CLG.L Regulatory News (CLG)

Clipper Logistics plc

Final Results for the year ended 30 April 2016

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 2016.

Financial Highlights for the year ended 30 April 2016

1 Adjusted EBIT is defined as operating profit excluding discontinuing and exceptional costs.

2 Adjusted earnings per share is based on profit attributable to ordinary equity holders adjusted by adding back discontinuing and exceptional costs, and adjusting for the tax thereon.

3 Including discontinuing costs of £nil (2015: £0.3m) and exceptional costs of £nil (2015: £0.9m).

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 2016

Post Year End Highlights

Steve Parkin, Executive Chairman of Clipper commented:

"The Group is proud of its reputation as a leader in the development of innovative logistics solutions to meet the challenges of retailers in an increasingly changing consumer landscape. Our latest set of full year results reflects the confidence that our customers, both long-standing and new, place in our ability to provide services that allow them to consistently achieve their service proposition to their customers. Clipper's strategy of driving organic growth and seeking targeted acquisitions, whilst working with some of the UK's most recognised and respected brands, continues to drive shareholder value. Our new financial year has started well with a strong pipeline of opportunities and we look forward to updating the market as these crystallise in the coming months. In addition, our new Click and Collect solution for the high street, developed in collaboration with John Lewis, will provide nationwide coverage from the Autumn and we are in discussions with a number of retailers about this unique service."

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 proud to present our 2016 financial results following our second anniversary of listing on the London Stock Exchange in June 2014.

During our second year as a listed company, we have seen continued growth. This growth is a result of our ability to think outside the box and deliver innovative, best-practice, low-cost solutions for our extensive blue-chip client base. Our recognised skills in delivering these solutions mean we remain confident of our ability to continue this momentum.

The Group has seen a strong performance throughout the year under review, with a number of high-profile contracts starting, including those with M&Co, Zara, Haddad, and Pep&Co. In addition, our commercial vehicles business has performed very strongly.

Servicecare Support Services Limited ("Servicecare"), which we acquired in December 2014, has extended our ability to offer a comprehensive returns management solution under our "Boomerang" brand, and Servicecare is delivering results in line with our expectations.

Our driving force remains our focus on identifying new services, processes and solutions that address the operational needs of our customers. Our unrivalled understanding of the dynamics of e-retail and multi and omni-channel retailing, coupled with the dramatic changes taking place in these sectors, provide the Group with exceptionally strong strategic positioning for the future.

We are particularly excited about the prospects for our new dedicated next day Click and Collect solution, developed in collaboration with John Lewis. This is a service designed to address the rapidly growing need for retailers to offer an effective next day service to store for orders placed online. After an initial trial period involving 115 Waitrose stores, the service will be extended to the whole Waitrose estate in late summer 2016, and we are in advanced discussions with a number of other retailers who wish to use the service.

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

Group results

Group revenues increased by 23.7% to £290.3 million for the year to 30 April 2016, and Group Adjusted EBIT* increased by 21.0% to £14.5 million.

Adjusted earnings per share were 10.3 pence for the year to 30 April 2016 (2015: 8.4 pence), an increase of 22.6%.

On an unadjusted basis earnings per share were 10.3 pence (2015: 7.3 pence).

Net debt was £18.8 million at the year end, 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), and paying £2.2 million in deferred consideration in respect of the acquisition of Servicecare.

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.

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 Sean Fahey (CIO), the Company benefits from the combined experience of its Non-Executive Directors: Paul Hampden Smith (Senior Independent Non-Executive Director), Stephen Robertson, Ron Series and Mike Russell.

Dividends

The Board is recommending a final dividend of 4.0 pence per share, making a total dividend in respect of the year ended 30 April 2016 of 6.0 pence per share (2015: 4.8 pence), an increase of 25.0%.

The proposed final dividend, if approved by shareholders, will be paid on 20 October 2016 to shareholders on the register at the close of business on 23 September 2016.

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 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 continue to achieve further growth, both in the UK and internationally.

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

Operating and Financial Review

1. Overview of results

The Group continued to make excellent progress in the financial year to 30 April 2016.

Group revenue

Group revenue increased by 23.7% to £290.3 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.

