CLG.L Regulatory News (CLG)

24 August 2020

Clipper Logistics plc

Final Results for the year ended 30 April 2020

An excellent year leading to record results; strong momentum throughout COVID-19

Clipper Logistics plc ("Clipper", the "Group", or the "Company"), a leading provider of value-added logistics solutions, e-fulfilment and returns management services, is pleased to announce its Full Year Results for the year ended 30 April 2020.

Financial highlights for the year ended 30 April 2020

1. This is an alternative performance measure, the definition of which can be found in the Alternative performance measures section of the Operating and Financial review together with a reconciliation to the statutory measure. This is to aid comparability to the prior year, and applies throughout this announcement.

Operational highlights for the year ended 30 april 2020

Post year end highlights

Outlook

General economic conditions remain uncertain due to the COVID-19 pandemic. However, the Group has experienced a very positive start to the new financial year, with exceptionally high levels of demand for its e-fulfilment and returns management services in particular. Consequently, the Board anticipates that the Group's results for the year ending 30 April 2021 will comfortably exceed market expectations.

Steve Parkin, Executive Chairman of Clipper commented:

"I am delighted to report such a strong set of final results as Clipper reaches a significant milestone, delivering record revenues exceeding £0.5 billion. This has been driven by strong organic growth in the period, particularly in e-fulfilment, and value-enhancing acquisitions made in prior years."

"The impact of Government restrictions affected many of our retail clients, however it was testament to our long standing and proactive client relationships and broad service offering that activity levels have swiftly bounced back and have since achieved record levels after the initial disruption. There will, without doubt, be longer term changes to the retail landscape however we are confident that our ability to evolve our solutions to meet client needs will ensure that Clipper benefits from these trends as the shift to online retail accelerates."

"Recent contract wins, together with a strong pipeline of new business activity and the further evolution of our Click and Collect proposition, we believe place the Group in an excellent position to achieve further growth both in the UK and internationally and we look forward to the new financial year with confidence as we continue to deliver shareholder value."

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.

Publication of Annual Report and Accounts

Clipper's 2020 Annual Report and Accounts are available on the Company's website: https://www.clippergroup.co.uk/report-accounts/ and will shortly be submitted to the National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Copies of the Annual Report and Accounts will be posted to shareholders who require them in hard copy shortly and a further announcement will be made by the Company at that time.

This announcement is released by Clipper Logistics plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 ("MAR"). It is disclosed in accordance with the Group's obligations under Article 17 of MAR. Upon the publication of this announcement, this information is considered to be in the public domain.

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of Clipper Logistics plc by David Hodkin, Chief Financial Officer.

Enquiries

Chairman's statement

As Chairman of Clipper Logistics plc, I am pleased to present our 2020 financial results.

In the financial year ended 30 April 2020 the Group achieved a milestone, with revenue exceeding £0.5 billion. This has arisen through organic growth, particularly in e-fulfilment and returns management. As the retail sector evolves, we continue to identify key emerging trends and drive innovation such that we can continue to support our partners with 'best-in-class' solutions.

On 23 March 2020, the Government announced the 'lockdown' and consequent closure of non-essential retail outlets. This resulted in a diminution in activity in not only high street retail, but also in online demand. However, demand for online fulfilment quickly recovered and rose to unprecedented levels. We recognised those trends and ensured that we had in place sufficient resources to satisfy rapidly increasing demand for e-fulfilment and returns management activity. We further re-deployed our distribution networks to support the demands placed on food retailers by the pandemic to help feed the nation.

Clipper was approached by the NHS Supply Chain for assistance with provision of PPE to hospitals and other care providers in light of the growth of the pandemic. I am immensely proud of the achievements of our teams, in developing a solution within four days, to establish a separate supply chain for the distribution of PPE to nearly 600 hospitals. We further quickly developed, in conjunction with eBay, an online portal to enable care providers, care homes and other organisations to order PPE online, and to provide fulfilment of these orders.

Recent research would indicate that COVID-19 has led to a permanent upward shift in the transition of retail online. Given our already strong pipeline in e-fulfilment, returns management and Click and Collect, Clipper is extremely well positioned to continue to deliver on these trends.

