24 August 2020

Clipper Logistics plc

 

Final Results for the year ended 30 April 2020

 

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

 

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

Financial highlights for the year ended 30 April 2020

 

·	Group revenue increased by 8.8% from £460.2m to £500.7m.
·	Group EBIT1 up 19.1% to £24.1m (2019: £20.2m).
·	Group profit after tax of £16.2m (2019: £13.4m).
·	Basic earnings per share were 15.9 pence (2019: 13.2 pence), an increase of 20.5%.
·	Cash generated from operations1 of £31.9m (2019: 28.3m).
·	Strength of performance and cash generation leads the Board to recommend a final dividend of 6.2p per share, making a total dividend per share of 9.7p for the full year (2019: 9.7p).
·	Net debt at 30 April 2020 was just over 1xEBITDA, representing very substantial headroom against the net debt covenant of 2.5x.

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

Operational highlights for the year ended 30 april 2020

 

·	Significant organic growth in the period, particularly driven by high e-fulfilment volumes, leading to milestone revenue of over £0.5 bn in the period.
·	Sharp bounce back in activity levels following implementation of Government restrictions on non-essential retail due to COVID-19 pandemic which temporarily affected high street and e-commerce demand.
·	Swift re-deployment of Clipper network, following outbreak of COVID-19, to meet high demand for additional distribution capability from new and existing food retail customers including Tesco, Asda and Morrisons.
·	Clipper mandated to establish a new supply chain for NHS Personal Protective Equipment (PPE) products, delivering to NHS Hospital Trusts and other healthcare providers across the UK; solution mobilised within four days.
·	Commenced multiple new contracts with high-profile customers such as Amara, Joules, N Brown, the NHS, SLG and the Very Group.
·	Expanded existing contracts with multiple customers including PrettyLittleThing.com, Neon Sheep, Levi Strauss, Sports Direct, Vestel and Ginger Ray.
·	Organic growth supported by high demand in European market with extended contracts with customers including Westwing and s.Oliver.
·	Continued progress for technical services providing electrical product returns to customers, with new contracts secured with Amazon, John Lewis and the Very Group.
·	Board further strengthened by appointment of Dino Rocos, a highly experienced supply chain leader, bringing with him over forty years' retail industry experience at the UK's leading omni-channel retailer, John Lewis.

Post year end highlights

 

·	Appointment of Christine Cross to the Board as Senior Independent Non-Executive Director, bringing considerable retail experience with FTSE100 and FTSE250 businesses.
·	Further support provided to NHS through provision of an online portal for fulfilling orders for PPE to GP surgeries, small care homes and home care providers.
·	New activities undertaken after Government restrictions began and new contracts that came on stream in Q1 FY21 added a further 1.5 million square feet of space to pre-existing 10 million sq. ft. infrastructure.
·	Annualised revenue of the probability-weighted pipeline of over £50 million, a significant increase on the same period last year.
·	Clicklink service expected to see increased demand as the UK Government looks to encourage the use of Click & Collect initiatives to kick-starting activity on the UK's high street whilst reducing congestion.
·	Clipper consolidating position at the forefront of industry, creating shared user transport networks to enable multi-use client delivery services to the high street as clients reconsider supply chain needs.
·	Commencement of operations on new contract wins with Arcadia and T.M. Lewin.

Outlook

 

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

Steve Parkin, Executive Chairman of Clipper commented:

 

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

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

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

Forward looking statements

 

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

Publication of Annual Report and Accounts

 

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

 

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

 

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

 

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

Enquiries

 

Clipper:	+44 (0)11 3204 2050
Steve Parkin, Executive Chairman
Tony Mannix, Chief Executive Officer
David Hodkin, Chief Financial Officer
Buchanan:	+44 (0) 20 7466 5000
David Rydell
Stephanie Watson

Chairman's statement

 

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

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

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

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

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

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

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

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

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

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

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

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

Group results

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

People and Board

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

The team has a proven track record of identifying key trends within the sectors we serve and developing relevant cost-effective solutions that address those needs. Further, we have a proven ability to identify acquisitions that enhance Group performance and shareholder value. We explored potential acquisitions during the year; however, on the conclusion of our internal due diligence processes, they were not pursued as they did not meet the Group's strategic objectives.

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

I would like to take this opportunity to thank all the employees of the Group for their continued commitment and contribution to the Group's performance, particularly in the light of the challenges presented by COVID-19.

Governance

The executive management team comprises Tony Mannix (Chief Executive Officer), David Hodkin (Chief Financial Officer) and myself, and the Group benefits from the combined experience of Christine Cross (Senior Independent Director), Dino Rocos and Stuart Watson, our Independent Non-Executive Directors.

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

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

Dividends

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

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

Outlook

The Group continues to be one of the leading providers of value-added logistics and e-fulfilment solutions to the retail sector in the UK, and is rapidly growing its operations in Europe. Recent contract wins, together with a strong pipeline of new business activity and the further evolution of our Click and Collect proposition, we believe place the Group in an excellent position to achieve further growth both in the UK and internationally. Indeed, Clipper's approach of adopting a hands-on, long-term and pro-active relationship with its retail clients allows it to continue to support its clients during these changing retail market conditions.

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

Steve Parkin

Executive Chairman

Operating and Financial Review

Group performance for the year ended 30 April 2020

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

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

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

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

Group revenue

Revenue	Year ended 30 Apr  2020  £m	Year ended 30 Apr 2019  £m	% change
E-fulfilment & returns management services	277.0	233.9	+18.4%
Non e-fulfilment logistics	143.8	145.3	-1.0%
Total value-added logistics services	420.8	379.2	+11.0%
Commercial vehicles	82.5	82.6	-0.1%
Inter-segment sales	(2.6)	(1.6)
Group revenue	500.7	460.2	+8.8%

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

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

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

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

Group EBIT¹

	Year ended 30 Apr  2020 £m	Year ended 30 Apr  2019  £m	% change
E-fulfilment & returns management services	17.6	13.6	+29.9%
Non e-fulfilment logistics	14.2	13.0	+9.1%
Central logistics overheads	(6.9)	(5.5)	+24.7%
Value-added logistics services	24.9	21.1	+18.4%
Commercial vehicles	2.0	1.1	+72.6%
Head office costs	(2.8)	(2.0)	+42.4%
Group EBIT (IAS 17 basis)1	24.1	20.2	+19.1%
IFRS 16 adjustments	8.4	-	-
Group EBIT (IFRS 16 basis)1	32.5	20.2	+60.6%

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

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

·	£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 prior year;
·	for the prior year, EBIT1 benefited from a £3.1 million contribution from property-related consultancy activities. There was no similar contribution to EBIT1 in the year ended 30 April 2020; and
·	in the prior year, there was a credit to the income statement of £1.2 million in respect of share based payment accruals built up in previous years. In the year ended 30 April 2020 there is a share based payment charge of £0.3 million. This represents a swing of £1.5 million.

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

	Year ended 30 Apr 2020  £m	Year ended  30 Apr 2019 £m	% change
EBIT1	24.1	20.2	+19.1%
Property-related consultancy	-	(3.1)
'Negative goodwill'	(3.5)	-
Share based payments	0.3	(1.2)
EBIT1 (excluding non-underlying factors)	20.9	15.9	+31.4%

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

	Year ended 30 Apr  2020 £m	Year ended 30 Apr  2019 £m	% change
Revenue	420.8	379.2	+11.0%
EBIT1	24.9	21.1	+18.4%
EBIT1 (excluding non-underlying factors)	21.6	17.6	+22.7%

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

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

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

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

Reported EBIT¹ benefited from:

·	£3.5 million of favourable contribution 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). There was no similar contribution to EBIT1 in the prior year; and
·	a £3.1 million contribution to EBIT1 from property-related consultancy activities in the prior year. There was no similar contribution to EBIT1 in the year ended 30 April 2020; and
·	a share based payment charge in 2020 of £0.2 million (2019: credit of £0.4 million).

The following table normalises this:

	Year ended 30 Apr  2020 £m	Year ended 30 Apr 2019  £m	%  change
EBIT1	24.9	21.1	+18.4%
Property-related consultancy	-	(3.1)
Share based payments	0.2	(0.4)
'Negative goodwill'	(3.5)	-
EBIT1 (excluding non-underlying factors)	21.6	17.6	+22.7%

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

	Year ended 30 Apr  2020  £m	Year ended 30 Apr 2019 £m	% change
Revenue	277.0	233.9	+18.4%
EBIT1	17.6	13.6	+29.9%
EBIT1 (excluding non-underlying factors)	15.8	13.6	+16.2%

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

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

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

	Year ended 30 Apr  2020  £m	Year ended 30 Apr 2019  £m	% change
EBIT1	17.6	13.6	+29.9%
'Negative goodwill'	(1.8)	-
EBIT1 (excluding non-underlying factors)	15.8	13.6	+16.2%

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

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

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

·	the part year impact of operations commenced during the year ended 30 April 2020, including: Shop Direct, N Brown, Hope & Ivy, Simba Sleep, the Nutmeg online operation for Morrisons, Amara Living and Joules. The impact of these activities will not be fully realised until the year ending 30 April 2021;
·	the full year impact of operations commenced during the year ended 30 April 2019, including: boohoo.com subsidiary PrettyLittleThing, Ginger Ray, Levi Strauss, Vestel and Tech Data in the UK; and
·	volume growth and extension of services on existing contracts, including with ASOS, Love Crafts, Zara, Inditex and Browns in the UK, in part driven by particularly strong organic growth in the UK e-fulfilment market due to the continuing shift in retail trends towards online trading, and European growth in logistics services for Westwing, Smiffy's and s.Oliver, and technical returns services for Amazon.

