CLG.L Regulatory News (CLG)

25 August 2021

Clipper Logistics plc

Final Results for the year ended 30 April 2021

Structural shift to online driving further momentum

Clipper Logistics plc ("Clipper", the "Group", or the "Company"), a leading provider of value-added logistics solutions, e-fulfilment and returns management services, is pleased to announce its Full Year Results for the year ended 30 April 2021.

Financial Highlights for the year ended 30 April 2021

1. This is an alternative performance measure ("APM"). EBIT is defined as operating profit, including the Group's share of operating profit in equity‑accounted investees and before the amortisation of intangible assets and other exceptional costs. Underlying EBIT excludes the impact of IFRS 16 from both years and in the year ended 30 April 2020 a £3.5 million 'negative goodwill' credit release relating to the IFRS 3 business combination. Underlying profit after tax and Basic EPS exclude the impact of the 'negative goodwill' credit of £3.5m in the year ended 30 April 2020. A reconciliation of APMs can been found in Operating and Financial Review. These APMs apply throughout this announcement.

2. EBITDA is defined as profit before interest, tax charges, depreciation and amortisation excluding the impact of IFRS 16 (see note 27).

Operational Highlights for the year ended 30 April 2021

Post Year End Highlights

Outlook

The Group continues to be a leading provider of value-added logistics and e-fulfilment solutions to the retail sector in the UK and is rapidly growing its operations in Mainland Europe. The structural shift to online during the pandemic with continuing momentum in e-fulfilment post pandemic together with strategically aligned acquisitions will help drive further shareholder value in future years.

The Group has made a strong start to the new financial year and is trading in line with its recently upgraded guidance for FY22. The Group's pipeline of new opportunities remains buoyant and further momentum with new contract wins is expected during the year.

Steve Parkin, Executive Chairman of Clipper commented:

"I am pleased to report a very strong set of results, which in a very fluid environment demonstrates the ability and agility of the Group and the robustness of our business model to capitalise upon opportunities and deliver growth. We have grown revenue by £195.5 million to £696.2 million and we have also grown Underlying EBIT¹ by a much larger 52.4% to £31.4 million. The market has witnessed significant recent change particularly with the acceleration of the growth in e-fulfilment which now represents 70% of our logistics revenue. Our unique proposition, which offers the full end to end range of services within the e-commerce field, has allowed the Group to benefit from this strong dynamic and will provide further momentum in the coming years. Our recent contract wins demonstrate that we are our customers' partner of choice both in and outside of the UK, for delivering innovative, sustainable, and resilient added value solutions.

I would like to personally thank all of our colleagues throughout the business, for their commitment and engagement in maintaining our services through the pandemic.

Our highly deployable asset-light model has enabled us to reinforce our pan-European proposition during the financial year, which together with a strong pipeline of new business activity ensures that the Group is in an excellent position to achieve further growth both domestically and internationally. The prospects for the Group remain strong and we are confident that we will deliver further shareholder value accretion in the coming years".

Forward Looking Statements

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

Publication of Annual Report and Accounts

Clipper's 2021 Annual Report and Accounts will be available on the Company's website: https://www.clippergroup.co.uk/report-accounts/ and will shortly be submitted to the National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

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

The results will be presented via conference call at 9.30am for analysts only on the morning of the announcement; please contact Buchanan at clipper@buchanan.uk.com if you would like to join. An audiocast of the meeting will be made available on the Group's investor relations website later on the day of the results.

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

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

Enquiries

Chairman's Statement

As Chairman of Clipper Logistics plc, I am pleased to present our financial results for the year ended 30 April 2021.

I am pleased to report the outstanding performance of the Group for the year ended 30 April 2021. Against an uncertain backdrop, the resilience of our business model has been proven once again. We grew revenue by £195.5 million to £696.2 million, an increase of 39.1% from the prior year. Even more pleasing is the fact that underlying EBIT¹ has grown ahead of sales, having increased to £31.4 million representing growth of 52.4% compared to the prior year.

Driving this growth has been the permanent structural shift to online. Approximately 70% of revenue in our value-added logistics services segment is generated from e-commerce activities. As a business we are very well placed to capitalise on further global growth in the coming years. Our recent contract wins demonstrate that our customers are confident that we are their partner of choice both in and outside of the UK in delivering innovative, sustainable, and resilient value add solutions.