Within the logistics services segment, the Group benefited from:

Revenue growth in commercial vehicles was driven by:

Group Adjusted EBIT

Adjusted EBIT is the primary Key Performance Indicator ("KPI") by which the management team assesses corporate performance. Adjusted EBIT is assessed against Board approved budgets. A further KPI is net debt, which is discussed below.

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

Group Adjusted EBIT is defined as Group operating profit excluding discontinuing and exceptional costs.

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

Group Adjusted EBIT increased by 21.0% to £14.5 million in the year to 30 April 2016, and 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 2016, the commencement of activities on further new contracts and a strong new business pipeline.

Adjusted EBIT margin (%) is not a key metric as 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, Adjusted EBIT is a more relevant measure of financial performance than Adjusted EBIT margin (%).

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.

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.

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. In our 2015 Annual Report, we stated our intention to invest more in such resources during the year ended 30 April 2016 and we have done so, particularly in operational support and business development. Additionally, the central logistics overheads have increased in the year due to share based payment charges. In the year, we have restructured the reporting within the central logistics management team, 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 further 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 full year costs of the Group General Counsel and Deputy Chief Financial Officer both appointed during the year ended 30 April 2015 to strengthen the senior management structure of the Group post-IPO, and incremental Non-Executive Director costs and share based payment charges following the Group's listing on the London Stock Exchange.

Share based payment charges totalling £0.5 million (2015: £0.1 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 22 to the Group Financial Statements). Since listing on the London Stock Exchange in the year ended 30 April 2015, 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 2016 included a full year of charges in respect of options granted in the year ended 30 April 2015, together with a part year of charges in respect of options granted in the year ended 30 April 2016; the prior year only incurred a part year of charges in respect of options granted in the year ended 30 April 2015.

The profit after tax for the year to 30 April 2016 was £10.3 million (2015: £7.3 million). In the year ended 30 April 2016, there were no discontinuing costs (2015: £0.3 million) and no exceptional costs (2015: £0.9 million) expensed in arriving at this figure.

As such, adjusted profit after tax (which excludes the discontinuing costs, exceptional costs and the tax associated with those costs) for the year to 30 April 2016 was also £10.3 million (2015: £8.4 million), an increase of 23.6%.

Of the exceptional costs of £0.9 million incurred in the year to 30 April 2015, £0.7 million related to the costs of the IPO and £0.2 million related to legal and professional expenses incurred on the acquisition of Servicecare.

Net interest charges

Net interest charges for the year to 30 April 2016 were £1.4 million, in line with the charge incurred in the previous year.

Taxation

The effective rate of taxation of 21.2% (2015: 22.8%) is higher than the standard UK rate of corporation tax of 20.0% (2015: 20.9%) principally due to certain expenditure incurred which is disallowable for tax purposes and the higher rate of tax to which our German business is subject. The reduction in the year-on-year effective rate of taxation stems from the reduction in the headline rate in the UK, together with a reduction in the quantum of disallowable items, some of which related to the exceptional and discontinuing items in the year ended 30 April 2015.

Earnings per share

As discussed above, there were no non-recurring costs in the year ended 30 April 2016 (2015: £1.2 million).

Earnings per share were 10.3 pence for the year to 30 April 2016 (2015: 8.4 pence adjusted, 7.3 pence unadjusted).

Capital expenditure

Of total capital expenditure of £16.2 million (2015: £7.8 million), £15.5 million (2015: £7.3 million) related to the logistics services segment and £0.7 million (2015: £0.5 million) related to the commercial vehicles segment. Of the £15.5 million attributable to the logistics services segment, approximately £10.7 million is backed by customer commitments to repay Clipper over the term of the customer contracts.

Clipper has committed to spending a significant sum on capital expenditure in the year ended 30 April 2017, with £9.5 million contracted at 30 April 2016 and £2.8 million in the course of construction (2015: £0.8 million and £nil). £9.5 million of the total relates to the new Northampton shared-use facility where John Lewis is the core client. Where a customer has a strong credit rating, we will often fund the initial capital requirements and customers will commit to repay us over the term of the contract, together with finance charges and a management fee.