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

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

Non e-fulfilment logistics

	Year ended 30 Apr  2020  £m	Year ended 30 Apr 2019  £m	% change
Revenue	143.8	145.3	-1.0%
EBIT1	14.2	13.0	+9.1%
EBIT1 (excluding non-underlying factors)	12.4	9.9	+25.3%

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

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

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

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

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

	Year ended 30 Apr  2020 £m	Year ended 30 Apr  2019  £m	% change
EBIT1	14.2	13.0	+9.1%
Property-related consultancy	-	(3.1)
'Negative goodwill'	(1.8)	-
EBIT1 (excluding non-underlying factors)	12.4	9.9	+25.3%

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 full year effect of the activities commenced in the prior year, including new activities for Halfords out of the new Crick warehouse, for Sports Direct out of various UK locations, for Levi Strauss out of Northampton and for Neon Sheep out of Milton Keynes;
·	organic volume growth and extensions to service offerings with existing customers, including Asda, Morrisons, Liberty and Halfords. This was partly offset by some organic decline with certain other retail customers driven by high street market conditions and the loss of a significant product range from our M&S activities in Peterborough; and
·	part year contributions from new activities commenced in the current year, with SLG and the NHS. Such activities will generate a full year of contribution in the year ending 30 April 2021.

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

·

various contracts ceased in the year ending 30 April 2020, including: Bench (due to liquidation); Links of London (due to liquidation); C&A (due to a Brexit-related relocation); M&S Swadlincote activities (due to the activities being taken in-house by M&S); and Go Outdoors and Whistles (contracts which were not renewed on reaching the end of the term).

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

Central logistics overheads

	Year ended 30 Apr  2020 £m	Year ended 30 Apr 2019 £m	% change
EBIT1	(6.9)	(5.5)	+24.7%
Share based payment charges	0.2	(0.4)
EBIT1 (excluding non-underlying factors)	(6.7)	(5.9)	+13.6%

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

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

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

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

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

Overall share based payment charges

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

Commercial vehicles

	Year ended 30 Apr  2020 £m	Year ended 30 Apr 2019 £m	% change
Revenue	82.5	82.6	-0.1%
EBIT1	2.0	1.1	+72.6%

 

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

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

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

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

Head office costs

	Year ended 30 Apr 2020  £m	Year ended 30 Apr 2019 £m	% change
EBIT1	(2.8)	(2.0)	+42.4%
Share based payments	0.1	(0.8)
EBIT1 (excluding non-underlying factors)	(2.7)	(2.8)	-3.6%

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

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

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

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

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

Net finance costs

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

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

Profit Before Tax and Amortisation ("PBTA")

PBTA is defined as profit before income tax, before amortisation of intangible assets arising on consolidation. Whilst not considered a KPI by management, this measure is used by market analysts. PBTA on an IAS 17 basis was £21.3 million (£20.1 million PBT plus £1.2 million amortisation of other intangible assets) for the year ended 30 April 2020, an increase of 17.8% on the year ended 30 April 2019 PBTA of £18.1 million (£16.9 million PBT plus £1.2 million amortisation of other intangible assets).

Taxation

The effective rate of taxation of 19.5% (2019: 20.8%) is higher than the average standard UK rate of corporation tax applicable in the year of 19.0% (2019: 19.0%) principally due to certain expenditure incurred which is disallowable for tax purposes and the higher effective rate of tax to which the German and Polish businesses are subject.

Profit after tax

The profit after tax for the year ended 30 April 2020 was £16.2 million (2019: £13.4 million), an increase of 20.8%.

Earnings per share

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

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

Current trading and outlook

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

·	the full year effects of the new operations brought on line in the logistics segment. As noted previously, the Group commenced activities on a number of new contracts in the year ended 30 April 2020;
·	growth with existing customers, either organically - particularly with those in e-commerce who will benefit from market growth - or through new service lines for those customers;
·	growth from conversion of some of the opportunities on our new business pipeline, including in mainland Europe. These opportunities will be converted through a focus on retail specialisms and provision of cost-effective, value-added solutions. Some of these new business activities will not reach full year run-rate until the year ending 30 April 2022 and beyond; and
·	operations which have either recently commenced after the year end or other known new activities which are at various stages of planning. The annualised impact of these activities will not be fully delivered until the year ending 30 April 2022.

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

Balance sheet and cash flow

Capital expenditure and fixed assets

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

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

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

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

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

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

Cash flow

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

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

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

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

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

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

·	dividends paid in the year ended 30 April 2020 amounted to £10.2 million, an increase of 13.8% on the prior year (2019: £8.9 million), and in line with our stated dividend policy;
·	cash flows arising from the drawdown and repayments of bank loans were a £1.2 million inflow in the year ended 30 April 2020 (2019: £7.3 million), the drawdown being used to fund additions of non-current assets in the year;
·	cash purchases of fixed assets amounted to £6.7 million in the year ended 30 April 2020 (2019: £7.7 million), with a further £43.3 million (2019: £10.4 million) of cash used to repay leases. The IFRS 16 impact was £33.8 million. Finance leasing and hire purchase funding remains an attractive means of funding for Clipper, as the future cash outflows can be funded through future cash inflows on open book contracts. Sales of non-current assets generated £0.5 million in the year ended 30 April 2020 (2019: £0.5 million);
·	included within investing activities is £2.9 million of cash outflow relating to the business combination (see note 29.1 to the Group Financial Statements);
·	corporation tax of £3.5 million was paid in the year ended 30 April 2020 (2019: £4.3 million), the decrease being driven by the deferment of a corporation tax payment on account during the COVID-19 pandemic;
·	interest paid increased by £1.0 million to £3.0 million in the year ended 30 April 2020 (2019: £2.0 million), primarily due to increased borrowing levels on HP contracts and stocking lines; and
·	cash inflows of £0.114 million were generated from shares issued in the year ended 30 April 2020, compared to £0.350 million in the prior year.

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

Net debt

In addition to EBIT¹, net debt⁴ is considered a KPI for the Group. The Group had £45.1 million of net debt⁴ outstanding at 30 April 2020 (2019: £45.9 million) (see note 21 to the Group Financial Statements), a decrease of £0.8 million. The decrease in net debt⁴ was driven primarily by a reduction in HP and finance lease contracts of £3.0 million offset by a £1.3 million increase in bank loans. It is worth noting that where an open book customer has a strong credit rating, Clipper will often fund the initial capital requirements on the condition that the customer commits to repaying this over the term of the contract, together with finance charges and a management fee. At 30 April 2020, Clipper had £35.4 million (2019: £34.9 million) of capital contracted to be recovered from open book customers over the remaining term of the customer contracts.

Impact of IFRS 16

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

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

Alternative performance measures ("APMs")

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

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

	Year ended April 2020 £m					Year ended April 2019 £m
	Statutory IFRS 16	IFRS 16 impact	IAS 17  basis	Non- underlying  items2	Excluding non-underlying items	Statutory IAS 17	Non- underlying  items3	Excluding non-underlying items
Revenue	500.7	-	500.7	-	500.7	460.2	(3.1)	457.1
EBIT1	32.5	(8.4)	24.1	(3.2)	20.9	20.2	(4.3)	15.9
Net debt4	217.1	(172.0)	45.1			45.9
Net finance costs	11.1	(8.4)	2.7			2.1
Cash generated from operations	66.8	(34.9)	31.9			28.3
Earnings per share (pence)	15.9	(0.4)	15.5			13.2
Diluted earnings per share (pence)	15.8	(0.5)	15.3			13.1

 

1	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.
2	Non-underlying items in the year ended 30 April 2020 were £3.5 million negative goodwill release relating to the IFRS 3 business combination (see note 29.1 to the Group Financial Statements) and a charge relating to share based payment accruals of £0.3 million.
3	Non-underlying items in the year ended 30 April 2019 were £3.1 million contribution from property-related consultancy activities and credit to the income statement of £1.2 million in respect of share based payment accruals.
4	Net debt is defined as financial liabilities: borrowings less cash and cash equivalents less non-current financial assets and leases previously classified as finance leases and hire purchase agreements under IAS 17.

David Hodkin

Chief Financial Officer

Director's statement on basis of preparation - announcement

 

Whilst the financial information included in this announcement has been prepared on the basis of the requirements of IFRSs in issue, as adopted by the European Union and effective at 30 April 2020, this statement does not itself contain sufficient information to comply with IFRS.

These financial results do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Group Income Statement, Group Statement of Comprehensive Income, Group Statement of Financial Position, Group Statement of Changes in Equity, and Group Statement of Cash Flows, and selected notes for the year ended 30 April 2020 have been extracted from the Group's audited Financial Statements for the year then ended.