Our unique service propositions providing full end-to-end e-commerce solutions is what differentiates us from our competitors. This coupled with our highly deployable asset-light model has enabled us to reinforce our pan-European position during the financial year.

To illustrate this, I am pleased to report the opening of our new facility in Venray, Netherlands, adding another territory to our current portfolio and the significant acceleration of our growth in Poland following the expansion of our contract with ASOS and the implementation of a returns solution for Zalando.

We now have over 16.0 million square feet of space under management in over 50 locations in five territories across Europe. The Group is actively pursuing further organic and M&A opportunities in Europe and North America in order to further position the Clipper brand and expertise as a global e-commerce logistics player.

Since the end of the previous financial year, we have worked in conjunction with the Department of Health and Social Care, Royal Mail and eBay to ensure vital PPE and other healthcare ancillaries are where they are most needed. With our partners we have delivered to over 600 hospitals, and some 70,000 other local healthcare providers during the COVID-19 pandemic. I am proud of the contribution that we as a Group have played to support the country during the pandemic.

We have ensured that our workplaces have been safe environments to work in at all times beyond Government guidelines. I would like to personally thank all of our colleagues throughout the business, for their commitment and engagement to ensure that we as a business have played our part in ensuring the continuity of supply chains in all of the sectors we serve.

We have seen our e-fulfilment & returns management revenues grow by 52.0% and our non e-fulfilment activity grow by 35.4%, well ahead of the market and our industry peers which reinforces our positioning as a retail enabler.

Our Technical Services division continues to grow both within the UK and in Europe. Our investment in existing facilities will allow for additional processing capacity.

I am delighted to welcome our new customers, including Mountain Warehouse and JD Sports with whom we are commencing new operations in the financial year ending 30 April 2022. In addition, we have been able to demonstrate the benefit for customers to outsource their supply-chain by joining our shared user operations and are delighted to integrate the River Island site in Milton Keynes into the Clipper network.

Alongside our logistics activity we are pleased to welcome Wippet to the Group. Wippet will launch an online B2B marketplace to service the broader healthcare sector in the UK. This new investment is aligned to the Group's strategic intent to extend its penetration into the Life Sciences sector, which we have previously highlighted as a potential significant growth opportunity for the Group.

These opportunities will drive further EBIT¹ growth in the next financial year.

Group results

Group revenue increased by 39.1% to £696.2 million for the year ended 30 April 2021 (2020: £500.7 million), and our group underlying EBIT¹ (IAS 17 basis) grew by 52.4% to £31.4 million (2020: £20.6 million).

On an IFRS 16 basis our Group EBIT¹ grew by 22.5% to £39.8 million (2020: £32.5 million).

Diluted earnings per share were 20.9 pence for the year ended 30 April 2021 (2020: 15.8 pence), an increase of 32.3%. Basic earnings per share were 21.3 pence (2020: 15.9 pence), an increase of 34.0%.

People and Board

Clipper Logistics plc is led by a very experienced and international management team which has been able to support the growth acceleration in a highly fluid environment.

The team has a proven track record of identifying key trends within our markets to develop and deliver innovative and cost-effective solutions to drive organic growth, and in addition continues to seek strategic acquisitions in new geographies that will further enhance Group performance and shareholder value.

Governance

The executive management team comprises Tony Mannix (Chief Executive Officer), David Hodkin (Chief Financial Officer) and myself, and the Group benefits from the combined experience of Christine Cross (Senior Independent Director), Dino Rocos and Stuart Watson, our Independent Non-Executive Directors. I would like to thank all members of the Board for their invaluable contribution this year.

Dividends

The Board is recommending a final dividend of 7.1 pence per share, making a total dividend in respect of the year ended 30 April 2021 of 11.1 pence (2020: 9.7 pence) in line with our progressive dividend policy.

The proposed final dividend, if approved by shareholders, will be paid on 15 October 2021 to shareholders on the register at the close of business on 17 September 2021.

Outlook

The Group continues to be a leading provider of value-added logistics and e-fulfilment solutions to the retail sector in the UK, and is rapidly growing its operations in Mainland Europe.

Our pipeline of new opportunities remains strong and we expect further momentum with contract wins in the current financial year.

The Group's strong track record of providing innovative solutions, and supporting retailers in driving growth, cost efficiency and excellent customer service has strategically positioned us well to seize further opportunities. Our very agile and entrepreneurial culture has been a significant advantage to support our customers and enable retail.

