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CLG Clipper Logistics Plc

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Clipper Logistics plc Interim Results (6224Y)

07/12/2017 7:00am

UK Regulatory


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RNS Number : 6224Y

Clipper Logistics plc

07 December 2017

CLIPPER LOGISTICS PLC

"Continuing strong growth in line with expectations"

INTERIM RESULTS FOR THE SIX MONTHS TO 31 OCTOBER 2017

Clipper Logistics plc ("Clipper", "the Group", or "the Company"), a leading provider of value-added logistics solutions and e-fulfilment to the retail sector, is pleased to announce its unaudited results for the six months ended 31 October 2017.

Financial Highlights

 
 --   Group revenue up 21.1% to GBP199.7 million (2016: 
       GBP164.9 million); 
 --   Group EBIT(1) 19.4% ahead at GBP9.2 million (2016: 
       GBP7.7 million), reflecting strong performance across 
       all service lines: 
       o   E-fulfilment and returns management services EBIT 
            up 25.7% to GBP5.3 million (2016: GBP4.2 million); 
       o   Non e-fulfilment logistics EBIT up 6.3% to GBP6.3 
            million (2016: GBP5.9 million); 
       o   Commercial vehicles EBIT up 13.5% to GBP1.4 million 
            (2016: GBP1.3 million); 
 --   Group Profit Before Tax and Amortisation(1) up 21.0% 
       to GBP8.4 million (2016: GBP6.9 million); 
 --   Group Profit Before Tax (PBT) up 15.6% to GBP7.9 
       million (2016: GBP6.9 million); 
 --   Cash generated from operations up 1.8% to GBP12.6 
       million (2016: GBP12.3 million); 
 --   Earnings per share up 18.9% to 6.3 pence (2016: 
       5.3 pence); 
 --   Interim dividend increased by 16.7% to 2.8 pence 
       per share (2016: 2.4 pence). 
 

(1) As defined in Alternative Performance Measures section

Operational Highlights

 
 --   Extended our Clicklink click-and-collect network 
       to other retail customers including Supergroup and 
       Urban Outfitters; 
 --   Successfully launched new operations for Secret 
       Sales, M&S and River Island in the United Kingdom, 
       and recently commenced returns operations with ASOS 
       in Poland, leveraging knowledge and experience from 
       existing ASOS returns activities in the United Kingdom; 
 --   Commenced a major new sortation and distribution 
       contract with the Edinburgh Woollen Mill Group, 
       bringing with it new sites in Nantgarw (Cardiff) 
       and Carlisle, and commenced a new transport operation 
       with Crosswater Holdings Limited; 
 --   Completed the acquisitions of Tesam Distribution 
       Limited and RepairTech Limited, both of which are 
       immediately earnings-enhancing. Tesam enhances our 
       existing relationship with M&S and RepairTech brings 
       new skills and customers to our electrical repairs 
       and returns offering; 
 --   Significant organic growth, both with long-standing 
       customers and with more recent start-ups, including 
       the commencement of new Vype operations for BAT; 
 --   Strong performance in commercial vehicles division 
       driven by new vehicle sales; 
 --   Continuing strong pipeline of new business opportunities. 
 

Commenting on the results, Steve Parkin, Executive Chairman of Clipper, said:

"I am pleased to report that the Group has once again delivered strong results in line with the Board's expectations.

Strong revenue and profit growth has continued in all sectors.

Our market-leading position in the high-growth area of e-fulfilment and associated services, has been enhanced further by the onboarding of new customers onto the Clicklink click-and-collect operation, and the new ASOS returns facility in Poland demonstrates our commitment to leveraging our existing business across Europe.

The first half of the current financial year saw strong organic growth on existing contracts, particularly in the e-commerce sector, and this was complemented by contract wins and two strategic acquisitions. Both of these acquisitions are performing in line with our expectations.

The new business pipeline continues to be strong, and we expect the positive momentum from existing and new contracts to continue into the second half of the year.

The Board remains confident for the future, and I look forward to updating our shareholders and the markets throughout the year."

 
 ENQUIRIES 
 Clipper:         +44 (0)113 204 2050 
 Steve Parkin, Executive Chairman 
 Tony Mannix, Chief Executive Officer 
 David Hodkin, Chief Financial Officer 
 Public Relations Advisers: 
 Buchanan:       +44 (0) 20 7466 5000 
 David Rydell 
 Stephanie Watson 
 
 

This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation which came into effect on 3 July 2016.

About Clipper

Clipper Logistics plc (www.clippergroup.co.uk), which is premium listed on the Main Market of the London Stock Exchange, is a retail logistics specialist, which provides value-added, consultancy-led services to its blue chip client base. Clipper is a UK leader in its markets, with a long-standing customer base in:

 
 --   e-fulfilment 
 --   fashion 
 --   high-value logistics 
 

A profitable and cash generative commercial vehicles business complements the Group's logistics activities.