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

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

 

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

We confirm that to the best of our knowledge:

·	the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
·	the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

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

	Note	2020 Group £'000	2019 Group £'000
Revenue	3	500,671	460,171
Cost of sales		(358,653)	(331,879)
Gross profit		142,018	128,292
Other net gains or losses	6	4,097	(327)
Administration and other expenses		(114,686)	(108,481)
Operating profit before share of equity-accounted investees, net of tax	4	31,429	19,484
Share of equity-accounted investees, net of tax	16	(231)	(413)
Operating profit	6	31,198	19,071
EBIT*		32,454	20,213
Less: amortisation of other intangible assets	4	(1,240)	(1,185)
share of tax and finance costs of equity-accounted investees	4	(16)	43
Operating profit	6	31,198	19,071
Finance costs	8	(11,155)	(2,199)
Finance income	9	64	58
Profit before income tax		20,107	16,930
Income tax expense	10	(3,915)	(3,524)
Profit for the financial year		16,192	13,406
Basic earnings per share	11	15.9p	13.2p
Diluted earnings per share	11	15.8p	13.1p

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

Group Statement of Comprehensive Income

For the year ended 30 April

	Note	2020 Group £'000	2019 Group £'000
Profit for the financial year		16,192	13,406
Other comprehensive income/(expense) for the year, net of tax:
May be reclassified to the income statement in subsequent periods:
Exchange differences on retranslation of foreign operations		(504)	31
Total comprehensive income for the financial year		15,688	13,437

Group Statement of Financial Position

At 30 April

	Note	2020  Group  £'000	20191  Group  £'000
Assets:
Non-current assets
Goodwill		25,951	25,951
Other intangible assets		11,997	11,390
Intangible assets	12	37,948	37,341
Property, plant and equipment	14	28,966	61,470
Right-of-use assets	15	186,213	-
Interest in equity-accounted investees	16	634	865
Non-current financial assets	28	1,950	1,950
Deferred tax assets	10	1,154	-
Total non-current assets		256,865	101,626
Current assets
Inventories	17	27,857	24,049
Trade and other receivables	18	102,742	96,347
Cash and cash equivalents	19	2,724	3,517
Total current assets		133,323	123,913
Total assets		390,188	225,539
Equity and liabilities:
Current liabilities
Trade and other payables	20	130,813	125,982
Financial liabilities: borrowings	21	19,315	12,285
Lease liabilities: short term	22	38,378	-
Short-term provisions	23	99	214
Current income tax liabilities		1,760	803
Total current liabilities		190,365	139,284
Non-current liabilities
Financial liabilities: borrowings	21	126	39,110
Lease liabilities: long term	22	163,906	-
Long-term provisions	23	6,521	1,610
Deferred tax liabilities	10	-	2,320
Total non-current liabilities		170,553	43,040
Total liabilities		360,918	182,324
Equity shareholders' funds
Share capital	24	51	51
Share premium		2,174	2,060
Currency translation reserve		(612)	(108)
Other reserve		84	84
Merger reserve		6,006	6,006
Share based payment reserve		1,669	1,643
Retained earnings		19,898	33,479
Total equity attributable to the owners of the Company		29,270	43,215
Total equity and liabilities		390,188	225,539

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

Group Statement of Changes in Equity

For the year ended 30 April

	Share capital  Group £'000	Share premium Group £'000	Currency translation reserve Group  £'000	Other reserve  Group  £'000	Carried forward Group  £'000
Balance at 1 May 2018	51	1,710	(139)	84	1,706
Profit for the year	-	-	-	-	-
Other comprehensive income/(expense)	-	-	31	-	31
Equity settled transactions	-	-	-	-	-
Share issue	-	350	-	-	350
Dividends	-	-	-	-	-
Balance at 30 April 2019	51	2,060	(108)	84	2,087
IFRS 16 transition adjustment	-	-	-	-	-
Profit for the year	-	-	-	-	-
Other comprehensive income/(expense)	-	-	(504)	-	(504)
Equity settled transactions	-	-	-	-	-
Share issue	-	114	-	-	114
Dividends	-	-	-	-	-
Balance at 30 April 2020	51	2,174	(612)	84	1,697

 

	Brought forward Group  £'000	Merger reserve Group  £'000	Share based payment reserve  Group £'000	Retained earnings Group  £'000	Total Group  £'000
Balance at 1 May 2018	1,706	6,006	2,745	28,861	39,318
Profit for the year	-	-	-	13,406	13,406
Other comprehensive income/(expense)	31	-	-	-	31
Equity settled transactions	-	-	(1,102)	146	(956)
Share Issue	350	-	-	-	350
Dividends	-	-	-	(8,934)	(8,934)
Balance at 30 April 2019	2,087	6,006	1,643	33,479	43,215
IFRS 16 transition adjustment	-	-	-	(19,627)	(19,627)
Profit for the year	-	-	-	16,192	16,192
Other comprehensive income/(expense)	(504)	-	-	-	(504)
Equity settled transactions	-	-	26	20	46
Share issue	114	-	-	-	114
Dividends	-	-	-	(10,166)	(10,166)
Balance at 30 April 2020	1,697	6,006	1,669	19,898	29,270

Group Statement of Cash Flows

For the year ended 30 April

	Note	2020 Group  £'000	2019  Group  £'000
Profit before tax from operating activities		20,107	16,930
Adjustments to reconcile profit before tax to net cash flows:
- Depreciation and impairment of property, plant and equipment	6	3,244	7,426
- Amortisation and impairment of intangible assets	6	2,114	1,973
- Depreciation of right-of-use assets	15	32,946	-
- Gain on disposal of non-current assets	6	(468)	(124)
- Share of equity-accounted investees, net of tax	16	231	413
- 'Negative goodwill'	29.1	(3,499)	-
- Exchange differences		(582)	104
- Finance costs	8 & 9	11,091	2,141
- Share based payments charge/(credit)	25	348	(1,178)
Working capital adjustments:
- (Increase)/decrease in trade and other receivables and prepayments		(8,527)	(22,915)
- (Increase)/decrease in inventories		(3,365)	(773)
- Increase/(decrease) in trade and other payables		13,182	24,298
Operating activities:
- Cash generated from operations		66,822	28,295
- Interest received		46	55
- Interest paid		(2,954)	(2,027)
- Income tax paid		(3,541)	(4,276)
Net cash flows from operating activities		60,373	22,047
Investing activities:
- Purchase of property, plant and equipment		(8,141)	(24,320)
- Purchase of right-of-use assets		(3,260)	-
- Proceeds from sale of property, plant and equipment		389	490
- Proceeds from right-of-use assets		106	-
- Purchase of intangible assets		(951)	(2,096)
- Proceeds from sale of intangible assets		117	-
- Acquisition of a business	29.1	(2,899)	-
- Acquisition of subsidiary undertakings net of cash acquired	29.2	-	(500)
Net cash flows from investing activities		(14,639)	(26,426)
Financing activities:
- Drawdown of bank loans		2,000	8,000
- Debt issue costs paid		-	(20)
- Shares issued	24	114	350
- Dividends paid	7	(10,166)	(8,934)
- Repayment of bank loans		(789)	(747)
- Financing advanced in relation to right-of-use assets		5,654	18,698
- Repayment of principal on lease liabilities		(43,340)	(10,389)
Net cash flows from financing activities		(46,527)	6,958
Net (decrease)/increase in cash and cash equivalents		(793)	2,579
Cash and cash equivalents at start of year		3,517	938
Cash and cash equivalents at end of year	19	2,724	3,517

Notes to the Group Financial Statements

1. General information

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

Statutory accounts for the years ended 30 April 2020 and 30 April 2019 have been reported on by the auditor. Their reports for both years (i) were unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their audit report and (iii) did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

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

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

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

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

2. Summary of significant accounting policies

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

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

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

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

Under the transition rules, the Group has applied IFRS 16 using the modified retrospective approach with the cumulative effect of applying the standard recognised in retained earnings on 1 May 2019 with no restatement of comparative information. Lease liabilities have been measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of transition. The Group is taking available exemptions for short-term leases (leases which, at the transition date, have a lease term of less than 12 months) and low value leases (<£5,000).

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

3. Revenue

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

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

Revenue recognised in the income statement is analysed as follows:

	2020  Group £'000	2019  Group £'000
E-fulfilment & returns management services	276,979	233,872
Non e-fulfilment logistics	143,847	145,286
Value-added logistics services	420,826	379,158
Commercial vehicles	82,495	82,552
Inter-segment sales	(2,650)	(1,539)
Revenue from external customers	500,671	460,171

 

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

Geographical information - revenue from external customers:

	2020 Group  £'000	2019  Group £'000
United Kingdom	424,057	389,028
Germany	25,128	25,044
Rest of Europe	51,486	46,099
Revenue from external customers	500,671	460,171

 

Geography is determined by the location of the end customer.

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

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

	2020 Group £'000	2019 Group  £'000
Receivables, which are included in 'Trade and other receivables'	62,920	57,372
Contract assets, which are included in 'Trade and other receivables'	13,303	16,111
Contract liabilities, which are included in 'Trade and other payables'	22,423	24,557

 

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

4. Segment information

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

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

·	value-added logistics services; and
·	commercial vehicles, including sales, servicing and repairs.

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

·	e-fulfilment & returns management services;
·	non e-fulfilment logistics; and
·	central logistics overheads, being the costs of support services specific to the value-added logistics services segment, but which are impractical to allocate between the sub-segment activities.