Goodwill and other intangible assets

The goodwill recognised on the acquisition of Servicecare in the year ended 30 April 2015 amounted to £4.2 million, and the contracts and licences, principally in respect of customer relationships, were valued at £1.2 million. We have not revised the acquisition fair values of the acquired assets in the twelve months' post-acquisition and so the gross value of the goodwill and contracts and licences recognised on 30 April 2016 remain at the same values as they were on 30 April 2015. The amortisation recognised through the income statement in the year ended 30 April 2016 in respect of this acquisition amounted to £156,000.

Cash flow

Cash generated from operations was £20.5 million (2015: £12.6 million, after paying £2.1 million of IPO transaction costs, so £14.7 million before taking account of such costs), an increase of 39.8%.

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 used in working capital was broadly neutral in each of the two years ended 30 April 2016 and 30 April 2015.

Net cash paid in the year to 30 April 2015 for the purchase of Servicecare amounted to £3.7 million. A further £2.2 million was paid in deferred consideration in the year ended 30 April 2016.

There has been significant investment in the fixed assets base this year, as noted above. However, providing the terms are commercially acceptable, we typically fund 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 2016 was £5.9 million compared to £0.3 million in the year ended 30 April 2015.

The Group repaid £10.1 million of bank loans in the year, including £10.0 million of Medium Term Loans, £8.75 million of which was repaid on the renegotiation of its principal bank facilities with Santander (see 'Net debt' section below). £6.4 million of new loans, including £5.5 million of the Revolving Credit Facility under the modified principal bank facilities, have been drawn in the year.

In line with the stated dividend payment policy, 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 were paid in the year to 30 April 2016. This compares to the maiden interim dividend of £1.6 million (1.6 pence per share) and the dividend of £0.3 million paid to the former parent company prior to IPO in the year to 30 April 2015.

Net debt

In addition to Adjusted EBIT, net debt is considered a Key Performance Indicator for the Group. As with Adjusted EBIT, net debt is assessed against Board approved budgets.

The Group had £18.8 million of net debt outstanding at 30 April 2016 (2015: £13.6 million), broadly in line with expectations. The increase in net debt compared to the prior year was driven primarily by the need to invest in capital assets to service significant new contracts, largely backed by contractual commitments from customers to repay that capital expenditure over the term of the contract, together with both finance and management fees.

The Group renegotiated its principal bank facilities in the year ended 30 April 2016. Before the modification, the Group had principal bank facilities comprising a Medium Term Loan of £8.75 million, a committed Revolving Credit Facility of £12.5 million maturing in April 2019 and an overdraft facility of £5.0 million, renewed annually. After the modification, the Group's principal bank facility is a £30.0 million Revolving Credit Facility committed until January 2021, from which an overdraft of £8.0 million and bonds and guarantee facilities of £2.4 million have since been carved out (£2.3 million of bonds and guarantee facilities were in place at 30 April 2016, with a further £0.1 million carved out subsequent to the year end). Additionally, the interest margin and the covenant requirements are more favourable to Clipper under the renegotiated facility than under the facilities it replaced.

2. Value-added logistics services

Market overview, size and growth of market and market trends

Traditional bricks and mortar retail still constitutes the majority of retail sales in the UK. However, in fashion the growth of online retailing and the desire for major retail brands to have as many different touch points with their customers as possible means that multi-channel retailing will be a dynamic driver of change for both the retail and logistics markets in the near future. An increasing number of distribution channels are now required to meet the demands of the consumer, including shopping at stores, home delivery, Click and Collect as well as the return of purchased items. The fact that the penetration of internet-based sales in the UK economy (12.5% of total retail sales in 2015 (Source: ONS)) is one of the highest in the world leads the Directors to believe that the UK is at the forefront of the logistics challenges being posed to retailers by the growth in online retail.

The retail sector is undergoing structural changes and, as a market leader in the provision of services to support retailers' online and returns management challenges, the Group is strategically well-placed to capitalise on the very significant growth expected in this sector of the market.