Cautionary statement

Any forward looking statements made in this document represent the Board's best judgement as to what may occur in the future. However, the Group's actual results for the current and future financial periods and corporate developments will depend on a number of economic, competitive and other factors, some of which may be outside the control of the Group. Such factors could cause the Group's actual results in future periods to differ materially from those expressed in any forward looking statements included in this announcement.

PERFORMANCE AT A GLANCE

 
                              6 months       6 months 
                              ended 31       ended 31              12 months 
                               October        October               ended 30 
                                  2017           2016             April 2017 
                           (unaudited)    (unaudited)   Change     (audited) 
                                  GBPm           GBPm                   GBPm 
-----------------------  -------------  -------------  -------  ------------ 
 
 Revenue                         199.7          164.9   +21.1%         340.1 
 
 EBIT                              9.2            7.7   +19.4%          17.9 
 
 Profit before tax and 
  amortisation                     8.4            6.9   +21.0%          16.2 
 
 Profit before tax                 7.9            6.9   +15.6%          16.1 
 
 Earnings per share               6.3p           5.3p   +18.9%         12.5p 
 
 Cash generated from 
  operations                      12.6           12.3    +1.8%          25.7 
-----------------------  -------------  -------------  -------  ------------ 
 

ALTERNATIVE PERFORMANCE MEASURES

The Group makes use of an Alternative Performance Measure (APM) in the management of its operations and as a key component of its internal and external reporting. In accordance with FRC guidance, this is explained below.

Earnings before interest and tax (EBIT) is defined as the operating profit, including the Group's share of operating profit in equity-accounted investees, before amortisation of intangible assets arising on consolidation and any exceptional or non-recurring items. Due to the structure of our contractual relationships, with approximately 70% of revenue in our UK logistics operations being on open book terms, EBIT is the key metric rather than EBIT margin or revenue. A reconciliation of EBIT by business area to Group operating profit and Group PBT is included in note 4.

Profit before tax and amortisation is defined as the Profit before tax, before amortisation of intangible assets arising on consolidation and any exceptional or non-recurring items.

GROUP RESULTS

The Group has enjoyed a successful first half of the year with strong revenue and profit growth in line with the Board's expectations.

The Group's strategic positioning in e-fulfilment and returns management services delivered continued strong organic growth in this sector.

Compared to the six months ended 31 October 2016, results for the six months ended 31 October 2017 benefited from:

 
 -   the full six months' run rate impact of new contract 
      wins commenced in the six months ended 31 October 
      2016 including Halfords, Thread 35, Kidly, Links 
      of London, Vype for BAT and activities at the John 
      Lewis ancillary facility in Northampton; 
 -   the full six months' benefit of new contract wins 
      commenced in the six months ended 30 April 2017 
      including Secret Sales, Pretty Green, SilkFred and 
      Inditex in the UK, Smiffy's in Germany and Westwing 
      in Poland; 
 -   a part-period benefit from new contract wins commenced 
      in the six months ended 31 October 2017 including 
      M&S returns, River Island, Edinburgh Woollen Mills 
      and Crosswater in the United Kingdom, ASOS returns 
      in Poland, and with Urban Outfitters and Supergroup 
      in the Clicklink joint venture; 
 -   organic growth from ASOS returns, ASDA ecom, Wilkinsons, 
      Zara and Browns in the UK; and s.Oliver in Germany; 
      and 
 -   a part-period contribution from the trading of the 
      Tesam and RepairTech acquisitions completed in the 
      period; 
 

and were adversely impacted by:

 
 -   the end of the Hobbycraft and Ted Baker contracts 
      in the prior year, a reduction in tobacco-related 
      packing activities and incremental share-based payment 
      charges and related NI accruals. 
 

The combination of these factors resulted in EBIT from e-fulfilment and returns management activities increasing by 25.7% to GBP5.3 million (2016: GBP4.2 million), with EBIT from non e-fulfilment activities increasing by 6.3% to GBP6.3 million (2016: GBP5.9 million). This was further complemented by continuing strong performance in the commercial vehicles division driven by new vehicle sales, resulting in an EBIT increase of 13.5% to GBP1.4 million (2016: GBP1.3 million).

Whilst Clipper continues to invest in quality people and infrastructure, central logistics and head office overhead costs have been tightly managed, despite increased share based payment charges. As a result, central logistics costs decreased slightly by GBP0.1 million to GBP2.5 million (2016: GBP2.6 million) and head office costs increased by GBP0.1 million to GBP1.3 million (2016: GBP1.2 million).