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

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

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

Earnings before interest and tax ("EBIT"):

	2020 Group £'000	2019 Group £'000
E-fulfilment & returns management services	17,618	13,560
Non e-fulfilment logistics	14,238	13,048
Central logistics overheads	(6,922)	(5,551)
Value-added logistics services	24,934	21,057
Commercial vehicles	1,963	1,137
Head office costs	(2,820)	(1,981)
Group EBIT (excluding impact of IFRS 16)	24,077	20,213
IFRS 16 adjustments	8,377	-
Group EBIT (including impact of IFRS 16)	32,454	20,213

Amortisation of other intangible assets:

	2020 Group £'000	2019 Group £'000
E-fulfilment & returns management services	(562)	(510)
Non e-fulfilment logistics	(678)	(675)
Central logistics overheads	-	-
Value-added logistics services	(1,240)	(1,185)
Commercial vehicles	-	-
Head office costs	-	-
Group total	(1,240)	(1,185)

 

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

	2020 Group £'000	2019  Group £'000
Net finance costs	(68)	(50)
Income tax credit (expense)	52	93
Group total	(16)	43

Operating profit and profit before income tax:

	2020 Group £'000	2019 Group £'000
Operating profit:
E-fulfilment & returns management services	17,271	13,506
Non e-fulfilment logistics	13,560	12,373
Central logistics overheads	(6,922)	(5,551)
Value-added logistics services	23,909	20,328
Commercial vehicles	1,963	1,137
Head office costs	(2,820)	(1,981)
Group operating profit before share of equity-accounted investees (IAS 17 basis)	23,052	19,484
IFRS 16 adjustment	8,377	-
Group operating profit before share of equity-accounted investees (IFRS 16 basis)	31,429	19,484
Share of equity-accounted investees, net of tax	(231)	(413)
Operating profit	31,198	19,071
Finance costs (IAS 17 basis)	(2,786)	(2,199)
Finance income	64	58
Finance costs arising under IFRS 16	(8,369)	-
Profit before income tax	20,107	16,930

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

At 30 April 2020:	Segment assets  £'000	Segment liabilities £'000
Value-added logistics services	342,930	(294,135)
Commercial vehicles	43,380	(45,582)
Segment assets/(liabilities)	386,310	(339,717)
Unallocated assets/(liabilities):
- Cash and cash equivalents	2,724	-
- Other financial liabilities	-	(19,441)
- Deferred tax	1,154	-
- Income tax assets/(liabilities)	-	(1,760)
Total assets/(liabilities)	390,188	(360,918)

 

At 30 April 2019:	Segment assets £'000	Segment liabilities £'000
Value-added logistics services	182,388	(93,207)
Commercial vehicles	39,634	(34,599)
Segment assets/(liabilities)	222,022	(127,806)
Unallocated assets/(liabilities):
- Cash and cash equivalents	3,517	-
- Financial liabilities	-	(51,395)
- Deferred tax	-	(2,320)
- Income tax assets/(liabilities)	-	(803)
Total assets/(liabilities)	225,539	(182,324)

 

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

Capital expenditure:

	2020  Group £'000	2019 Group  £'000
Value-added logistics services	22,083	25,802
Commercial vehicles	777	614
Total	22,860	26,416

 

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:

	2020 Group £'000	2019 Group £'000
Value-added logistics services	2,998	6,691
Commercial vehicles	246	735
Total	3,244	7,426

Amortisation:

	2020 Group £'000	2019 Group £'000
Value-added logistics services	2,113	1,972
Commercial vehicles	1	1
Total	2,114	1,973

Depreciation of right-of-use assets:

	2020 Group £'000	2019 Group £'000
Value-added logistics services	32,099	-
Commercial vehicles	847	-
Total	32,946	-

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

	2020  Group  £'000	2019 Group  £'000
United Kingdom	233,122	92,373
Germany	12,868	3,890
Rest of Europe	9,721	5,363
Deferred taxation assets	1,154	-
Total	256,865	101,626

5. Staff costs

	2020  Group £'000	2019  Group £'000
Wages and salaries	161,048	125,089
Social security costs	15,280	11,840
Pension costs for the defined contribution scheme	4,155	2,649
Share based payments	348	(1,178)
Total	180,831	138,400

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

	2020 Group Number	2019 Group Number
Warehousing	5,494	3,828
Distribution	502	505
Service and maintenance	465	252
Administration	1,139	1,055
Total	7,600	5,640

Key management compensation (including Executive Directors):

	2020  Group £'000	2019  Group £'000
Wages and salaries	2,736	3,102
Social security costs	412	425
Pension costs for the defined contribution scheme	127	178
Compensation for loss of office	249	-
Share based payments	106	(1,291)
Total	3,630	2,414

Directors' emoluments:

	2020  Group £'000	2019  Group £'000
Aggregate emoluments excluding share based payments on unvested awards	1,274	1,220
Value of share options vested during the year	-	-
Pension costs for the defined contribution scheme	10	10
Total	1,284	1,230

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

	2020 Group Number	2019 Group Number
Defined contribution plans	1	2

6. Group operating profit

This is stated after charging:

	2020  Group £'000	2019 Group  £'000
Depreciation of property, plant and equipment - owned assets	3,244	2,938
Depreciation of property, plant and equipment - leased assets	-	4,488
Amortisation of intangible assets (included within administration and other expenses)	2,114	1,973
Depreciation of right-of-use assets	32,946	-
Total depreciation and amortisation expense (IFRS 16 basis)	38,304	9,399
Operating lease rentals:
- Vehicles, plant and equipment	-	10,306
- Audit of the subsidiaries	-	25,847

 

Auditor's remuneration:
- Audit of the Group Financial Statements	198	149
- Audit of the subsidiaries	99	111
- Fees to prior year auditors	71	-
- Non-audit fees	-	-
Total fees paid to the Group's auditors	368	260

Operating profit is stated after crediting/(charging):

	2020  Group £'000	2019 Group  £'000
Other net gains or net losses:
- Profit on sale of property, plant and equipment	123	124
- Profit on disposal of lease liabilities	345	-
- Dealership contributions	44	98
- Rental income	335	51
- 'Negative goodwill' (see note 29)	3,499	-
- Net (loss) from other exceptional costs	(249)	(600)
Total net gains/(losses)	4,097	(327)

 

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

7. Dividends

	2020  Group £'000	2019 Group  £'000
Final dividend for the prior year of 6.5 pence (2019: 5.6 pence) per share	6,608	5,685
Interim dividend for the year of 3.5 pence (2019: 3.2 pence) per share	3,558	3,249
Total dividends paid	10,166	8,934
Proposed final dividend for the year ended 30 April 2020 of 6.2 pence (2019: 6.5 pence) per share	6,303	6,605

 

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

8. Finance costs

	2020  Group £'000	2019 Group  £'000
On bank loans and overdrafts	744	691
On hire purchase agreements¹	1,365	953
Amortisation of debt issue costs	138	130
Commercial vehicle stocking interest	385	316
Invoice discounting	96	94
Other interest payable	58	15
Total interest expense for financial liabilities measured at amortised cost (IAS 17 basis)	2,786	2,199
IFRS 16 lease liability interest	8,038	-
Discount charges on long-term provisions	331	-
Total interest expense for financial liabilities measured at amortised cost (IFRS 16 basis)	11,155	2,199

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

9. Finance income

	2020  Group £'000	2019 Group  £'000
Bank interest	1	-
Other interest	4	6
Amounts receivable from related parties	59	52
Total interest income for financial assets measured at amortised cost	64	58

10. Income tax expense

10.1 Tax charged in the income statement:

	2020  Group £'000	2019 Group  £'000
Current income tax:
UK and foreign corporation tax	4,346	3,263
Amounts under/(over) provided in previous years	151	(724)
Total income tax on continuing operations	4,497	2,539
Deferred tax:
Origination and reversal of temporary differences	(338)	280
Amounts (over)/under provided in previous years	(200)	775
Impact of change in tax laws and rates	(44)	(70)
Total deferred tax	(582)	985
Tax expense in the income statement on continuing operations	3,915	3,524

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

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

10.3 Reconciliation of income tax charge:

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

	2020  Group £'000	2019 Group  £'000
Profit before taxation from continuing operations	20,107	16,930
Standard rate of corporation tax in UK	19.00%	19.00%
Tax on profit on ordinary activities at standard rate	3,820	3,217
Share of equity-accounted investees, already net of tax	44	78
Expenses not allowable for tax purposes	127	235
Tax under/(over) provided in previous years	(49)	51
Difference in tax rates overseas	17	13
Deferred tax rate difference	(44)	(70)
Total tax expense reported in the income statement	3,915	3,524

10.4 Deferred tax in the statement of financial position:

	Brought forward	IFRS 16 transition	(Charged)/ credited to income statement	Foreign currency adjustment	(Charged)/ credited to share based payment reserve	Acquisitions	At 30 April 2020 £'000
Tax effect of temporary differences due to:
Share based payments	579	-	139	-	(293)	-	425
IFRS 16 adjustment	-	3,933	461	(4)	-	-	4,390
Other timing differences	520	-	(148)	4	-	68	444
Deferred tax asset	1,099	3,933	452	-	(293)	68	5,259
Intangible assets	(1,557)	-	117	-	-	(323)	(1,763)
Accelerated capital allowances	(1,821)	-	203	-	-	(493)	(2,111)
Other timing differences	(41)	-	(190)	-	-	-	(231)
Deferred tax liability	(3,419)	-	130	-	-	(816)	(4,105)
Net deferred tax	(2,320)	3,933	582	-	(293)	(748)	1,154

 

	Brought forward	(Charged)/ credited to income statement	Foreign currency adjustment	(Charged)/ credited to share based payment reserve	Acquisitions	At 30 April 2019 £'000
Tax effect of temporary differences due to:
Share based payments	581	(216)	-	214	-	579
Other timing differences	401	127	(8)	-	-	520
Deferred tax asset	982	(89)	(8)	214	-	1,099
Intangible assets	(1,737)	180	-	-	-	(1,557)
Accelerated capital allowances	(739)	(1,082)	-	-	-	(1,821)
Other timing differences	(47)	6	-	-	-	(41)
Deferred tax liability	(2,523)	(896)	-	-	-	(3,419)
Net deferred tax	(1,541)	(985)	(8)	214	-	(2,320)

 

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

11. Earnings per share

Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the potentially dilutive instruments into ordinary shares.