We look into the new financial year with confidence. The Group will continue to focus on our four strategic pillars; to build our market‑leading customer proposition to expand the customer base; develop new, complementary products and services; continue European expansion; and explore acquisition opportunities.

I am delighted that we have commenced significant new contracts with high-profile customers such as Amara, Joules, N Brown, the NHS, SLG and the Very Group.

We have achieved strong organic growth with PrettyLittleThing.com, Neon Sheep, Levi Strauss, Sports Direct, Vestel and Ginger Ray.

Our European business continues to enjoy very strong organic growth with customers including Westwing and s.Oliver.

In addition, our technical services operation is performing well, having secured contracts with Amazon, John Lewis and the Very Group for the management of electrical product returns.

The commercial vehicles business saw a return to normalised levels of profitability, until the government imposed lockdown as a result of the COVID-19 pandemic.

The Group is well positioned to continue to deliver strong returns to our shareholders as the trends toward online retailing continue.

Group results

Group revenue increased by 8.8% to £500.7 million for the year ended 30 April 2020 (2019: £460.2 million), and Group EBIT (IAS 17 basis)1 was £24.1 million (2019: £20.2 million), growth of 19.1%. Group EBIT1 inclusive of IFRS 16 was £32.5 million. Diluted earnings per share were 15.8 pence for the year ended 30 April 2020 (2019: 13.1 pence), an increase of 20.6%. Basic earnings per share were 15.9 pence (2019: 13.2 pence), an increase of 20.5%.

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 acquisitions that enhance Group performance and shareholder value. We explored potential acquisitions during the year; however, on the conclusion of our internal due diligence processes, they were not pursued as they did not meet the Group's strategic objectives.

We have recently made new appointments to enhance our Senior Management Team.

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, particularly in the light of the challenges presented by COVID-19.

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 Christine Cross (Senior Independent Director), Dino Rocos and Stuart Watson, our Independent Non-Executive Directors.

Christine Cross joined the Board on 3 June 2020 and Dino Rocos on 1 January 2020. Stephen Robertson stood down from the role of Senior Independent Director on 3 June 2020, having completed his second three-year term. Mike Russell stood down from the Board on 28 February 2020, having served on the Board of Clipper and its former parent company prior to IPO for nine years.

I would personally like to thank Stephen and Mike for their commitment and valuable contribution over the years. I also would like to welcome Christine and Dino to the Board.

Dividends

The Board is recommending a final dividend of 6.2 pence per share, making a total dividend in respect of the year ended 30 April 2020 of 9.7 pence (2019: 9.7 pence).

The proposed final dividend, if approved by shareholders, will be paid on 5 October 2020 to shareholders on the register at the close of business on 11 September 2020.

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, and is rapidly growing its operations in Europe. Recent contract wins, together with a strong pipeline of new business activity and the further evolution of our Click and Collect proposition, we believe 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 support its clients 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

Group performance for the year ended 30 April 2020

On 1 May 2019, the Group applied IFRS 16 - a new accounting standard effective for the year ended 30 April 2020. The Group applied the modified retrospective approach with no restatement of prior year comparatives. To aid comparability to the prior year, the discussion of the results is excluding the impact of IFRS 16 ("IAS 17 basis") unless otherwise stated. This is now considered an alternative performance measure.

The Group continued to make good progress in the financial year ended 30 April 2020. Group revenue grew by 8.8% to £500.7 million. Group EBIT1 for the year was £24.1 million compared to £20.2 million in the prior year, an increase of 19.1%.

Revenue growth was very strong in e-fulfilment & returns management services, where revenue of £277.0 million was 18.4% ahead of the previous year. Non e-fulfilment revenues marginally declined by 1.0% to £143.8 million, whilst revenue from commercial vehicles remained flat year-on-year.

EBIT1 in both operating segments grew significantly in the financial year ended 30 April 2020. Value-added logistics services increased by 18.4% to £24.9 million and the commercial vehicles segment increased by 72.6% to £2.0 million.

Group revenue

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

Group revenue increased by 8.8% to £500.7 million, with strong growth of 11.0% in value-added logistics services being partly offset by a marginal decline in commercial vehicles.