According to market research (Source: IMRG), the UK's e-commerce market has grown from £0.8 billion in 2000 to £104 billion in 2014 and £114 billion in 2015 (10% annual increase), with a further 11% growth forecast in 2016. Within that market there are also significant changes taking place:

In 2015, 12.5% of sales in the UK were online (Source: ONS); by 2022, one third of sales in the UK are forecast to be conducted online (Source: Insider Trends). The rest of Europe is also experiencing a similar trend. Germany is the second largest e-commerce market in Europe after the UK. Here, online retail sales are forecast to reach €73 billion by 2019, and Europe as a whole is forecast to generate €233 billion of online retail sales by 2018 (Source: Forrester Western European Online Retail Sales Forecast for 2013 to 2018).

Structural growth in online, multi-channel and omni-channel retailing

The UK has one of the highest rates of internet and smartphone penetration in Western Europe and this level of penetration is expected to increase further in coming years. The proportion of online sales as a percentage of total retail sales in the UK is already one of the highest in the world (Source: eMarketer December 2014).

This trend has fundamentally altered the logistical requirements of retailers, who must meet the challenges of multi-channel retailing (whereby customers place orders across a variety of sales channels, for example retail stores, online stores, mobile stores and telephone sales), which demands complex warehousing, order processing and stock management systems in order to deliver a high quality service to consumers.

Omni-channel represents the latest evolution of multi-channel retailing, whereby retailers offer consumers flexibility not only on the method of order placement (as is the case with multi-channel) but also in respect of the choice of delivery destination - for example, the consumer might place an order online and choose to have the order delivered to that retailer's high street store, or at a Click and Collect site in a third party location, rather than their home address. Retailers are embracing the trend towards Click and Collect as it brings customers in-store inspiring impulse purchases and building brand loyalty. This development adds even greater complexities to the logistical requirements of retailers.

Returns management demands of retailers increasingly complex

Returns management continues to be an ever-increasing area of importance for retailers. Depending upon the category involved, returns rates can vary from less than 10% to over 35% (Source: Metapack). A recent market study highlighted that 83% of consumers would stay loyal to a retailer if it could provide a reliable and effective returns service (Source: Metapack). Retailers are therefore focusing more and more on consumers' returns experience, just as much as they are on consumers' purchase experience. Retailers are increasingly focusing on ensuring that returns management is handled effectively so that their brands are not damaged by customers using social media to comment unfavourably on their experience.

Where historically customers would return the product to the store where the purchase was made, more recently as online retail has developed, customers are demanding choice in their method of return, for example posting the product back to the retailer, or taking it into a high street store or a collection point. As well as providing this range of returns methodologies from which consumers can choose, it is good practice for the retailer, particularly e-tailers, to also provide returns ready packaging and ready-printed returns labels not requiring pre-authorisation, and for the consumer to receive credit for any goods returned as soon as possible.

This developing returns culture has several implications for retailers. Returns cost money so many retailers bear the cost to ensure that they don't risk alienating their customers. Free returns as part of an offer in fashion for example are used as a sales generator to help with conversion. By focusing on improving the returns process, retailers can reduce the adverse impact on their bottom lines. In addition, product cleaning and rectification during the returns management process can maximise the saleable value to the retailer of returned goods.

Managing the returns process also represents a stock management and processing challenge for retailers, since traditional distribution centres are designed to receive and process bulk quantities of identical product, rather than to receive individual units of product. Equally, such returned units will inevitably require some degree of inspection, rectification, cleaning or repair before going back into available stock, or may even be deemed unfit for prime sale. Traditional warehouses are simply not geared up for dealing with such a high level of intervention for single products.

Retailers therefore need to rework the product into a saleable state very quickly to reduce working capital investment and maintain margins. Clipper's returns proposition gets the stock back into a distribution centre compliant format allowing the distribution centre to focus on its core function of fulfilment. The Group has a strong track record of managing these processes for customers, including managing the returns operation for ASOS, the UK's leading online fashion retailer, and for s.Oliver, one of the largest fashion and lifestyle companies in Europe.

Further, the power of social media and consumer review websites enhances the importance of returns management as the returns experience represents the final touch point between a retailer and the consumer - a badly handled customer experience in respect of the returns process may be quickly communicated by that customer to a large number of people, particularly via social media, which has the potential to harm a retailer's future sales prospects.