The following reflects the income and share data used in the earnings per share computation:

	2020  Group £'000	2019 Group  £'000
Profit attributable to ordinary equity holders of the Company (excluding impact of IFRS 16)	15,723	13,406
Impact of IFRS 16 on profit	469	-
Profit attributable to ordinary equity holders of the Company (including impact of IFRS 16)	16,192	13,406

 

	2020 Group	2019 Group
Basic weighted average number of shares (thousands)	101,656	101,512
Basic earnings per share (excluding impact of IFRS 16)	15.5p	13.2p
Basic earnings per share (including impact of IFRS 16)	15.9p	-
Diluted weighted average number of shares (thousands)	102,511	102,061
Diluted earnings per share (excluding impact of IFRS 16)	15.3p	13.1p
Diluted earnings per share (including impact of IFRS 16)	15.8p	-

12. Intangible assets

	Goodwill Group  £'000	Contracts, customer relationships and licences Group £'000	Computer software Group £'000	Total Group £'000
Cost:
At 1 May 2018	25,951	11,623	4,089	41,663
Additions	-	-	2,096	2,096
Disposals	-	-	-	-
Foreign currency adjustment	-	-	(12)	(12)
At 30 April 2019	25,951	11,623	6,173	43,747
Additions	-	-	951	951
Acquisitions (see note 29)	(3,499)	1,882	-	(1,617)
Credited to the income statement	3,499	-	-	3,499
Disposals	-	-	(120)	(120)
Foreign currency adjustment	-	-	6	6
At 30 April 2020	25,951	13,505	7,010	46,466
Accumulated amortisation:
At 1 May 2018	-	2,252	2,193	4,445
Charge for the year	-	1,185	788	1,973
Disposals	-	-	-	-
Foreign currency adjustment	-	-	(12)	(12)
At 30 April 2019	-	3,437	2,969	6,406
Charge for the year	-	1,240	874	2,114
Disposals	-	-	(3)	(3)
Foreign currency adjustment	-	-	1	1
At 30 April 2020	-	4,677	3,841	8,518
Net book value:
At 1 May 2018	25,951	9,371	1,896	37,218
At 30 April 2019	25,951	8,186	3,204	37,341
At 30 April 2020	25,951	8,828	3,169	37,948

 

The average remaining useful life of contracts and licences at 30 April 2020 is 7.3 years (2019: 7.5 years).

13. Impairment test for goodwill

The carrying amount of goodwill has been allocated to each cash-generating unit as follows:

	2020  Group £'000	2019 Group  £'000
Value-added logistics services	20,025	20,025
Commercial vehicles	5,926	5,926
Total	25,951	25,951

 

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 2023.

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 2020 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 between 3.0% and 5.0% (2019: 3.0% and 5.0%) to perpetuity (2019: 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 8.9% and 10.7% (2019: 8.5% and 10.3%). The forecasts of foreign operations are translated at the exchange rate ruling at the end of the year.

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

14. Property, plant and equipment

	Leasehold property Group  £'000	Motor vehicles Group  £'000	Plant, machinery, fixtures & fittings Group  £'000	Total  Group  £'000
Cost:
At 1 May 2018	8,042	4,763	63,189	75,994
Additions	3,999	648	19,673	24,320
Acquisitions	-	-	-	-
Disposals	(212)	(753)	(742)	(1,707)
Foreign currency adjustment	(4)	(35)	(98)	(137)
At 30 April 2019	11,825	4,623	82,022	98,470
Transfer to right-of-use assets on transition¹	(6,925)	(1,527)	(44,292)	(52,744)
Transfer to right-of-use assets²	-	(205)	-	(205)
Additions	6,622	152	1,366	8,140
Acquisitions (see note 29)	-	-	2,899	2,899
Disposals	(20)	(352)	(503)	(875)
Foreign currency adjustment	1	17	(237)	(219)
Transfer from right-of-use assets3	-	-	-	-
At 30 April 2020	11,503	2,708	41,255	55,466
Accumulated depreciation:
At 1 May 2018	2,779	2,635	25,582	30,996
Charge for the year	883	791	5,752	7,426
Disposals	(212)	(602)	(527)	(1,341)
Foreign currency adjustment	(2)	(17)	(62)	(81)
At 30 April 2019	3,448	2,807	30,745	37,000
Transfer to right-of-use assets on transition¹	(240)	(886)	(11,937)	(13,063)
Transfer to right-of-use assets²	-	(61)	-	(61)
Charge for the year	1,090	239	1,915	3,244
Disposals	(20)	(347)	(243)	(610)
Foreign currency adjustment	(1)	8	(17)	(10)
Transfer from right-of-use assets3	-	-	-	-
At 30 April 2020	4,277	1,760	20,463	26,500
Net book value:
At 1 May 2018	5,263	2,128	37,607	44,998
At 30 April 2019	8,377	1,816	51,277	61,470
At 30 April 2020	7,226	948	20,792	28,966

1    Assets funded under finance leases or hire purchase agreements recognised under IAS 17 were reclassified on transition to IFRS 16.

2    Assets purchased in the prior year, where financing has been drawndown after transition to IFRS 16.

3    Assets funded under finance leases or hire purchase agreements, which are retained after repaying the finance are transferred to property, plant and equipment.

Additions to plant, machinery, fixtures & fittings include £79,000 (2019: £2,843,000) in respect of assets in the course of construction.

15. Right-of-use assets

	Land and buildings Group £'000	Vehicles Group  £'000	Other Group £'000	Total Group  £'000
Cost:
At 30 April 2019	-	-	-	-
Opening balance on transition	151,811	7,158	5,536	164,505
Reclassification on transition¹	6,925	1,527	44,292	52,744
Transfer from property, plant and equipment²	-	205	-	205
Additions	4,426	6,847	2,496	13,769
Remeasurement of asset	388	-	-	388
Acquisitions (see note 29)	2,407	-	-	2,407
Disposals and other movements	(1,704)	(520)	(44)	(2,268)
Foreign currency adjustment	(158)	3	20	(135)
Transfer to property, plant and equipment3	-	-	-	-
At 30 April 2020	164,095	15,220	52,300	231,615
Accumulated depreciation:
At 30 April 2019	-	-	-	-
Reclassification on transition¹	240	886	11,937	13,063
Transfer from property, plant and equipment²	-	61	-	61
Charge for the year	20,960	4,529	7,457	32,946
Impairment	-	-	-	-
Disposals and other movements	(222)	(354)	(10)	(586)
Foreign currency adjustment	(76)	-	(6)	(82)
Transfer to property, plant and equipment3	-	-	-	-
At 30 April 2020	20,902	5,122	19,378	45,402
Net book value:
At 30 April 2019	-	-	-	-
At 30 April 2020	143,193	10,098	32,922	186,213

1    Assets funded under finance leases or hire purchase agreements recognised under IAS 17 were reclassified on transition to IFRS 16.

2    Assets purchased in the prior year, where financing has been drawndown after transition to IFRS 16.

3    Assets funded under finance leases or hire purchase agreements, which are retained after repaying the finance are transferred to property, plant and equipment.

16. Investment in equity-accounted investees

	2020 Group £'000	2019 Group  £'000
Brought forward	865	1,278
Share of (loss) after tax for the period	(231)	(413)
Carried forward	634	865

 

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

Summarised financial information from Clicklink's audited accounts for the year ended 31 January 2020 is set out below:

	31 January 2020 £'000	31 January 2019  £'000
Current assets	6,122	6,818
Non-current assets	4,093	4,349
Current liabilities	(4,690)	(5,611)
Non-current liabilities	(4,060)	(4,015)
Equity attributable to owners of the Company	1,465	1,541

 

	Year ended 31 January 2020 £'000	Year ended 31 January 2019  £'000
Revenue	27,315	22,616
Operating profit/(loss)	42	(1,381)
Interest payable and similar charges	(125)	(91)
Income tax credit/(expense)	7	286
(Loss) for the period	(76)	(1,186)

17. Inventories

	2020 Group  £'000	2019 Group  £'000
Component parts and consumable stores	5,515	5,271
Commercial vehicles	5,601	4,195
Commercial vehicles on consignment	16,741	14,583
Total inventories net of provision for obsolescence	27,857	24,049

See below for the movements in the provision for obsolescence:

	Group £'000
At 1 May 2018	112
Charged for the year	82
Utilised	(35)
At 30 April 2019	159
Charged for the year	215
Utilised	(82)
At 30 April 2020	292

 

The cost of inventories recognised as an expense amounted to £87,066,000 (2019: £ 89,917,000).