Group revenue growth of £40.5 million was largely attributable to growth in the e-fulfilment & returns management business activity, which grew by 18.4%.

There was no property-related consultancy revenue in the year ended 30 April 2020 (2019: £3.1 million).

Group EBIT1

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

Group EBIT1 grew by 19.1% to £24.1 million in the year ended 30 April 2020 (2019: £20.2 million). This growth is in part attributed to the revenue growth in the year of 8.8%. In addition there are some material non-underlying factors impacting EBIT1 in both years. Of the £3.9 million increase:

Excluding these items, underlying EBIT1 increased by £5.0 million (31.4%) in the year ended 30 April 2020 compared to the prior year. The table below normalises the effect of these impacts:

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

EBIT1 is the primary KPI by which the management team assesses corporate performance. EBIT1 is assessed against Board approved budgets.

EBIT1 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 value added logistics segment 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, EBIT1 is a more relevant measure of financial performance than EBIT1 margin (%).

Segmental trading overview

Clipper is managed through two distinct operating segments, being value-added logistics services and commercial vehicles. The value-added logistics services segment is further subdivided into two business activities, being e-fulfilment & returns management services and non e-fulfilment logistics.

Value-added logistics services

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

Revenue in the year ended 30 April 2020 within the value-added logistics services operating segment was £420.8 million, representing growth on the previous year of 11.0%.

This growth is due to a combination of the full year impact of new contracts won in the prior year, revenue growth in Continental Europe, new contracts won in the year ended 30 April 2020 and growth in existing customers in the UK.

These revenue items had a positive impact on EBIT1. EBIT1 excluding non-underlying factors grew by £4.0 million to £21.6 million, growth of 22.7% in the year ended 30 April 2020. The trading factors contributing to the growth in this segment are covered in more detail below.

Reported EBIT1 benefited from:

The following table normalises this:

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

E-fulfilment & returns management services

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

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 Click and Collect activities (through the Clicklink joint venture) and Technical Services.

Revenues from e-fulfilment & returns management services increased by 18.4% from £233.9 million for the year ended 30 April 2019 to £277.0 million for the year ended 30 April 2020, with EBIT1 excluding non-underlying factors growing by 16.2% to £15.8 million. Reported EBIT1 was 29.9% higher than in the previous year. Included within reported EBIT1 was £1.8 million of 'negative goodwill' relating to the business combination.

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

This growth continues the double digit percentage EBIT1 growth of prior years, and delivers against our stated objective of being a market leader in the provision of value-added services across the e-fulfilment sector.

Performance in e-fulfilment & returns management services benefited from:

Whilst we experienced some organic revenue decline with certain of our customers, overall revenue growth was strong.

Prior to COVID-19, Clicklink, our joint venture with John Lewis, was benefiting from the impact of price increases secured in the previous year and the onboarding of new customers onto the network. The Group was expecting it to generate a positive contribution to EBIT1 in the year ended 30 April 2020. As a result of Government measures introduced in response to COVID-19 and the lockdown that was implemented through the closure of non-essential retail stores, Clicklink contributed a loss of £0.2 million in the year ended 30 April 2020. Since the year end, Clicklink has reduced the losses incurred through re-deployment of staff and resources and has returned to profitability. Recently a three year forecast was completed for Clicklink which demonstrated a significant growth trajectory. Since the year end, we have commenced activities with new customers including Arcadia and T.M. Lewin which we expect to further drive EBIT1 growth in the year ending 30 April 2021.

Non e-fulfilment logistics

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

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.

Revenue from non e-fulfilment operations marginally declined by 1.0% for the year ended 30 April 2020, from £145.3 million to £143.8 million. Included in the year ended 30 April 2019 was £3.1 million of property-related income; therefore underlying revenue grew by 1.0%.

Reported EBIT1 grew by 9.1% to £14.2 million in the year ended 30 April 2020. EBIT1 in this business activity benefited from £1.8 million of negative goodwill in the year ended 30 April 2020.

