The effect of changes in foreign exchange rates

2

75

Other changes

 

 

New finance leases in respect of additions to property, plant and equipment

-

4,966

New finance leases in respect of commercial vehicle inventories

-

908

Bank loans in respect of additions to intangible assets and property, plant and equipment

381

-

Finance costs

114

-

Total other changes

 495

5,874

Balance at 30 April 2018 (unaudited)

10,728

23,818

21. Provisions

 

Onerous contracts Group

£'000

Uninsured

losses

Group

£'000

Dilapidations Group

£'000

Total

Group

£'000

At 1 May 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

Utilised

(92)

(213)

(206)

(511)

Charged in year

10

213

358

581

At 30 April 2018 (unaudited)

17

-

1,547

1,564

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

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Current

78

127

Non-current

1,486

1,367

Total

1,564

1,494

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 warehouses have leases that expire 19 and 15 years from the balance sheet date and an office lease expires 13 years from the balance sheet date. All other leases expire in 10 years or less.

During the prior year the Company took assignment of a property lease with seven 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

 

Unaudited

2018

Company £'000

2017

Company £'000

Allotted, called up and fully paid:

 

 

101,360,523 (2017: 100,022,968) ordinary shares of 0.05 pence each

51

50

During the year the Company issued 1,087,555 ordinary shares to satisfy employee share options, for aggregate consideration of £1,381,000; and 250,000 ordinary shares at a price of 100 pence per share to satisfy an option dated 30 May 2014 which was entered into by the Company and the Company's broker Numis Securities Limited. The new shares rank pari passu with all existing ordinary shares in issue. See also note 23.

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 three years.

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 three-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 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

Granted during the year

336,293

nil

561,980

379.74p

Forfeited during the year

(176,429)

nil

(86,400)

255.16p

Exercised during the year

(106,338)

nil

(981,217)

140.64p

Outstanding 30 April 2018 (unaudited)

1,647,665

nil

1,165,834

311.64p

At 30 April 2018, PSP options over 572,532 (2017: nil) and Sharesave options over 85,783 (2017: 4,509) 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:

 

Unaudited

2018

Share price at:

 

18 January 2018

470.00p

13 February 2018

407.00p

Expected life of option

3.5 years

Volatility

40%

Dividend yield

1.62-1.87%

The expected life of the options has been estimated as six months beyond vesting date. Volatility has been calculated on a rolling three year period up to the week prior to grant. 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 2018 relating to employee share based payment plans was £1,219,000 (2017: £832,000). The fair value of share options at 30 April 2018 to be amortised in future years was £2,830,000 (2017: £2,052,000).

All share based payments in both years are equity settled.

24. Commitments and contingencies

Operating lease commitments - land and buildings:

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Within one year

20,807

19,191

Between one and five years

59,529

66,367

After more than five years

56,754

77,567

Total minimum lease payments

137,090

163,125

Operating lease commitments - vehicles, plant and equipment:

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Within one year

6,597

5,844

Between one and five years

9,243

9,443

After more than five years

2

11

Total minimum lease payments

15,842

15,298

25. Capital commitments

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Authorised and contracted for

5,500

2,011

Authorised but not contracted for

12,359

2,659

Total capital commitments

17,859

4,670

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 London Stock Exchange. Given the high credit quality of counterparties with which the Group has investments, the Directors do not expect any counterparty to fail to meet its obligations.

At 30 April 2018 there were no significant concentrations of credit risk (2017: none). 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 (2017: 50 basis points) on that portion of borrowings affected would be to reduce the Group's profit before tax by £132,000 (2017: £93,000).

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, Polish Zloty 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.

 

Unaudited

2018

Group

£'000

2017

Group

£'000

EBIT

20,854

17,928

Finance costs (net)

1,976

1,636

Interest cover ratio

10.6

11.0

 

 

Unaudited

2018

Group

£'000

2017

Group

£'000

EBIT

20,854

17,928

Depreciation and impairment of property, plant and equipment

6,394

4,725

Amortisation and impairment of computer software

527

371

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

27,775

23,024

Net debt (note 20)

31,658

25,050

Net debt/EBITDA ratio

1.14

1.09

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 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

30 April 2018 (unaudited)

 

 

 

 

Fixed rate borrowings

6,971

6,712

10,549

24,232

Floating rate borrowings

2,248

584

9,170

12,002

Total borrowings

9,219

7,296

19,719

36,234

Trade and other payables

84,972

-

-

84,972

Total financial liabilities

94,191

7,296

19,719

121,206

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.

·    

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

 

 

Unaudited

2018

Book value £'000

Unaudited

2018

Fair value

£'000

2017

Book value £'000

2017

Fair value

£'000

Non-current financial assets

1,950

1,907

1,450

1,394

 

 

 

 

 

Current financial assets:

 

 

 

 

Cash and cash equivalents

2,275

2,275

862

862

Trade and other receivables

73,430

73,430

47,728

47,728

Liabilities:

 

 

 

 

Bank overdraft

(1,337)

(1,337)

-

-

Short-term borrowings

(9,219)

(9,219)

(7,389)

(7,389)

Trade and other payables

(102,402)

(102,402)

(85,068)

(85,068)

Long-term borrowings

(26,664)

(25,919)

(19,973)

(19,100)

Long-term borrowings 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.

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

Guiseley Association Football Club, which shares a common director with Clipper Logistics plc, receives sponsorship income from the Group.