The structural shift to online during the pandemic with continuing momentum in e-fulfilment post-pandemic together with strategically aligned acquisitions will drive further shareholder value accretion in the future years.

Steve Parkin

Executive Chairman

Operating and Financial Review

Group performance for the year ended 30 April 2021

The Group delivered a very strong performance in the financial year ended 30 April 2021 against a fluid background arising from the ongoing COVID-19 pandemic. The results reflect the resilience of the business model, being well positioned in a growing e-commerce market, together with the Group's ability to rapidly respond to changing circumstances.

Group revenue grew by 39.1% to £696.2 million. Group EBIT¹ for the year was £39.8 million compared with £32.5 million in the prior year, an increase of 22.5%. Underlying EBIT¹ grew by 52.4%.

Group revenue

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

Group revenue growth in the current year is largely attributable to the value-added logistics services segment, which grew by 46.3% to £615.6 million, with e‑fulfilment & returns management services growing by 52.0% to £420.9 million and non e-fulfilment logistics growing by 35.4% to £194.7 million.

Revenue from the commercial vehicles segment was £83.6 million and remained flat year‑on‑year.

Group EBIT¹

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

Group EBIT¹ grew by 22.5% to £39.8 million in the year ended 30 April 2021 (2020: £32.5 million). Both segments grew strongly with value-added logistics services growing by 21.8% to £40.1 million and the commercial vehicles division growing by 40.4% to £3.3 million.

This growth is in part attributed to the revenue growth in the current year of 39.1%. There is a material non‑underlying factor impacting the prior year.

£3.5 million of favourable contribution resulted from a 'negative goodwill' credit arising on a business combination in the year ended 30 April 2020 (see note 29 to the Group Financial Statements). This has been split equally between e‑fulfilment & returns management services and non e‑fulfilment logistics with £1.75 million in each. There was no similar contribution to EBIT¹ in the current year.

Excluding the 'negative goodwill' credit from the prior year and the impact of IFRS 16 leases (impacting both years), underlying EBIT¹ increased by £10.8 million (52.4%) in the year ended 30 April 2021 compared to the prior year. The table below normalises the effect of these impacts:

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

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

EBIT¹ margin (%) is not considered by the Directors to be a key metric since the high proportion of open book and minimum volume guarantee contracts within the value-added logistics segment distorts reported margins. This is due to an element of management fees on certain contracts being relatively fixed in the short term, so that an increase in revenue in periods of increased activity will not necessarily give rise to a proportionate increase in profit, resulting in lower reported margins. Conversely, in periods of reduced activity levels, reported margins would typically increase. Similarly, revenue derived from minimum volume guarantee contracts is fixed at a minimum level, so that a shortfall in activity levels would give rise to a lower cost base and a higher reported margin. In addition, within the commercial vehicles segment, the level of high value, relatively low margin new vehicle sales also distorts reported margins. Accordingly, EBIT¹ is a more relevant measure of financial performance than EBIT¹ margin (%).

Segmental trading overview

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

Value-added logistics services

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

Revenue in the year ended 30 April 2021 within the value‑added logistics services operating segment was £615.6 million, representing growth on the previous year of 46.3%.

This growth is due to a combination of the full year impact of new contracts won in the prior year, new contracts won in the year ended 30 April 2021 and organic growth in existing customers in the UK.

These revenue items had a positive impact on EBIT¹. EBIT¹ excluding non-underlying factors grew by £10.4 million to £31.9 million; growth of 48.4% in the year ended 30 April 2021. The trading factors contributing to the growth in this segment are covered in more detail below.

Reported EBIT¹ benefited from:

The following table normalises this together with the impact of IFRS 16 (impacting both years):

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

E-fulfilment & returns management services

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

E‑fulfilment & returns management services include the receipt, warehousing, stock management, picking, packing and despatch of products on behalf of customers to support their online trading activities, as well as a range of ancillary support services including returns management, branded as Boomerang™, under which returns of products are managed on behalf of retailers. This business activity also includes click and collect activities (through the Clicklink™ joint venture) and Technical Services.

Revenue from e‑fulfilment & returns management services increased by 52.0% from £277.0 million for the year ended 30 April 2020 to £420.9 million for the year ended 30 April 2021, with EBIT¹ excluding non‑underlying factors growing by 60.1% to £25.3 million. Reported EBIT¹ was 34.2% higher than in the previous year. Included within reported EBIT¹ in the prior year was £1.8 million of 'negative goodwill' relating to the business combination. There was no similar transaction in the current year.