Property-related income reduced from £3.1 million in the year ended 30 April 2019 to £nil in the year ended 30 April 2020. As a result, EBIT1 excluding non-underlying factors increased by 25.3% to £12.4 million in the year ended 30 April 2020.

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

The following factors contributed positively to the EBIT1 growth:

The following factors had an adverse impact on revenue year-on-year:

Whilst EBIT1 excluding non-underlying factors increased, costs on one specific closed book contract continued to make an adverse contribution to EBIT1, as we were unable to recover the fixed costs of the operation through unit rates. This contract is currently being renegotiated to give more favourable terms to Clipper going forward.

Central logistics overheads

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

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 increased by £1.4 million (24.7%), from £5.5 million in the year ended 30 April 2019 to £6.9 million in the year ended 30 April 2020.

Included within EBIT1 for the year ended 30 April 2020 is a share based payment charge of £0.2 million. In the previous year there was a share based payment credit of £0.4 million representing a swing of £0.6m. Adjusting for this, central logistics overheads have increased by £0.8 million year on year.

We have continued to invest in the operational support and back office functions of the business to accommodate revenue growth, thereby increasing the overhead base.

Overall share based payment charges

Share based payment charges of £0.3 million have been recognised in the income statement for the current year (2019: £1.2 million credit) primarily to central logistics overheads and head office costs (as appropriate) in respect of the Sharesave Plan and the Performance Share Plan ("PSP") (see note 25 to the Group Financial Statements and page 60 of the Directors' Remuneration Report contained in the Company's 2020 Annual Report and Accounts (available to download from www.clippergroup.co.uk/report-accounts/)).

Commercial vehicles

The commercial vehicles business, Northern Commercials (Mirfield) Limited, operates Iveco and Fiat commercial vehicle dealerships from five dealership locations and has three sub-dealers. Main dealerships are located in Brighouse, Manchester, Northampton, Dunstable and Tonbridge. The business operates across the north of England and into Wales, through the Midlands, and into the South East.

Commercial vehicles revenue for the year ended 30 April 2020 declined just 0.1% to £82.5 million despite operating a significantly reduced service operation from 23 March 2020 due to the COVID-19 pandemic.

New vehicle sales increased by £1.2 million for the year ended 30 April 2020, having sold 1,399 new vehicles. However, this increase in revenue was more than offset by a reduction in revenue in other parts of the business, namely aftersales and parts sales.

EBIT1 for the year increased by 72.6% to £2.0 million, partially due to improved manufacturer bonuses.

Head office costs

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

Head office costs represent the cost of certain Executive and Non-Executive Directors, plc compliance costs and the costs of the plc head office at Central Square, Leeds.

Head office costs increased by £0.8 million (42.4%), from £2.0 million in the year ended 30 April 2019 to £2.8 million in the year ended 30 April 2020. The year-on-year increase in head office costs is largely due to the £0.9 million swing in share based payments (see above) - which contributed a credit of £0.8 million in the year ended 30 April 2019 and incurred a charge of £0.1 million in the current year.

Overview of profit and loss performance for the year ended 30 April 2020

The revenue and EBIT1 performance of the Group are as discussed above. The other aspects of the Group income statement are discussed below.

Net finance costs

Net finance costs for the year ended 30 April 2020 on an IAS 17 basis1 increased by 27.1% to £2.7 million (2019: £2.1 million), the increase being largely as a result of increased interest costs on hire purchase and finance lease agreements previously recognised under IAS 17 following significant capital expenditure in the year ended 30 April 2019, and to a lesser extent increased interest costs on the commercial vehicles stocking lines.

On an IFRS 16 basis, a financing charge of £8.0 million has been recognised for the first time this year in respect of the interest on lease liabilities. Net finance costs were £11.1 million for the year ended 30 April 2020 (2019: £2.1 million).

Profit Before Tax and Amortisation ("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 on an IAS 17 basis was £21.3 million (£20.1 million PBT plus £1.2 million amortisation of other intangible assets) for the year ended 30 April 2020, an increase of 17.8% on the year ended 30 April 2019 PBTA of £18.1 million (£16.9 million PBT plus £1.2 million amortisation of other intangible assets).