To address the latest challenges faced by retailers in relation to returns management as outlined above, Clipper has successfully introduced the 'Boomerang' brand and concept, and we are particularly pleased to report that under Boomerang approximately 95% of products have been successfully returned to prime stock at first pass.

Servicecare brings additional returns handling capabilities to Clipper. Servicecare specialises in electrical reverse logistics, a solution which had, until the acquisition, represented a gap in Clipper's service offering. The Servicecare proposition adds additional capability into our Boomerang brand. We are promoting the Boomerang brand across Servicecare's existing customers and are broadening our service offering with existing Clipper customers with the Servicecare electrical returns proposition, as evidenced by our securing of the contract with John Lewis which includes an electrical returns aspect.

Our inaugural reverse logistics contract in mainland Europe commenced in the year ended 30 April 2015 with s.Oliver in Germany, owners of a global fashion brand. Under the contract, Clipper manages s.Oliver's European wholesale and retail returns management service.

Mechanisation and technology

Mechanisation and semi-automation is becoming increasingly prevalent in the market for large volume customers. Clipper's in-house knowledge and skill allows us to work in a collaborative way with our customers to deliver best practice solutions. Clipper has recently completed a number of client initiatives in the year just ended and is working on a number of other such projects in the current year, including:

The majority of capital costs on contracts are typically front-loaded and occur in the run up to project 'go live'. A number of contracts, including the new Northampton logistics facility initially providing ancillary services for John Lewis and Clipper's Click and Collect offering, have significant capital commitments authorised at 30 April 2016 totalling £16.7 million (2015: £9.4 million). Customer-specific capital costs such as warehouse fit-out costs are typically recovered through depreciation and finance charges to our customers over the life of the underlying customer contract; speculative space fill capital investment such as adding new mezzanine flooring tends to be recovered from customers when the space is ultimately filled. The majority of capital expenditure is financed through hire purchase agreements.

E-fulfilment & returns management growth

Our ability and agility, particularly in respect of omni-channel, multi-channel, returns management and mechanisation noted above, have enabled the Group to make substantial advances in its revenues and earnings, significantly outperforming market growth. Revenues from e-fulfilment & returns management services increased by 61.1% from £60.6 million for the year to 30 April 2015 to £97.6 million for the year to 30 April 2016, with Adjusted EBIT growing by 47.6% from £5.5 million to £8.1 million over the same period. This is a particularly pleasing performance, as one of our core strategies has been to become 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 SuperGroup, ASOS, Wilko, John Lewis and Tesco, the full year impact of the s.Oliver operations commenced in the year ended 30 April 2015, and the new operations commenced with Zara, Browns and Ireland's largest retailer in the year ended 30 April 2016 have all contributed favourably to the growth in this business activity year-on-year.

The results of this business activity include a full year contribution from Servicecare in the year ended 30 April 2016 compared to only five months in the year ended 30 April 2015 following its acquisition in December 2014. In addition to the full year effect, Servicecare also delivered significant organic growth year-on-year, and profitability is in line with our expectations at the time of the acquisition.

This business activity saw the launch of a collaboration with John Lewis in September 2015. This collaboration initially involved providing John Lewis with a Click and Collect service, comprising automated parcel sortation and transport distribution services, to 115 stores in the Waitrose portfolio, 33% of the total Waitrose store estate. The remainder of the Waitrose store estate will be added from August 2016. We are also in advanced discussions with other Clipper customers who wish to use this network. This collaboration with John Lewis leaves Clipper extremely well-positioned to exploit this strategically important growth area of the market.

Despite the increasingly challenging logistics demands of the Black Friday-Cyber Monday weekend in the UK outlined previously, Clipper delivered a very successful 2015 Black Friday-Cyber Monday trading period for its clients and maintained excellent service levels throughout.

Clipper had been providing e-commerce fulfilment services to Tesco in a property leased by Tesco in Daventry. As a result of underutilised space elsewhere in its property portfolio, Tesco has opted not to renew its Daventry lease and intends to relocate into its Fenny Lock property from August 2016. The compensation for this early termination means Clipper's profit and loss account for the year ended 30 April 2017 will not be adversely impacted by this.