The following table normalises this together with the impact of IFRS 16 (impacting both years):

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

This growth represents a significant increase on the double digit percentage EBIT¹ growth of prior years and delivers against our stated objective of being a market leader in the provision of value‑added services across the e‑fulfilment sector.

The solid financial performance in e‑fulfilment & returns management services benefited from the following:

Europe was impacted to a greater degree than the UK as a result of restrictions in response to the pandemic, with revenue falling 10% compared with the prior year.

Whilst we experienced some organic revenue decline with certain of our customers, overall revenue growth was strong due to the structural shift to online.

Since the year end, we have commenced activities with new customers including Mountain Warehouse, River Island and JD Sports which we expect to further drive EBIT¹ growth in the year ending 30 April 2022. In Europe, we are pleased that since the year end, we have experienced the return of high volumes on the Westwing contract, secured a contract extension with ASOS in Poland, commenced a trial with Zalando, and we have commenced operations in the Netherlands, a new jurisdiction for the Group, with Farfetch. The Board expects European logistics to be a high growth area of the Group in future years.

Non e-fulfilment logistics

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

Non e‑fulfilment logistics operations include receipt of inbound product, warehousing, picking, packing and distribution of products on behalf of customers in traditional bricks and mortar retail. Within this business activity, the Group handles high value products, including tobacco, alcohol and designer clothing, and also undertakes traditional retail support services including processing, storage and distribution of products, particularly fashion, to high street retailers.

Despite a difficult background during the pandemic, the Group is pleased to report that revenue from non e‑fulfilment increased by 35.4% for the year ended 30 April 2021, from £143.8 million to £194.7 million.

Reported EBIT¹ grew by 1.3% to £17.0 million in the year ended 30 April 2021. EBIT¹ in this business activity benefited from £1.8 million of 'negative goodwill' in the year ended 30 April 2020.

As a result, EBIT¹ excluding non‑underlying factors increased by 16.0% to £14.5 million in the year ended 30 April 2021. The following table normalises this together with the impact of IFRS 16 (impacting both years):

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

The following factors contributed positively to the EBIT¹ growth:

The following factors had an adverse impact on revenue and EBIT¹ year‑on‑year:

Central logistics overheads

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

Central logistics overheads include the costs of the directors of the logistics business, the project delivery and IT support teams, sales and marketing, accounting and finance, and human resources, that cannot be allocated in a meaningful way to business units.

Central logistics overheads increased by £1.0 million (13.3%), from £6.9 million in the year ended 30 April 2020 to £7.9 million in the year ended 30 April 2021.

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

Commercial vehicles

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

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

Commercial vehicles revenue for the year ended 30 April 2021 grew by a marginal 1.4% to £83.6 million despite a significantly reduced service operation with Government mandated closure of non-essential retail at various parts of the year in response to the COVID‑19 pandemic.

New vehicles sold in the year ended 30 April 2021 were 1,517; an increase of 118 units compared with the prior year. Used vehicle sales in the year ended 30 April 2021 were 376 units compared with 271 units in the prior year. Bodyshop and Service hours sold in the year ended 30 April 2021 were 147,758 compared with 147,279 in the prior year.

EBIT¹ for the year increased by 40.4% to £3.3 million as a result of the above, which is encouraging given the difficult background arising from the pandemic. EBIT¹ excluding non-underlying factors grew by 53.4% from £2.0 million to £3.1 million excluding the impact of IFRS 16.

Head office costs

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

Head office costs represent the cost of certain Executive and Non‑Executive Directors, other central senior management, plc compliance costs and the costs of the plc head office at Central Square, Leeds.

Head office costs increased by £0.8 million (28.9%), from £2.8 million in the year ended 30 April 2020 to £3.6 million in the year ended 30 April 2021. The year‑on‑year increase in head office costs is largely due to the recruitment of additional SMT members to support the future growth of the Group.

Overview of profit and loss performance for the year ended 30 April 2021

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

Overall share based payment charges

Share based payment charges of £0.7 million have been recognised in the income statement for the current year (2020: £0.3 million) primarily to central logistics overheads and head office costs (as appropriate) in respect of the Sharesave Plan and the Performance Share Plan ("PSP") (see note 25 to the Group Financial Statements and page 74 of the Directors' Remuneration Report contained in the Company's 2021 Annual Report and Accounts (available to download from www.clippergroup.co.uk/report-accounts/)). The increase in the overall charge relates to the timing of grants.

