CLG.L Regulatory News (CLG)

Clipper Logistics plc

Final Results for the year ended 30 April 2017

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

Financial Highlights for the year ended 30 April 2017

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

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

Operational Highlights for the year ended 30 April 2017

Post Year End Highlights

Steve Parkin, Executive Chairman of Clipper commented:

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

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

Forward looking statements

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

ENQUIRIES

Chairman's Statement

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

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

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

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

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

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

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

Group results

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

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

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

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

People and Board

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

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

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

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

Governance 

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

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

Dividends

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

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

Outlook

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

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

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

Operating and Financial Review

Overview of results

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

Group revenue

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

Revenue growth in commercial vehicles was driven by:

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

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

Group EBIT

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

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

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

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

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

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

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

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

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

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

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

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

Net interest charges

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

Taxation

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

Profit after tax

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

Earnings per share

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

Capital expenditure and fixed assets

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

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

Cash flow

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

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

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

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

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

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

Net debt

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

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

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

Logistics

E-fulfilment & returns management growth

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

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

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

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

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

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

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

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

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

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

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

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

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

Investment in key personnel

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

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

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

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

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

Commercial vehicles

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

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

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

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

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

Current trading and outlook

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

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

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

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

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

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

By order of the Board

Steve Parkin, Executive Chairman

27 July 2017

Directors' Statement on the Basis of Preparation - Announcement

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

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

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

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

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

Company law requires the Directors to prepare Group and Parent Company Financial Statements for each financial year. Under that law they are required to prepare the Group Financial Statements in accordance with IFRS as adopted by the EU and applicable law and have elected to prepare the Parent Company Financial Statements in accordance with UK Accounting Standards, including FRS 101 Reduced Disclosure Framework.

Under company law, the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for the period. In preparing each of the Group and Parent Company Financial Statements, the Directors are required to: 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its Financial Statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. 

Under applicable law and regulations, the Directors are also responsible for preparing a strategic report, directors' report, directors' remuneration report and corporate governance statement that complies with that law and those regulations. 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' Responsibility Statement

We confirm that to the best of our knowledge:

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

Group Income Statement

For the year ended 30 April

Group Statement of Comprehensive Income

For the year ended 30 April

Group Statement of Financial Position

At 30 April

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 Statement

1. General information

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

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

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

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

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

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

2. Summary of significant accounting policies

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

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

3. Revenue

Revenue recognised in the income statement is analysed as follows:

Geographical information - revenue from external customers:

Geography is determined by the location of the end customer.

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

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

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 2017:

Earnings before interest & 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 property, plant and equipment (note 14) and intangible assets (note 13).

Depreciation:

Amortisation:

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:

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 8 September 2017. The payment of this dividend will not have any tax consequences for the Group.

8. Finance costs

9. Finance income

10. Income tax expense

(a) Tax charged in the income statement:

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

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

(c) Reconciliation of income tax charge:

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

(d) Deferred tax in the income statement:

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

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

(f) Deferred tax movement:

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

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

13. Impairment test for goodwill

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

A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of a CGU is determined based on value-in-use calculations.

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

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

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

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

14. Property, plant and equipment 

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

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

15. Investment in equity-accounted investees

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

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

16. Inventories

See below for the movements in the provision for obsolescence:

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

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

17. Trade and other receivables

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:

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

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

The ageing analysis of trade receivables was as follows:

18. Cash and cash equivalents

19. Trade and other payables

20. Financial liabilities: borrowings

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

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

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

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

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

21. Provisions

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

Onerous contracts

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

Uninsured losses

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

Dilapidations

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

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

22. Share capital

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

23. Share based payments

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

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

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