In this business activity, since the year end on 30 April 2016:

In April 2016 we appointed a new Managing Director at Servicecare to drive the future growth and development strategy of the business. The new Managing Director brings a wealth of experience in electrical returns, having previously held senior roles at Panasonic and Comet. He is working alongside the UK Logistics team to broaden the service offering to existing customers to also include electrical returns.

Non e-fulfilment logistics is central to our 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 our transport and high value logistics activities.

Revenue from non e-fulfilment operations grew by 6.1% for the year ended 30 April 2016, from £102.1 million to £108.4 million, with Adjusted EBIT increasing by 6.4%, from £10.1 million to £10.7 million.

Within non e-fulfilment, the full year effect of the contracts secured in the prior year with Philip Morris and Ted Baker in the UK contributed to revenue and EBIT growth, as did organic growth on existing contracts with Sainsbury's, British American Tobacco, SuperGroup and Bench. Our transport operations at Rotherham and Harlow and our tobacco contract packing operations at Brighouse also performed particularly strongly, but this was partly offset by the cessation of the Aurora and Michael Lewis contracts during the year.

In the year just ended, we implemented a complex operational change to the SuperGroup activity in Burton whereby the e-commerce and non e-commerce activities could both be serviced from a common pool of stock. The Group will continue to innovate to deliver best in class solutions for its customers.

Additionally, in the year to 30 April 2016 we commenced operating under new long-term contracts with:

In this business activity, since the year end on 30 April 2016:

Multi-user operations

The Group encourages the use of multi-user sites, where a multiplicity of customers is served from a single location.

This facilitates the sharing of specialised resources, and assists in optimising and balancing demand on people and facilities, in turn allowing the Group to provide cost-effective solutions.

Investment in key personnel

The Group differentiates itself by providing consultancy-led, value-added services to its actual and prospective client base. We have established ourselves as a thought leader within the logistics sector, and this is evidenced both by our customers' buy-in to our 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, we invest 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.

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

3. Commercial vehicles

The commercial vehicles business delivered EBIT of £2.3 million in the year to 30 April 2016 (2015: £1.9 million), an increase of 20.8% 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, and in the year ended 30 April 2016 Northern Commercials added an Iveco sales office on the sub-dealer's site in Liverpool. Thus, the business operates across the north of England and Wales (with sub-dealers supporting this geographic territory), through the midlands, and into the south-east.

The business sold 1,792 new vehicles in the year to 30 April 2016 (2015: 1,810), and 443 used vehicles (2015: 470). However, due to a change in mix of vehicles sold, the average selling price of a new vehicle in the year to 30 April 2016 was £29,000 compared to £23,000 in the prior year, an increase of 26.1%, and the average selling price of a used vehicle was £11,000 compared to £9,000 in the prior year, an increase of 15.8%. Servicing saw increases in revenue between the year ended 30 April 2015 and the year ended 30 April 2016, with a 7.2% increase in the number of hours sold, and parts sales increased by 4.1%.

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

The business achieved a number of important key performance measures in the year:

4. Current trading and outlook

As noted previously, the Group secured a number of significant contract wins in the two years ended 30 April 2016, the full year benefit of which will not be realised until the years to 30 April 2017 and 30 April 2018.

As we look ahead to the 2017 financial year, we have a strong new business pipeline. Since the year end we have won new contracts within both e-fulfilment & returns management services and non e-fulfilment logistics, both in the UK and Europe, through our focus on our 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. We look forward to updating shareholders on the progress of these new contracts.

The structural management changes we have made in central logistics, and key personnel changes in Servicecare, leave us ideally positioned to proactively and reactively scale-up our activities as necessary. These changes will enable us to cross-fertilise Clipper's and Servicecare's activities and customers and will allow us to deliver further growth.

Our new Click and Collect solution in collaboration with John Lewis, soon to experience an increase in level of activity when the second sorter hub goes live in Northampton in August 2016, is expected to generate a strong financial contribution from the year ending 30 April 2017 onwards.

The commercial vehicles business is expected to continue to deliver steady growth in profitability in the year to 30 April 2017.

Following the UK referendum decision to exit the European Union, we do not anticipate any immediate impact on our activities. We believe our business model, whereby the majority of our contracts are on an open-book or minimum volume basis, coupled with fuel price escalators in our other contracts, means we will be able to mitigate the effect of short term economic uncertainty. We will continue to monitor and react accordingly to the development of the new trading environment as the details of the exit process become clearer.