Net finance costs

Net finance costs for the year ended 30 April 2021 decreased by 4.8% to £10.6 million (2020: £11.1 million), the decrease being largely as a result of reduced bank interest due to lower utilisation of the Revolving Credit Facility ("RCF") throughout the year and reduced interest costs on hire purchase and finance lease agreements due to lower requirements of facilities to fund capital expenditure in the year.

IFRS 16 lease interest for the year ended 30 April 2021 was £8.0 million which was comparable to the prior year (2020: £8.0 million).

Profit Before Tax and Amortisation and Exceptional Costs ("PBTA")

PBTA is defined as profit before income tax, before amortisation of intangible assets arising on consolidation, and exceptional costs. Whilst not considered a KPI by management, this measure is used by market analysts. PBTA was £28.8 million (£26.7 million PBT plus £1.3 million amortisation of other intangible assets plus £0.8 million of exceptional costs) for the year ended 30 April 2021, an increase of 31.5% on the PBTA for the year ended 30 April 2020 of £21.3 million (£20.1 million PBT plus £1.2 million amortisation of other intangible assets).

Exceptional costs of £0.8 million relate to £0.5 million of aborted acquisition costs and £0.3 million relating to redundancy costs incurred within our commercial vehicles segment as a direct consequence of the COVID-19 pandemic.

Taxation

The effective rate of taxation of 19.0% (2020: 19.5%) is in line with the standard UK rate of income tax applicable in the year of 19.0% (2020: 19.0%). The impact of certain expenditure which is disallowable for tax purposes and the higher effective rate in Germany and Poland is offset by the significant contribution from Clicklink™ in the year. As it is an equity-accounted investment, the post-tax contribution of Clicklink™ is included in the Group's pre-tax result.

Profit after tax

The profit after tax for the year ended 30 April 2021 was £21.7 million (2020: £16.2 million), an increase of 33.8%.

Earnings per share

Earnings per share were 21.3 pence for the year ended 30 April 2021 (2020: 15.9 pence). Adjusted to remove amortisation of intangible assets arising on consolidation, earnings per share were 22.3 pence (2020: 17.0 pence).

Current trading and outlook

In the year ending 30 April 2022, we expect revenue to benefit from:

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

Balance sheet and cash flow

Capital expenditure and fixed assets

Additions to intangible assets in the year ended 30 April 2021 were £2.6 million (2020: £1.0 million). Noteworthy additions in the year included a new telematics transport management system which will reduce the cost and environmental impact of our fleet operations, maximise utilisation, increase efficiency and improve safety and driver performance. In addition, we completed our migration to Node 4, a cloud based, enterprise level, IT infrastructure solution.

Additions to property, plant and equipment in the year ended 30 April 2021 were £7.1 million (2020: £8.1 million). £7.0 million of this was incurred in the logistics services segment (2020: £7.9 million) and £0.1 million (2020: £0.2 million) in the commercial vehicles segment. Within logistics, noteworthy additions in the year include additional mezzanine capacity at our Peterborough Distribution Centres in order to facilitate new contract wins, installation of energy efficient LED lighting at our Selby site, and further fitout and hardware costs across our sites to accommodate growth in existing contracts.

Additions to right-of-use assets in the year ended 30 April 2021 were £61.6 million (2020: £13.8 million). £51.0 million (2020: £4.4 million) of these related to property leases and £7.1 million (2020: £6.8 million) related to vehicle leases. During the year we entered into new property leases at Sherburn, Lutterworth, a second facility in Sheffield and in Venray in the Netherlands.

The cash outlay on capital expenditure in the year of £9.7 million (2020: £9.1 million) was mitigated by £1.6 million (2020: £5.7 million) of funding for additions in the prior year drawn on hire purchase and finance lease agreements in the year under review.

In the year ended 30 April 2021, we disposed of assets with a net book value of £0.4 million, on which we generated a loss on disposal of £0.2 million.

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

Clipper's outstanding capital expenditure commitment at 30 April 2021 was £12.0 million (2020: £3.6 million), reflecting the timing of investments in new and existing customer contracts.