Harrogate Road Restaurants Limited, a company which shares a common director with Clipper Logistics plc, receives management and administration services from the Group.

Hamsard 3476 Limited, a company controlled by Steve Parkin, receives property-related services from the Group.

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

Knaresborough Real Estate Limited, a company owned by Steve Parkin, is the landlord of one of the Group's leasehold properties.

Roydhouse Properties Limited is the landlord of two of the Company's leasehold properties and has common directors with Clipper Logistics plc.

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.

Trust Electric Heating Limited, a supplier to the Group, shares a common director with Clipper Logistics plc.

In the prior year, the Group chartered an aircraft from South Acre Aviation Limited, a company owned by Steve Parkin.

Key management compensation is disclosed in note 5.

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

 

Unaudited 2018

Group

£'000

2017

Group

£'000

Non-current financial assets:

 

 

Clicklink Logistics Limited - interest bearing loan

1,950

1,450

Trade and other receivables:

 

 

Clicklink Logistics Limited - trading balance

1,491

282

Knaresborough Investments Limited

-

115

Branton Court Stud LLP

93

125

Hamsard 3476 Limited

4,200

-

Southerns Office Interiors Limited

1

-

Trade and other payables:

 

 

Clicklink Logistics Limited

168

135

Southerns Office Interiors Limited

63

36

Trust Electric Heating Limited

2

-

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 has been fully drawn in two 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.

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

 

Unaudited

2018

Group

£'000

2017

Group

£'000

Items credited to the income statement:

 

 

Clicklink Logistics Limited - revenue

15,738

4,701

Clicklink Logistics Limited - finance income

35

18

Branton Court Stud LLP

437

125

Hamsard 3476 Limited - revenue

4,200

-

Harrogate Road Restaurants Limited

-

2

Knaresborough Investments Limited

285

150

Southerns Office Interiors Limited

23

7

Items charged to the income statement:

 

 

Clicklink Logistics Limited

1,682

410

Guiseley Association Football Club

67

25

Hamsard 3476 Limited

-

-

Knaresborough Investments Limited

8

5

Knaresborough Real Estate Limited

361

345

Roydhouse Properties Limited

865

888

Southerns Office Interiors Limited

33

47

South Acre Aviation Limited

-

7

Trust Electric Heating Limited

4

-

Purchase of non-current assets

 

 

Southerns Office Interiors Limited

70

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

277

3,681

28. Business combinations (unaudited)

28.1 Tesam Distribution Limited

On 24 May 2017 the Company acquired the entire issued share capital of Tesam Distribution Limited ("Tesam") in exchange for cash consideration. Tesam operated as a provider of a variety of warehousing and distribution services to the retail sector. With effect from 30 April 2018 the Tesam operations have been hived-up into Clipper Logistics plc.

Purchase consideration and cash flows:

 

£'000

Cash consideration paid

11,750

Total consideration payable

11,750

Analysis of cash flows:

 

Cash consideration paid in the year

11,750

Net cash acquired with the subsidiary (included in cash flows from investing activities)

2,177

Net cash flow on the acquisition

(9,573)

Acquisition:

 

Fair value

£'000

Assets:

 

Property, plant and equipment

4,655

Customer relationships

8,173

Software

740

Trade and other receivables

1,157

Cash and cash equivalents

2,177

Liabilities:

 

Trade and other payables

(3,488)

Current tax liabilities

(147)

Current provisions

(1,036)

Deferred tax liabilities

(1,801)

Total identifiable net assets at fair value

10,430

Goodwill arising on acquisition

1,320

Total consideration

11,750

The goodwill of £1,320,000 comprises the value of expected synergies arising from the acquisition. Goodwill is allocated entirely to the value-added logistics services segment.

None of the goodwill recognised is expected to be deductible for income tax purposes.

From the date of acquisition, Tesam has contributed £14,810,000 of revenue and £4,871,000 to the profit before tax from continuing operations of the Group.

Professional fees and costs in relation to the acquisition were £159,000 and have been charged to the income statement.

28.2 RepairTech Limited

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

Purchase consideration:

 

£'000

Cash consideration paid

2,500

Deferred consideration paid June 2018

500

Total consideration payable

3,000

Analysis of cash flows:

 

Cash consideration paid in the year

2,500

Net cash acquired with the subsidiary (included in cash flows from investing activities)

300

Net cash flow on the acquisition

(2,200)

Acquisition:

 

Fair value

£'000

Assets:

 

Property, plant and equipment

159

Customer relationships

1,384

Other intangible assets

23

Inventories

34

Trade and other receivables

760

Cash and cash equivalents

300

Liabilities:

 

Trade and other payables

(611)

Current tax liabilities

(153)

Deferred tax liabilities

(275)

Total identifiable net assets at fair value

1,621

Goodwill arising on acquisition

1,379

Total consideration

3,000

The goodwill of £1,379,000 comprises the value of expected synergies arising from the acquisition. Goodwill is allocated entirely to the value-added logistics services segment.

None of the goodwill recognised is expected to be deductible for income tax purposes.

Other intangible assets recognised consist of the acquired order book.

From the date of acquisition, RepairTech has contributed £3,183,000 of revenue and £396,000 to the profit before tax from continuing operations of the Group.

Professional fees and costs in relation to the acquisition were £62,000 and have been charged to the income statement.


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