The Board is confident in the Group's prospects for the full year ahead. Current trading is in line with our strategic plan, and we are confident of achieving another period of excellent financial performance in the year to 30 April 2017.

By order of the Board

Steve Parkin, Executive Chairman

1 August 2016

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

Whilst the financial information included in this preliminary statement has been prepared on the basis of the requirements of IFRSs in issue, as adopted by the European Union and effective at 30 April 2016, 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 2016 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 2016 was approved by the Board on 1 August 2016. Statutory accounts for the year ended 30 April 2016 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.

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

*Earnings per share adjusted for discontinuing and exceptional costs as described in note 11.

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 Preliminary Statement

1. General information

The results comprise those of Clipper Logistics plc and its subsidiaries for the year ended 30 April 2016 and does not constitute the Group's statutory accounts for the years ended 30 April 2016 or 2015, 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 2016 and 30 April 2015 have been reported on by the auditors who issued an unqualified opinion in respect of both periods and the auditors' reports for 2016 and 2015 did not contain statements under 498(2) or 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 30 April 2015 have been filed with the Registrar of Companies. The statutory accounts for the year ended 30 April 2016, which were approved by the Board on 1 August 2016, 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 2016 were authorised for issue by the Board of Directors on 1 August 2016 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, 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 2015.

In the current year, amendments to IAS 19 and those arising from the annual improvements to IFRSs 2010-2012 & 2011-2013 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

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 are aggregated into one reportable 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 Group has no customers that account for greater than 10% of the total Group revenue.

The following tables present profit information for continuing operations regarding the Group's business segments for the two years ended 30 April 2016:

Operating profit before non-recurring items:

Exceptional and discontinuing costs:

Operating profit and profit before income tax:

1 Professional fees and other costs paid in relation to the Initial Public Offering. The majority of IPO costs were incurred in the year ended 30 April 2014.

2 Head office costs in previous years included a number of items which are not being borne by the Group post-Admission. These consist of certain advertising, sponsorship and corporate entertaining expenses, remuneration of a retiring Director, consultancy and professional fees in respect of potential investment opportunity appraisals and the costs of operating the Chairman's private office.

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 12) 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/(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 23 September 2016. 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 21% to 20% with effect from 1 April 2015. Legislation to reduce the rate to 19% with effect from 1 April 2017 and to 18% with effect from 1 April 2020 was substantively enacted at 30 April 2016. Legislation to further reduce these rates (to 18% and 17% respectively) was progressing, but not substantively enacted at 30 April 2016. A rate of 18% (2015: 20%) has been applied in the measurement of the Group's 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 basic earnings per share computation:

Adjusted earnings per share

As set out in note 4, during the year ended 30 April 2015 there were a number of non-recurring costs. Consequently, the basic measure of earnings per share is distorted by this.

Adjusted earnings per share:

12. Property, plant and equipment

Included within property, plant and equipment are amounts held under finance lease contracts. At 30 April 2016 the net book value of these assets was £10,638,000 (30 April 2015: £5,231,000).Total additions include £8,172,000 (2015: £2,070,000) under finance lease contracts.

Additions to plant, machinery, fixtures & fittings include £2,823,000 (2015: £nil) in respect of assets in the course of construction.

13. Intangible assets

The average remaining useful life of contracts & licences at 30 April 2016 is 6.5 years (2015: 7.6 years)

14. Impairment test for goodwill

The carrying amount of goodwill has been allocated to cash generating units ("CGU"s) 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 2019.

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 2016 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% (2015: 2.5%) to 2026 (2015: 2025). The cash flows have then been discounted using a pre-tax risk adjusted discount rate of between 9 and 11% (2015: 10%). 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.

15. Inventories

See below for the movements in the provision for obsolescence:

The cost of inventories recognised as an expense amounted to £82,398,000 (2015:£ 69,720,000).

Included within commercial vehicles is £930,000 (2015: £1,141,000) relating to assets held under hire purchase agreements.

16. Trade and other receivables

See note 25 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 20 days (2015: 23 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:

17. Cash and cash equivalents