In line with Clipper's dividend policy and reflecting the Group's strong cash flow and earnings growth, the Board is pleased to announce an interim dividend of 2.8 pence per share, which will be paid on 5 January 2018 to shareholders on the register at 15 December 2017. This represents an increase of 16.7% (0.4 pence per share) compared to the interim dividend of 2.4 pence paid in December 2016.

STRATEGY

The Group's strategy is set around four key principles all of which have seen positive developments over the period under review:

 
 --   To build on Clipper's market leading customer proposition 
       to expand the customer base; 
 --   Develop new, complementary products and services; 
 --   Continue European expansion; and 
 --   Explore acquisition opportunities. 
 

The Group continues to provide market-leading, value-added logistics solutions to the retail sector in the UK as demonstrated through further new contract wins with blue-chip clients. Examples of these include those with Edinburgh Woollen Mills, M&S and River Island. The Group is well-positioned in the high-growth e-commerce market and as a result has seen significant volume increases with the majority of its customers.

The Group continues to innovate in order to identify and address the logistical challenges of retailers through the development of new, complementary products and services. We continue to develop cutting-edge Warehouse Management System capabilities for our customers. Indeed, through collaboration with a world-leading WMS provider we have developed a system which gives our existing and potential customers the benefit of a class-leading WMS platform which would otherwise be prohibitively expensive to them.

The Group also continues to seek potential acquisitions providing complementary activities. We have acquired two such businesses in the period under review, and we will continue to monitor the market for potential targets and partners, both in the UK and throughout Europe, which will deliver enhanced earnings and increased shareholder value.

Our European activities continue to evolve apace. Our recent ASOS returns contract win in Poland demonstrates our ability to leverage long-standing UK customer relationships across Europe. We expect to see further developments both in Germany and further afield over the coming months and years, through a combination of organic growth with existing customers, organic growth with new customers and acquisitive growth.

OUTLOOK

Trading continues to perform well in the second half of the year and there is a strong business development pipeline, some of which is at an advanced stage of discussion. Our peak trading period has seen significant year-on-year increases in activity in all sectors, enhanced by the impact of new contract wins coming on-line. Further, the seasonal nature of the Clicklink joint venture means that significant profits are generated in the November and December peak months, with losses typically resulting outside of the peak trading months, such that Clicklink profitability is skewed into the second half of Clipper's financial year.

Once again, we are pleased to report a successful Black Friday to Cyber Monday trading period. We expect to see continuing high activity levels in the period through to Christmas and the Boxing Day sales, particularly in e-fulfilment and returns management services, and our recent acquisitions continue to perform at, or above, our expectations. Indeed, we are currently exploring a number of opportunities to further enhance the value from these acquisitions.

We have experienced some pressures on the availability of seasonal labour in part due to Brexit uncertainties. We have largely managed to mitigate these challenges during the peak trading period through certain innovative recruitment strategies and through diversifying our agency supply base. Moreover, we would not anticipate that market labour shortages would significantly impact our profitability; the high proportion of open-book contracts (approximately 70% of our UK logistics operations, in revenue terms) within our UK logistics operations ensures that current and potential future cost increases are "passed through" to customers, whether those cost increases are driven by the continued contraction of labour availability or as a result of the ongoing inflationary effects of the National Living Wage, the UK Apprenticeship Levy or auto-enrolment pension legislation. Further, for those contracts which are not open-book, Clipper has contract mechanisms in place which allow for increased rates to be negotiated.

The commercial vehicles business has achieved growth in excess of expectations in the first half of the year and we expect the business to continue to perform well.

The Board reasserts its belief that the UK's decision to leave the European Union will have little impact on the Group's trading for the foreseeable future. The nature of contractual relationships in the UK logistics sector provides a very high degree of protection against both cost inflation and volume downsides. Similarly, the Board expects that there will be little or no impact within the commercial vehicles sector. It remains to be seen whether the Government's desire to restrict immigration will have a longer term impact on labour availability, but the Group's contractual structures mean that it is well-placed to be able to compete for labour were that necessary in the future.

BUSINESS REVIEW

Operational review

E-fulfilment and returns management services

E-fulfilment operations 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. At no time does Clipper take ownership of customers' products.

We continue to manage the return of products on behalf of retailers, particularly those sold online, through our Boomerang brand.

Revenues for e-fulfilment and returns management services have increased 29.2% to GBP76.1 million in the six months ended 31 October 2017 (2016: GBP58.9 million). EBIT is 25.7% ahead of the equivalent period in the prior year at GBP5.3 million (2016: GBP4.2 million).

We have seen continued migration towards online and omni-channel retailing in the UK retail sector. And, despite the widely-reported pressures currently facing UK retailers, as a result of the continued migration, Clipper has seen significant growth in activity levels with many of its existing customers in the first half of the year, including ASOS returns, Antler, Asda, Wilkinsons, Zara and Browns in the UK, and s.Oliver in Germany. The recently-commenced contract wins with BAT (for Vype), Thread 35, Kidly, Secret Sales, SilkFred, Inditex, Smiffy's, Westwing and the e-commerce activities performed at our ancillary distribution centre for John Lewis have contributed a full six months of run rate to the period ended 31 October 2017.