Included within commercial vehicles is £1,299,000 (2019: £1,001,000) relating to assets held under lease liabilities.

18. Trade and other receivables

	2020 Group £'000	2019 Group £'000
Trade receivables	63,383	57,688
Less: provision for impairment of receivables	(463)	(316)
Trade receivables - net	62,920	57,372
Other receivables	1,749	4,328
Amounts receivable from related parties (see note 28)	2,069	2,089
Contract assets	13,303	16,111
Prepayments	22,701	16,447
Total trade and other receivables	102,742	96,347

 

The contract asset receivables relate to the Group's rights to consideration for work completed but not billed at the reporting date. They are transferred to receivables when the amounts are invoiced.

See note 27 on credit risk of trade receivables, which explains how the Group manages and measures credit quality of trade receivables that are neither past due nor impaired.

See below for the movements in the provision for impairment:

	Group £'000
At 1 May 2018	455
Charged for the year	43
Foreign currency adjustment	-
Utilised	(182)
At 30 April 2019	316
Charged for the year	477
Foreign currency adjustment	-
Utilised	(330)
At 30 April 2020	463

 

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 38 days (2019: 38 days).

The Group applies the simplified approach permitted by IFRS 9, which requires the application of a lifetime expected loss provision to trade receivables. The provision calculations are based on historic credit losses applied to older balances. The basis of this provision is the historical credit losses over the past 5 years as a percentage of total revenue. This approach is followed for all receivables unless there are specific circumstances which would render the receivable irrecoverable and therefore require a specific provision. A provision is made against trade receivables until such time as the Group believes the amount to be irrecoverable, after which the trade receivable or contract receivables balance is written off. Based on these calculations and managements review, there were no material individual impairments of trade receivables or contract receivables.

The ageing analysis of trade receivables was as follows:

	Total  £'000	Neither past due nor impaired £'000	Past due but not impaired
			30-60 days £'000	60-90 days £'000	> 90 days £'000
30 April 2020	62,920	50,068	4,296	1,991	6,565
30 April 2019	57,372	49,284	4,044	1,215	2,829

19. Cash and cash equivalents

	2020 Group  £'000	2019  Group  £'000
Cash and cash equivalents	2,724	3,517
Bank overdraft	-	-
Total cash and cash equivalents	2,724	3,517

20. Trade and other payables

	2020 Group £'000	2019  Group £'000
Trade payables	47,250	40,221
Consignment inventory payables	23,579	21,422
Amounts payable to related parties (see note 28)	355	227
Other taxes and social security	21,524	11,148
Other payables	2,868	5,762
Contract liabilities	22,423	24,557
Accruals	12,814	22,645
Total trade and other payables	130,813	125,982

 

The contract liabilities primarily relate to the consideration invoiced to customers in advance of the work being completed.

21. Financial liabilities: borrowings

	2020 Group £'000	2019 Group  £'000
Non-current:
Bank loans	126	17,307
Obligations under finance leases or hire purchase agreements¹	-	21,803
Total non-current	126	39,110
Current:
Bank loans	19,315	785
Obligations under finance leases or hire purchase agreements¹	-	11,500
Total current	19,315	12,285
Total borrowings	19,441	51,395
Add: Lease liabilities (see note 22)	202,284	-
Less: Cash and cash equivalents	2,724	3,517
Non-current financial assets (see note 28)	1,950	1,950
Net debt (including leases)	217,051	45,928
Less: IAS 17 'operating leases'²	(172,001)	-
Net debt (excluding leases)	45,050	45,928

1    On transition to IFRS 16 on 1 May 2019, finance leases and hire purchase agreements were reclassified as lease liabilities.

2    IAS 17 'operating leases' relate to those leases that were recognised as operating leases in the prior year but are now recognised as lease liabilities under IFRS 16.

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

	2020 Group £'000	2019 Group  £'000
In one year or less	19,315	785
Between one and five years	126	17,307
After five years	-	-
Total bank loans	19,441	18,092

 

The principal lender has security over all assets of the Group's UK operations. The Group's principal bank facilities were increased in January 2019 and at 30 April 2020 the facility available was £45,000,000. In October 2019, there was a re-designation of the facility which now consists of:

·	a Revolving Credit Facility of £34,000,000 repayable in January 2021; interest rate 1.75% above LIBOR. The amount drawn at 30 April 2020 was £19,000,000 (2019: £17,000,000);
·	a committed overdraft of £8,000,000. The amount drawn at 30 April 2020 was £nil (2019: £nil); and
·	bonds and guarantees of £3,000,000.

In August 2020 the Group's principal banking facilities were extended for a further three years.

In addition to the Revolving Credit Facility above, other items included within bank loans at 30 April 2020 are as follows:

·	other bank loans - £544,000 repayable in monthly instalments over periods between 2 and 36 months; interest rates fixed at between 3.72% and 4.56%; and
·	unamortised debt issue costs of £103,000 in relation to the principal facilities, which have been deducted from the total outstanding bank loans.

Changes in liabilities from financing activities:

	Bank loans £'000	Lease liabilities £'000
At 1 May 2019	18,092	33,303
Changes from financing cash flows
Drawdown of bank loans	2,000	-
Repayment of bank loans	(789)	-
New finance leases in respect of additions to property, plant and equipment	-	5,654
Payment of principal on lease liabilities	-	(43,340)
Total changes from financing cash flows	1,211	(37,686)
Changes arising from obtaining or losing control of subsidiaries or other business	-	-
The effect of changes in foreign exchange rates	-	(329)
Other changes
Lease liabilities arising on transition to IFRS 16	-	187,357
New lease liabilities in respect of right-of-use assets	-	9,711
Acquisition	-	2,183
Remeasurement of lease liabilities	-	388
Disposal of lease liabilities	-	(1,689)
New lease liabilities in respect of additions to property, plant and equipment	-	564
New lease liabilities in respect of commercial vehicle inventories	-	444
Finance costs	138	8,038
Total other changes	138	206,996
At 30 April 2020	19,441	202,284

22. Lease liabilities

22.1 Lease liabilities movement

	Land and buildings Group £'000	Vehicles Group £'000	Other Group £'000	Total  Group £'000
At 30 April 2019	-	-	-	-
Opening balance on transition	174,135	7,395	5,827	187,357
Reclassification of leases within borrowings	-	1,481	31,822	33,303
At 1 May 2019	174,135	8,876	37,649	220,660
Additions	2,110	7,319	6,944	16,373
Remeasurement of lease	388	-	-	388
Acquisition	2,183	-	-	2,183
Disposals	(1,569)	(84)	(36)	(1,689)
Repayments	(27,233)	(4,791)	(11,316)	(43,340)
Interest	7,418	367	253	8,038
Foreign currency adjustment	(174)	1	(156)	(329)
At 30 April 2020	157,258	11,688	33,338	202,284

22.2 Lease liabilities outstanding

	2020 Group £'000	2019 Group £'000
The present value of lease liabilities is as follows:
Within one year	38,378	-
Later than one year and not later than five years	110,257	-
Later than five years	53,649	-
Total lease liabilities	202,284	-

 

In prior periods, the Group only recognised lease assets and lease liabilities in relation to leases that were classified as 'finance leases' under IAS 17 'Leases'. For adjustments recognised on adoption of IFRS 16 on 1 May 2019 see note 30.

The expense relating to short term and low value leases was £2,572,000. The expense relating to variable lease payments not included in lease liabilities was £nil. Income recognised from subleasing was £nil.

The total cash outflow for leases, including short term and low value leases, in the year ended 30 April 2020 was £45,912,000 (2019: £46,543,000).

22.3 Opening lease liabilities reconciliation

A reconciliation of operating lease commitments disclosed at 30 April 2019 to the lease liability recognised on transition to IFRS 16 on 1 May 2019 is as follows:

	Land and buildings £'000	Other  £'000	Total Group £'000
Operating lease commitment disclosed as at 30 April 2019
Within one year	24,186	5,776	29,962
Between one and five years	83,496	6,339	89,835
After more than five years	74,188	-	74,188
Total minimum lease payments	181,870	12,115	193,985
Add: expected lease extensions post 30 April 2019	4,000	-	4,000
Add: finance leases and hire purchase agreements reclassified	-	33,303	33,303
Add: rent increases	315	-	315
Add: additional leases recognised under IFRS 16	-	1,880	1,880
Less: short-term/low value leases not capitalised on transition	-	(125)	(125)
Revised commitment as at 1 May 2019	186,185	47,173	233,358
Discounted at weighted average incremental rate of borrowing	174,135	46,525	220,660
Of which:
Current lease liabilities	16,876	19,695	36,571
Non-current lease liabilities	157,259	26,830	184,089
Total lease liabilities as at 1 May 2019	174,135	46,525	220,660

23. Provisions

	Redundancy provision Group £'000	Onerous contracts Group £'000	Uninsured losses  Group £'000	Dilapidations Group £'000	Total Group  £'000
At 1 May 2018	-	17	-	1,547	1,564
Utilised	-	(17)	(168)	(84)	(269)
Charged in year	-	-	168	361	529
At 30 April 2019	-	-	-	1,824	1,824
Recognition of dilapidation provision on IFRS 16 leases	-	-	-	4,086	4,086
Additions to right-of-use asset	-	-	-	233	233
Acquisition	400	-	-	224	624
Utilised	-	-	(122)	(498)	(620)
Charged in year	-	-	122	367	489
Foreign exchange adjustment	-	-	-	(16)	(16)
At 30 April 2020	400	-	-	6,220	6,620

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

	2020  Group  £'000	2019 Group £'000
Current	99	214
Non-current	6,521	1,610
Total	6,620	1,824

Redundancy provisions

As part of the business combination, a redundancy provision was acquired. See note 29.1.