Cash flow

Cash generated from operations was £86.9 million (2020: £60.4 million).

The business continues to be highly cash generative. Under the UK logistics business model, Clipper is typically paid in the month in which services are delivered on open book and minimum volume guarantee contracts, giving rise to a typically net favourable impact on working capital, whilst in the commercial vehicles division working capital is substantially funded by the manufacturer through stocking facilities for new vehicles and trade credit terms for parts supplied.

In the year ended 30 April 2021, we generated £13.3 million of cash inflow from working capital (2020: £1.3 million inflow).

There are a number of cash flows disclosed outside of cash flow from operating activities which occur regularly, although the magnitude of these can significantly change year‑on‑year.

These cash flows include dividends, drawdown and repayment of bank loans, sales and purchases of fixed assets (including repayments on assets purchased under finance leases), income tax payments, interest payments and share issues. Taking each of these in turn:

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

Net debt3

In addition to EBIT¹, net debt³ is considered a KPI for the Group. The Group had £16.9 million of net debt³ outstanding at 30 April 2021 (2020: £45.1 million) (see note 21 to the Group Financial Statements), a decrease of £28.2 million. The decrease in net debt³ was driven primarily by increased cash of £15.3 million, a reduction in hire purchase and finance lease contracts of £9.2 million and a £3.6 million decrease in bank loans. It is worth noting that where an open book customer has a strong credit rating, Clipper will often fund the initial capital requirements on the condition that the customer commits to repaying this over the term of the contract, together with finance charges and a management fee. At 30 April 2021, Clipper had £31.7 million (2020: £35.4 million) of capital contracted to be recovered from open book customers over the remaining term of the customer contracts.

Alternative performance measures ("APMs")

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

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

David Hodkin

Chief Financial Officer

Directors' Statement on Basis of Preparation - Announcement

Whilst the financial information included in this announcement has been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, 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 2021 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 2021 was approved by the Board on 24 August 2021. Statutory accounts for the year ended 30 April 2021 were approved on the same date and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on these Financial Statements. Their report was unqualified and did not contain a statement under s.498 (2) or (3) of the Companies Act 2006.

Responsibility Statement of the Directors in respect of the Annual Report and the Financial Statements

The following responsibility statement made by the Directors is repeated here solely for the purpose of complying with DTR 6.3.5. This statement relates to and is extracted from page 90 of the Company's 2021 Annual Report and Accounts. Responsibility is for the full Annual Report and Accounts not the extracted information presented in this announcement.

We confirm that to the best of our knowledge:

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

Group Income Statement

For the year ended 30 April

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

Group Statement of Comprehensive Income

For the year ended 30 April

All activities in the current and prior year are from continuing operations. Total comprehensive income for the year is attributable to equity shareholders of Clipper Logistics plc.

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 Financial Results

1. General information

The results comprise those of Clipper Logistics plc and its subsidiaries for the year ended 30 April 2021 and does not constitute the Group's statutory accounts for the years ended 30 April 2021 or 2020 but is derived from those accounts. The Group Financial Statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and approved by the Directors ("IFRSs").

Statutory accounts for the years ended 30 April 2021 and 30 April 2020 have been reported on by the auditor. Their reports for both years (i) were unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their audit report and (iii) did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 30 April 2020 have been filed with the Registrar of Companies. The statutory accounts for the year ended 30 April 2021, which were approved by the Board on 24 August 2021, 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 2021 were authorised for issue by the Board of Directors on 24 August 2021 and the Group Statement of Financial Position was signed on the Board's behalf by David Hodkin.

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

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

2. Summary of significant accounting policies

The results for the year have been prepared on a basis consistent with the accounting policies set out in Clipper's Annual Report and Accounts for the year ended 30 April 2020 except as noted below.

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

In May 2020, the ("IASB") published an amendment 'COVID-19 Related Rent Concessions (Amendment to IFRS 16). The amendment introduced a practical expedient to IFRS 16 'Leases', which provides relief for lessees in assessing whether specific COVID-19 concessions are considered to be lease modifications.

All conditions need to be met by the lessee for the practical expedient to be applied:

The Group took advantage of delays to rental payments in the first 3 months of the financial year. The consideration due under the lease contract did not change, with the payment just being deferred by up to 12 months. The Group has therefore taken advantage of the practical expedient to not assess the affected lease contracts as lease modifications.