Taxation

The effective rate of taxation of 19.5% (2019: 20.8%) is higher than the average standard UK rate of corporation tax applicable in the year of 19.0% (2019: 19.0%) 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 2020 was £16.2 million (2019: £13.4 million), an increase of 20.8%.

Earnings per share

Earnings per share were 15.5 pence for the year ended 30 April 2020 (2019: 13.2 pence) on an IAS 17 basis¹. Adjusted to remove amortisation of intangible assets arising on consolidation, earnings per share were 16.6 pence (2019: 14.2 pence).

On an IFRS 16 basis earnings per share were 15.9 pence.

Current trading and outlook

In the year ending 30 April 2021, we expect revenue to benefit from:

The Board is confident that the Group is strongly positioned to grow in the future.

Balance sheet and cash flow

Capital expenditure and fixed assets

We incurred expenditure of £22.9 million in the year ended 30 April 2020 (2019: £26.4 million) on intangible assets, property, plant and equipment and right-of-use assets. £22.1 million of this was incurred in the logistics services segment (2019: £25.8 million) and £0.8 million (2019: £0.6 million) in the commercial vehicles segment.

Approximately £6.7 million (2019: £7.7 million) of the additions were purchased in cash and £5.7 million (2019: £18.7 million) were purchased through hire purchase and finance agreements as would be previously recognised under IAS 17.

Noteworthy capital additions in the year were: an additional mezzanine floor at our Northampton shared user facility to support growth, fitout of our Peterborough site to house the Sports Direct operation, a new mezzanine floor in our Peterborough facility, automation kit at our Raven Mill site and fitout for the Amara Living operation at Northampton. Within Europe, we invested in racking, sprinkler systems and a pick tower.

In the year ended 30 April 2020, we disposed of assets with a net book value of £0.4 million, on which we generated a profit on disposal of £0.1 million.

In the prior year, we disposed of assets with a net book value of £0.4 million, on which we generated a profit on disposal of £0.1 million.

Clipper's outstanding capital expenditure commitment at 30 April 2020 was £3.6 million (2019: £8.6 million), reflecting the timing of investments in new and existing customer contracts.

Cash flow

Cash generated from operations was £66.8 million (2019: £28.3 million).

IFRS 16 resulted in a £34.9 million increase in cash flows generated from operating activities with an equal and opposite impact on cash flows generated from financing activities in the year ended 30 April 2020. Therefore excluding the impact of IFRS 16 cash generated from operations was £31.9 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 net favourable impact on 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.

In the year ended 30 April 2020, we generated £1.3 million of cash inflow from working capital (2019: £0.6 million inflow).

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, interest payments and share issues. Taking each of these in turn:

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.

Net debt

In addition to EBIT1, net debt4 is considered a KPI for the Group. The Group had £45.1 million of net debt4 outstanding at 30 April 2020 (2019: £45.9 million) (see note 21 to the Group Financial Statements), a decrease of £0.8 million. The decrease in net debt4 was driven primarily by a reduction in HP and finance lease contracts of £3.0 million offset by a £1.3 million increase in bank loans. It is 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 2020, Clipper had £35.4 million (2019: £34.9 million) of capital contracted to be recovered from open book customers over the remaining term of the customer contracts.

Impact of IFRS 16

IFRS 16 was implemented in the year ended 30 April 2020. On transition, a right-of-use asset of £204.2 million was recognised which included a transfer from property, plant and equipment of £39.7 million and we recognised lease liabilities of £36.6 million in current liabilities and £184.1 million in non-current liabilities (see note 30 to the Group Financial Statements). Finance leases recognised in the year ended 30 April 2019 were reclassified from financial liabilities: borrowings to lease liabilities. There was also a deferred tax asset arising on transition of £3.9 million.