Onerous contracts

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

Uninsured losses

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

Dilapidations

Prior to adoption of IFRS 16, provisions were established over the life of leases to cover remedial work necessary at termination under the terms of those leases.

On transition to IFRS 16, the balance of expected dilapidation provision for each property was included in the calculation of the right-of-use asset.

24. Share capital

	2020 Group £'000	2019 Group £'000
Allotted, called up and fully paid:
101,662,415 (2019: 101,614,522) ordinary shares of 0.05p each	51	51

 

During the year the Company issued 47,893 ordinary shares to satisfy employee share options, for aggregate consideration of £114,000. The new shares rank pari passu with all existing ordinary shares in issue. See also note 25 below.

25. Share based payments

The Clipper Performance Share Plan ("PSP") was approved by shareholders on 29 September 2014. The PSP enables selected Directors and employees of the Group to be granted awards in respect of ordinary shares. Share Awards under the PSP will ordinarily be structured as nil cost share options with the vesting of Share Awards being subject to performance conditions measured over a period of at least three years. A summary of the principal terms of the PSP, including vesting conditions, is contained in the Directors' Remuneration Report on pages 50 to 64 contained in the Company's 2020 Annual Report and Accounts (available to download from www.clippergroup.co.uk/report-accounts/).

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

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

Date	PSP Number	WAEP	Sharesave Number	WAEP
Outstanding 1 May 2018	1,647,665	nil	1,165,834	311.64p
Granted during the year	671,645	nil	2,007,277	193.34p
Forfeited during the year	(441,859)	nil	(603,320)	346.10p
Exercised during the year	(64,964)	nil	(189,035)	185.11p
Outstanding 30 April 2019	1,812,487	nil	2,380,756	213.21p
Granted during the year	-	nil	-	-
Forfeited during the year	(412,510)	nil	(421,652)	232.38p
Exercised during the year	-	nil	(47,893)	239.34p
Outstanding 30 April 2020	1,399,977	nil	1,911,211	208.33p

 

At 30 April 2020, the range of exercise prices for the various schemes were 193.34p - 379.74p (2019: 193.34p - 379.74p). At 30 April 2020, the weighted average remaining contractual life was 2.3 years (2019: 2.7 years).

At 30 April 2020, PSP options over 507,568 (2019: 507,568) and Sharesave options over 103,131 (2019: 105,776) of the above shares were exercisable.

The cost of the options is recognised over the expected vesting period. The total charge for the year ended 30 April 2020 relating to employee share based payment plans was £348,000 (2019: credit of £1,178,000). The fair value of share options at 30 April 2020 to be amortised in future years was £809,000 (2019: £1,538,000).

All share based payments in both years are equity settled.

26. Capital commitments

	2020 Group £'000	2019  Group  £'000
Authorised and contracted for	1,243	2,002
Authorised, but not contracted for	2,392	6,567
Total capital commitments	3,635	8,569

27. Financial instruments and financial risk management objectives and policies

In accordance with IFRS 9 ('Financial Instruments') the Group has reviewed all contracts for embedded derivatives that are required to be separately accounted for if they do not meet certain requirements. The Group did not identify any such derivatives.

The Group is exposed to a number of different market risks in the normal course of business including credit, interest rate and foreign currency risks.

Credit risk

Credit risk predominantly arises from trade receivables and cash and cash equivalents. The Group has a customer credit policy in place and the exposure to credit risk is monitored on an ongoing basis. External credit ratings are obtained for customers; Group policy is to assess the credit quality of each customer before accepting any terms of trade.

Internal procedures take into account customers' financial positions as well as their reputation within the industry and past payment experience. Cash and cash equivalents and derivative financial instruments are held with AAA or AA rated banks. Financial instruments classified as fair value through profit and loss and available for sale are all publicly traded on the UK London Stock Exchange. Given the high credit quality of counterparties with whom the Group has investments, the Directors do not expect any counterparty to fail to meet its obligations.

At 30 April 2020 there were no significant concentrations of credit risk (2019: £nil). The Group's maximum exposure to credit risk, gross of any collateral held, relating to its financial assets is equivalent to their carrying value. All financial assets have a fair value which is equal to their carrying value, as a consequence of their short maturity. The Group did not have any financial instruments that would mitigate the credit exposure arising from the financial assets designated at fair value through profit or loss in either the current or the preceding financial year.

Interest rate risk

The Group adopts a policy of ensuring that there is an appropriate mix of fixed and floating rates in managing its exposure to changes in interest rates on borrowings. Interest rate swaps are entered into, where necessary, to achieve this appropriate mix.

Interest rate sensitivity

The Group's borrowings are largely denominated in Pounds Sterling and the Group is therefore exposed to a change in the relevant interest rate. With all other variables held constant, the impact of a reasonably possible increase in interest rates of 50 basis points (2019: 50 points) on that portion of borrowings affected, would be to reduce the Group's profit before tax by £103,000 (2019: £189,000).

Foreign currency risk

The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in currencies other than Pounds Sterling. The currencies giving rise to this risk are primarily the Euro and Polish zloty. The volume of transactions denominated in foreign currencies is not significant to the Group.

The exposure to a short-term fluctuation in exchange rates on the investment in foreign subsidiaries is not expected to have a material impact on the results of the Group.

Capital management

The Group's main objective when managing capital is to protect returns to shareholders by ensuring the Group will continue to trade profitably in the foreseeable future. The Group also aims to maximise its capital structure of debt and equity so as to minimise its cost of capital.

The Group manages its capital with regard to the risks inherent in the business and the sector within which it operates by monitoring its gearing ratio on a regular basis and adjusting the level of dividends paid to ordinary shareholders.

The Group considers its capital to include equity and net debt. Net debt includes short-term and long-term borrowings (including overdrafts and lease obligations) net of cash and cash equivalents.

The Group has not made any changes to its capital management during the year. The Group has no long-term gearing ratio target. Borrowings are taken out to invest in the acquisition of subsidiaries, new sites or distribution centres and are considered as part of that investment appraisal. Key measures monitored by the Group are interest cover and net debt compared to earnings before interest, tax, depreciation and amortisation.

In order to achieve the overall objective, the Group's capital management, amongst other things, aims to ensure that it meets financial covenants attached to the borrowings. The Group has satisfied all such financial covenants in both years.

	2020 Group £'000	2019 Group £'000
EBIT (excluding impact of IFRS 16)	24,077	20,213
Finance costs (net) (excluding impact of IFRS 16)	2,722	2,141
Interest cover	8.8	9.4

 

	2020  Group £'000	2019  Group £'000
EBIT (excluding impact of IFRS 16)	24,077	20,213
Depreciation and impairment of property, plant and equipment (note 14)	3,244	7,426
Depreciation and impairment of lease liabilities (note 15)	32,946	-
Amortisation and impairment of computer software (note 12)	874	788
Earnings before interest, tax, depreciation and amortisation (EBITDA) (including impact of IFRS 16)	61,141	28,427
Less: Depreciation and impairment of 'IAS 17' operating leases	26,557	-
Earnings before interest, tax, depreciation and amortisation (EBITDA) (excluding impact of IFRS 16)	34,584	28,427
Net debt (note 21)	45,050	45,928
Net debt/EBITDA	1.30	1.62

Liquidity risk

Management closely monitors available bank and other credit facilities in comparison to the Group's outstanding commitments on a regular basis to ensure that the Group has sufficient funds to meet the obligations of the Group as they fall due.

The Board receives regular cash forecasts which estimate the cash inflows and outflows over the next 24 to 36 months, so that management can ensure that sufficient financing can be arranged as it is required. The Group would normally expect that sufficient cash is generated in the operating cycle to meet the contractual cash flows as disclosed above through effective cash management.

Estimation of fair values

The main methods and assumptions used in estimating the fair values of financial instruments are as follows:

·	interest-bearing loans and borrowings: fair value is calculated based on discounted expected future principal and interest cash flows; and
·	trade and other receivables/payables: the notional amount for trade receivables/payables with a remaining life of less than one year are deemed to reflect their fair value.

 

	2020 Book value £'000	2020 Fair value £'000	2019 Book value £'000	2019 Fair value £'000
Non-current financial assets	1,950	1,907	1,950	1,950
Current financial assets:
Cash and cash equivalents	2,724	2,724	3,517	3,517
Trade and other receivables	102,742	102,742	96,347	96,347
Liabilities:
Bank overdraft	-	-	-	-
Short-term borrowings	(19,315)	(19,315)	(12,285)	(12,285)
Lease liabilities: short term	(38,378)	(38,378)	-	-
Trade and other payables	(130,813)	(130,813)	(125,982)	(125,982)
Long-term borrowings	(126)	(120)	(39,110)	(38,830)
Lease liabilities: long term	(163,906)	(163,411)	-	-

 

Long-term borrowings are classified as Level 2 (items with significant observable inputs) financial liabilities under IFRS 13. There have been no transfers between Level 1 and Level 2 financial instruments during the year.