The adoption of the following standards, amendments and interpretations in the current period have not had a material impact on the Group's Financial Statements:

3. Revenue

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

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.

In the year ended 30 April 2021, the Group had one customer which exceeded 10% of total revenue. Total revenue from this customer amounted to £92,784,000, of which £45,464,000 is reported within E-fulfilment & returns management services and £47,320,000 is reported within Non e-fulfilment logistics. There were no such customers to report in the year ended 30 April 2020.

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

The contract assets primarily relate to the Group's right to consideration for work completed but not billed as at 30 April 2021. The contract assets are transferred to receivables when the rights become unconditional. The contract liabilities primarily relate to the advance consideration received from customers. Contract liabilities of £39,264,000 (2020: £22,423,000) will be recognised in Revenue in the year ending 30 April 2022 when the performance obligations are expected to be satisfied.

4. Segment information

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

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

Within the value-added logistics services segment, the CODM also reviews performance of two separate business activities, and overheads that are impractical to allocate:

These 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 2021:

Earnings before interest and tax ("EBIT"):

1 Comparatives have been adjusted for the impact of IFRS 16. In the prior year, the impact of this new standard was shown separately to aid comparability with the year ended 30 April 2019. The impact of IFRS 16 is now absorbed into the correct segments for both years; the allocation methodology is the same in both years.

Amortisation of other intangible assets:

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

Operating profit and profit before income tax:

1 Comparatives have been adjusted for the impact of IFRS 16. In the prior year, the impact of this new standard was shown separately to aid comparability with the year ended 30 April 2019. The impact of IFRS 16 is now absorbed into the correct segments for both years; the allocation methodology is the same in both years.

The segment assets and liabilities at the statement of financial position date are as follows:

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

Capital expenditure:

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

Depreciation of property, plant and equipment:

Depreciation of right-of-use assets:

Amortisation:

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

5. Staff costs

The UK Government made available a range of financial support to help companies during the COVID-19 pandemic, including the Coronavirus Job Retention Scheme ("CJRS"). During the year ended 30 April 2021, the Group received £3,769,000 in Government grants through CJRS which has been offset against the figure included in wages and salaries above. The scheme has been utilised as it was intended in order to avoid redundancies in areas of the business that have been significantly impacted by the COVID-19 pandemic. Customers under open book contracts benefited from any cost savings received as a result.

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:

1 Other exceptional costs relates to £535,000 relating to aborted acquisition costs and £254,000 relating to redundancy costs incurred within our commercial vehicles segment as a direct result of the COVID-19 pandemic.

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 17 September 2021. The payment of this dividend will not have any tax consequences for the Group.

8. Finance costs

1 Comparatives have been revised for the impact of IFRS 16. In the prior year, the impact of this new standard was shown separately to aid comparability with the year ended 30 April 2019; this has now been absorbed into the appropriate cost lines.

9. Finance income

10. Income tax expense

10.1. Tax charged in the income statement:

10.2. Tax relating to items charged or credited to other comprehensive income:

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

10.3. Reconciliation of income tax charge:

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

10.4. Deferred tax in the statement of financial position:

A rate of 19% (2020: 19%) has been applied in the measurement of the Group's deferred tax assets and liabilities in the year. It was announced in the Budget on 3 March 2021 that the Income tax rate will increase to 25% on 1 April 2023. This rate was substantively enacted on 24 May 2021.

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 number of shares detailed above differ from those in Note 24 due to the effect of weighting for the purposes of the earnings per share calculations.

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 2021 is 6.2 years (2020: 7.3 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 2024.

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 2021 as well as confirmed new and ceasing contracts. The key judgment is the assumed new contract wins during the business plan period, which has been based on historical experience.

Subsequent cash flows are extrapolated using an estimated long-term growth rate of 3.0% and 5.0% (2020: 3.0% and 5.0%) to perpetuity (2020: perpetuity). These are in line with what the Group considers the long-term growth rate is for the sectors in which the Group operates. The cash flows have then been discounted using a pre-tax risk adjusted discount rate of between 8.5% and 10.3% (2020: 8.9% and 10.7%). The forecasts of foreign operations are translated at the exchange rate ruling at the year end.

The estimated recoverable amount significantly exceeds the carrying amount. The Group has conducted sensitivity analysis on the impairment testing. The Directors have concluded that no reasonably foreseeable change in the key assumptions would give rise to an impairment.

14. Property, plant and equipment