The 'statutory' measure of EBIT1 includes the impact of IFRS 16 for the first time in the year ended 30 April 2020; the Group having transitioned to IFRS 16 on 1 May 2019. Those costs which would have been reported as straight-line operating lease rentals in prior periods are now replaced by straight-line depreciation and reducing balance interest components. Consequently, results for the year ended 30 April 2020 on a statutory basis are not directly comparable with those reported for prior periods. Operating lease rentals of £34.9 million have been added back and depreciation of £32.9 million has been deducted (of which £6.4 million relates to leases previously recognised under IAS 17), together improving 'statutory' EBIT1 by £8.4 million. At 30 April 2020, right-of-use assets were £186.2 million and lease liabilities were £38.4 million in current liabilities and £163.9 million in non-current liabilities; of which £30.3 million relates to leases previously recognised under IAS 17. IFRS 16 resulted in a £34.9 million increase in cash flows generated from operating activities with an equal and opposite impact on cash flows generated from financing activities in the year ended 30 April 2020.

Alternative performance measures ("APMs")

APMs are used by the Board to assess the Group's financial performance, for analysis and for incentive-setting purposes. These measures are not defined by International Financial Reporting Standards ("IFRS") and therefore may not be directly comparable with other companies' APMs, including those in the Group's industry. The Operating and Financial review has used APMs to aid comparability to the prior year.

APMs should be considered in addition to and are not intended to be a substitute for IFRS measurements. The table below reconciles APMs to statutory measures as defined by IFRS.

David Hodkin

Chief Financial Officer

Director's statement on basis of preparation - announcement

Whilst the financial information included in this announcement has been prepared on the basis of the requirements of IFRSs in issue, as adopted by the European Union and effective at 30 April 2020, 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 2020 have been extracted from the Group's audited Financial Statements for the year then ended.

The financial information contained within the preliminary announcement for the year ended 30 April 2020 was approved by the Board on 21 August 2020. Statutory accounts for the year ended 30 April 2020 were approved on the same date and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on these Financial Statements. Their report was unqualified and did not contain a statement under s.498 (2) or (3) of the Companies Act 2006.

Responsibility statement of the directors in respect of the Annual Report and the Financial Statements

The following responsibility statement made by the Directors is repeated here solely for the purpose of complying with DTR 6.3.5. This statement relates to and is extracted from page 69 of the Company's 2020 Annual Report and Accounts. Responsibility is for the full Annual Report and Accounts not the extracted information presented in this announcement.

We confirm that to the best of our knowledge:

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

Group Income Statement

For the year ended 30 April

* EBIT is defined as operating profit, including the Group's share of operating profit in equity-accounted investees and before the amortisation of intangible assets.

Group Statement of Comprehensive Income

For the year ended 30 April

Group Statement of Financial Position

At 30 April

1 The Group has applied IFRS 16 effective 1 May 2019, using the modified retrospective approach, without restating prior year figures. Information on the impact of adopting IFRS 16 is represented in note 30 to the Financial Statements.

Group Statement of Changes in Equity

For the year ended 30 April

Group Statement of Cash Flows

For the year ended 30 April

Notes to the Group Financial Statements

1. General information

The results comprise those of Clipper Logistics plc and its subsidiaries for the year ended 30 April 2020 and does not constitute the Group's statutory accounts for the years ended 30 April 2020 or 2019, but is derived from those accounts. Both the Company Financial Statements and the Group Financial Statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("IFRSs").

Statutory accounts for the years ended 30 April 2020 and 30 April 2019 have been reported on by the auditor. Their reports for both years (i) were 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 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 30 April 2019 have been filed with the Registrar of Companies. The statutory accounts for the year ended 30 April 2020, which were approved by the Board on 21 August 2020, will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The Group Financial Statements for the year ended 30 April 2020 were authorised for issue by the Board of Directors on 21 August 2020 and the Group Statement of Financial Position was signed on the Board's behalf by David Hodkin.

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

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

2. Summary of significant accounting policies

The results for the year have been prepared on a basis consistent with the accounting policies set out in Clipper's Annual Report and Accounts for the year ended 30 April 2019 except as noted below.

As the Group prepares its financial information in accordance with IFRS as adopted by the European Union, the application of new standards and interpretations will be subject to them having been endorsed for use in the EU via the EU Endorsement mechanism. In the majority of cases this will result in an effective date consistent with that given in the original standard or interpretation but the need for endorsement restricts the Group's discretion to early adopt standards.