28. Related party disclosures

Clicklink Logistics Limited (see note 16) is a supplier of logistics services to the Group. The Group provides certain resources to Clicklink, principally people and vehicles, under the terms of the joint venture agreement. Amounts charged for these resources are included in revenue.

Branton Court Stud LLP, in which Steve Parkin is a partner, receives management, recharge of expenditure and administration services from the Group. During the year £588,000 (2019: £590,000) was recharged to Branton Court Stud LLP for management time of Directors and other key management personnel in proportion to the time spent on non-Clipper-related activities. In addition, £2,000 was charged in relation to vehicle repair services.

Additionally, in the previous financial year, the Group recognised a credit from Branton Court Stud LLP of £977,000 in respect of Branton Court's contribution to costs incurred by the Group in respect of a one-off event.

In the year, the Group paid Branton Court Stud LLP £70,000 (2019: £120,000) received in relation to horse race winnings. These monies were not intended for the Group and were paid to Branton Court on the same day.

Guiseley Association Football Club shares a common director with Clipper Logistics plc.

Harrogate Road Restaurants Limited shares a common director with Clipper Logistics plc.

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

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

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

Southerns Office Interiors Limited supplied office furniture to the Group and was a customer of the commercial vehicles segment. A company owned by Steve Parkin is registered as a person with significant control over Southerns Limited, the ultimate parent of Southerns Office Interiors Limited.

In the prior year, the Group entered into a framework agreement with Styles & Wood Limited, a company which shares common directors. A payment of £2.0 million was advanced in relation to the agreed works on 27 June 2018. The agreement was subsequently cancelled and the payment was returned by 20 August 2018. No such transactions occurred in the year ended 30 April 2020.

During the year, £138,000 was received from Steve Parkin repaying Clipper for personal expenditure incurred on a company credit card. At 30 April 2020 £nil was outstanding.

In the prior year, the Company advanced two petty cash amounts totalling £27,000 to David Hodkin in exchange for personal cheques from David Hodkin. In both cases, there was a short period of time elapsing between David's withdrawal of the cash and Clipper's subsequent cashing of the cheque. No such transactions occurred in the year ended 30 April 2020.

28. Related party disclosures

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

	2020 Group £'000	2019 Group £'000
Non-current financial assets:
Clicklink Logistics Limited - interest-bearing loan	1,950	1,950
Trade and other receivables:
Clicklink Logistics Limited - trading balance	2,066	1,626
Branton Court Stud LLP	2	461
Knaresborough Investments Limited	-	-
Southerns Office Interiors Limited	1	2
Trade and other payables:
Clicklink Logistics Limited	179	227
Roydhouse Properties Limited	176	-

 

The shareholders in Clicklink Logistics Limited have jointly made available to that company a term loan facility of £3,900,000 of which the Company's 50% share is £1,950,000. Interest on each loan is calculated at a margin above 12 month LIBOR and is payable annually. All loans drawn under the facility are repayable in November 2022.

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

	2020 Group  £'000	2019 Group £'000
Items credited to the income statement:
Clicklink Logistics Limited - revenue	19,088	20,392
Clicklink Logistics Limited - finance income	59	52
Branton Court Stud LLP	590	2,097
Hamsard 3476 Limited	-	3,100
Knaresborough Investments Limited	-	174
Harrogate Road Restaurants Limited	-	-
Southerns Office Interiors Limited	9	7
Items charged to the income statement:
Clicklink Logistics Limited	2,438	2,750
Branton Court Stud LLP	-	129
Hamsard 3476 Limited	-	145
Knaresborough Investments Limited	1	176
Knaresborough Real Estate Limited	265	360
Roydhouse Properties Limited	808	910
Southerns Office Interiors Limited	-	17
Guiseley Association Football Club	-	25

29. Business combinations

29.1 Raven Mill operation

In April 2019, the Company entered into a series of contracts with a customer, which when combined represented a business combination in accordance with IFRS 3 'Business Combinations'. The acquisition consists of premises, assets and a workforce, together carrying out a logistics service business that is now carried out by the Company. The business acquired is an unincorporated entity. Several areas required significant judgment by management, in particular that the transfer of employees under TUPE and the lease of the premises commenced only after the year end, limiting the ability of the Group to control the relevant activities of the acquired business. On balance the Group has concluded that the effective date of the business combination is 1 July 2019 and that this series of transactions should be reflected within the year ended 30 April 2020. This is when management concluded that control has passed to the Group. The Group has carried out a fair value exercise of the business combination, which gives rise to 'negative goodwill' of £3,499,000. The 'negative goodwill' is recognised within the Company income statement in the year ended 30 April 2020.

The fair value table for the business combination is shown below.

Purchase consideration and cash flows:

	£'000
Cash consideration paid in the year	2,899
Cash consideration receivable	(2,765)
Total net consideration payable	134

Acquisition:

	Fair values £'000
Assets:
Property, plant and equipment	2,899
Right-of-use asset	2,407
Customer relationship	1,882
Liabilities:
Lease liabilities	(2,183)
Non-current provisions	(624)
Deferred tax liabilities	(748)
Total identifiable net assets at fair value	3,633
'Negative goodwill' arising on acquisition	(3,499)
Total consideration	134

 

As part of the series of transactions, the customer will pay, in the year ending 30 April 2021, the Company consideration in return for the Company assuming certain potential liabilities. This results in the net consideration payable being less than the fair value of net assets acquired, principally the customer relationship, which gave rise to 'negative goodwill'.

Professional fees and costs in relation to the acquisition amounted to £41,000 and have been charged to the income statement.

29.2 RepairTech Limited

In June 2018, the Company paid deferred consideration of £500,000 in relation to the acquisition of the entire issued share capital of RepairTech Limited on 15 June 2017.

30. IFRS 16 transition

The impact on the statement of financial position at the date of transition was as follows:

	Note	At 30 April 2019 Group £'000	IFRS 16 adjustment Group £'000	At 1 May 2019 Group £'000
Assets:
Non-current assets
Goodwill		25,951	-	25,951
Other intangible assets		11,390	-	11,390
Intangible assets-		37,341	-	37,341
Property, plant and equipment	1	61,470	(39,681)	21,789
Right-of-use assets	2	-	204,186	204,186
Investment in subsidiaries		865		865
Non-current financial assets		1,950		1,950
Deferred tax assets	3	-	1,613	1,613
Total non-current assets		101,626	166,118	267,744
Current assets
Inventories		24,049	-	24,049
Trade and other receivables	4	96,347	(4,915)	91,432
Cash and cash equivalents		3,517	-	3,517
Total current assets		123,913	(4,915)	118,998
Total assets		225,539	161,203	386,742
Equity and liabilities:
Current liabilities
Trade and other payables	4	125,982	(8,293)	117,689
Financial liabilities: borrowings	5	12,285	(11,500)	785
Lease liabilities: Short term	6	-	36,571	36,571
Short-term provisions		214	-	214
Current income tax liabilities		803	-	803
Total current liabilities		139,284	16,778	156,062
Non-current liabilities
Financial liabilities: borrowings	5	39,110	(21,803)	17,307
Lease liabilities: long term	6	-	184,089	184,089
Long-term provisions	4	1,610	4,086	5,696
Deferred tax liabilities	3	2,320	(2,320)	-
Total non-current liabilities		43,040	164,052	207,092
Total liabilities		182,324	180,830	363,154
Equity shareholders' funds
Share capital		51	-	51
Share premium		2,060	-	2,060
Currency translation reserve		(108)	-	(108)
Other reserve		84	-	84
Merger reserve		6,006	-	6,006
Share based payment reserve		1,643	-	1,643
Retained earnings	7	33,479	(19,627)	13,852
Total equity attributable to the owners of the Company		43,215	(19,627)	23,588
Total equity and liabilities		225,539	161,203	386,742

 

1    Assets previously recognised within property, plant and equipment under IAS 17 relating to finance leases were transferred as right-of-use assets at their book value at the date of transition.

2    Right-of-use assets: valued at an amount equal to the carrying amount as if IFRS 16 had been applied since the start of the lease, but applying the incremental rate of borrowing at the 1 May 2019 (date of transition).

3    Deferred tax asset: as per IAS 12, the net liability recognised on transition to IFRS 16 creates a temporary timing difference from that which will be deducted for tax purposes, therefore a deferred tax asset is recognised.

4    Reclassification of balance sheet items: lease incentive accruals, dilapidation provisions and lease prepayments have been reclassified on transition to IFRS 16.

5    Reclassification of lease liabilities: finance lease and hire purchase agreements previously recognised under IAS 17 have been reclassified to lease liabilities from financial liabilities: borrowings.

6    Lease liabilities: measured at the present value of the remaining lease payments, discounted using the Group's weighted average incremental borrowing rate (see critical accounting estimates and judgments on page 87 for more details).

7    Retained earnings adjustment: the Group has calculated the right-of-use asset as though IFRS 16 had been applied since the start of the lease and depreciated, resulting in a charge to retained earnings as the carrying value of right-of-use assets is lower than the finance lease liabilities recognised.