IFRS 16 'Leases' ("IFRS 16") was issued in January 2016, replacing IAS 17 'Leases' ("IAS 17") and associated interpretations IFRIC 4, SIC 15 and SIC 27. IFRS 16 applies to annual periods beginning on or after 1 January 2019, which for the Group is the year ended 30 April 2020. IFRS 16 primarily changes lease accounting for lessees.

Lease agreements now give rise to the recognition of an asset representing the right to use the leased item and a loan obligation for future lease payables. Lease costs are now recognised in the form of depreciation of the asset and interest on the lease liability replacing rental costs charged on a straight-line basis.

Under the transition rules, the Group has applied IFRS 16 using the modified retrospective approach with the cumulative effect of applying the standard recognised in retained earnings on 1 May 2019 with no restatement of comparative information. Lease liabilities have been measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of transition. The Group is taking available exemptions for short-term leases (leases which, at the transition date, have a lease term of less than 12 months) and low value leases (

The adoption of IFRS 16 at 1 May 2019 has a material impact on the Group's Financial Statements - see note 30. There is no cash impact of adopting IFRS 16, with the repayment of the principal portion of the lease liability being classified as financing instead of operating cash flows. The covenant requirements for the Group's committed financing facilities are based on 'Frozen GAAP' and therefore are not impacted by the transition to IFRS 16.

3. Revenue

The Group has applied IFRS 15 'Revenue from Contracts with Customers' with effect from 1 May 2018, using the cumulative effect method.

Revenue is disaggregated into two distinct operating segments. This is consistent with the revenue information that is disclosed for each reportable segment under IFRS 8 'Operating Segments', as reported in note 4 to the Financial Statements.

Revenue recognised in the income statement is analysed as follows:

Non e-fulfilment logistics revenue includes £nil (2019: £3,100,000) in respect of property-related advisory services.

Geographical information - revenue from external customers:

Geography is determined by the location of the end customer.

The Group has no customers that in the years ended 30 April 2020 or 30 April 2019 accounted for greater than 10% of the total Group revenue.

The following table provides information about receivables, contract assets and contract liabilities from contracts.

The contract assets primarily relate to the Group's right to consideration for work completed but not billed as at 30 April 2020. The contract assets are transferred to receivables when the rights become unconditional. The contract liabilities primarily relate to the advance consideration received from customers. Contract liabilities of £22,423,000 (2019: £24,557,000) will be recognised in revenue in the year ending 30 April 2021 when the performance obligations are expected to be satisfied.

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:

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

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

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

The following tables present profit information for continuing operations regarding the Group's business segments for the two years ended 30 April 2020:

Earnings before interest and tax ("EBIT"):

Amortisation of other intangible assets:

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

Operating profit and profit before income tax:

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

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

Capital expenditure:

Capital expenditure comprises additions to intangible assets (note 12), property, plant and equipment (note 14) and right-of-use assets (note 15).

Depreciation of property, plant and equipment:

Amortisation:

Depreciation of right-of-use assets:

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

5. Staff costs

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

Key management compensation (including Executive Directors):

Directors' emoluments:

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

6. Group operating profit

This is stated after charging:

Operating profit is stated after crediting/(charging):

The above exceptional cost in the year ended 30 April 2020 relates to compensation for loss of office to the outgoing deputy CEO. In the prior year, the exceptional costs relate to the staging of a one-off event.

7. Dividends

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these Financial Statements. The proposed dividend is payable to all shareholders on the Register of Members on 11 September 2020. The payment of this dividend will not have any tax consequences for the Group.

8. Finance costs

1 On transition to IFRS 16 on 1 May 2019, hire purchase agreements were reclassified to lease liabilities from financial liabilities: borrowings. Interest on hire purchase agreements has been separated from other IFRS 16 lease liabilities for comparison purposes.

9. Finance income

10. Income tax expense

10.1 Tax charged in the income statement:

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:

10.4 Deferred tax in the statement of financial position:

Legislation to reduce the UK corporation tax rate from 19% to 17% with effect from 1 April 2020 was enacted at 30 April 2019. Further legislation to cancel this reduction was substantively enacted at 30 April 2020. A rate of 19% (2019: 17%) has been applied in the measurement of the Group's 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:

12. Intangible assets