Whilst the M&S returns operation and River Island in the UK; ASOS returns in Poland; and Urban Outfitters and Supergroup in the Clicklink joint venture have generated contribution to the Group results in the six months ended 31 October 2017, these operations will not reach full run rate until the following financial year.

The acquisition of RepairTech Limited, completed in the current period, has also contributed some growth to the period.

Due to the structure of our contractual relationships, with approximately 70% of revenue in our UK logistics operations being on open book terms, EBIT is the key metric rather than EBIT margin. In the period under review, the seasonality and start-up phase of our Click and Collect operations have distorted reported margin percentages.

Non e-fulfilment logistics

Non e-fulfilment operations include receipt, warehousing, stock management, picking and distribution of products on behalf of customers. Clipper does not take ownership of customers' products at any time.

Within this sector, Clipper handles high value products, including tobacco, electrical products and high value clothing, whilst also undertaking traditional retail support services including processing, storage and distribution of products, particularly fashion, to high street retailers.

Revenues were 7.2% ahead of the same period of the prior year at GBP65.7 million (2016: GBP61.3 million), and EBIT was 6.3% higher at GBP6.3 million (2016: GBP5.9 million).

Pretty Green, Halfords, Links of London and the non-e-commerce aspects of the operations at Clipper's ancillary distribution centre for John Lewis all contribute a full six months of trading to the period ended 31 October 2017, having not been at full run-rate in the equivalent period of the prior year.

New non-e-commerce contracts which commenced in the six months ended 31 October were Edinburgh Woollen Mills and Crosswater, both contributing favourably to the year-on-year growth.

The acquisition of Tesam Distribution Limited, completed in the current period, has also contributed some growth to the period.

Organically too, we have seen growth with a number of customers, including Morrisons, Bench, Philip Morris, M&S (non-e-com operations), Browns and Haddad, whilst contract packing in the tobacco sector has reduced.

The end of the Hobbycraft and Ted Baker contracts in the prior year has adversely affected performance in this period.

As with e-fulfilment and returns management services, due to the nature of contracts EBIT is the key performance metric for this business activity.

Central logistics overheads

Central logistics overheads represent the costs of support services specific to the logistics operations, but which cannot be allocated in a meaningful way to the sub-segment activities.

Such costs include directorate, advertising and promotion, accounting and IT, and the costs of the solutions development team.

Central logistics overheads of GBP2.5 million decreased by 2.6% compared to the prior year (2016: GBP2.6 million), with savings in sales & marketing expenditure, human resources expenditure and central services expenditure, more than offsetting increased share based payment charges.

Commercial vehicles

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

We generated revenue of GBP58.8 million for the six months ended 31 October 2017, 28.9% ahead of the same period of last year (2016: GBP45.6 million). EBIT grew by 13.5% to GBP1.4 million in the same period (2016: GBP1.3 million). The significant revenue growth did not result in an equivalent growth in EBIT since much of the growth was attributable to new vehicles sales which are typically low margin. In addition, Commercial Vehicles Administration and other expenses increased by GBP1.0 million in the six month period year-on-year.

Financial Review

Revenue

Group revenue increased by 21.1% to GBP199.7 million (2016: GBP164.9 million).

Revenue derived from value-added logistics services increased by 18.0% to GBP141.8 million (2016: GBP120.2 million), with growth in e-fulfilment and returns management services of 29.2% and in non e-fulfilment services of 7.2%.

Revenue from sales and repairs of commercial vehicles increased by 28.9% to GBP58.8 million (2016: GBP45.6 million). The increase was driven primarily by new vehicle sales.

 
 Revenue (unaudited)                  Six months 
                                     to 31 October 
                                     2017         2016   Change 
-----------------------------  ----------  -----------  ------- 
 
 E-fulfilment & returns           GBP76.1      GBP58.9 
  management services                   m            m   +29.2% 
                                  GBP65.7      GBP61.3 
 Non e-fulfilment logistics             m            m    +7.2% 
-----------------------------  ----------  -----------  ------- 
                                 GBP141.8     GBP120.2 
 Total value-added logistics            m            m   +18.0% 
                                  GBP58.8      GBP45.6 
 Commercial vehicles                    m            m   +28.9% 
 Intra-Group                       (0.9)m    GBP(0.9)m 
-----------------------------  ----------  -----------  ------- 
                                 GBP199.7     GBP164.9 
 Consolidated total                     m            m   +21.1% 
-----------------------------  ----------  -----------  ------- 
 

EBIT

Group EBIT increased by 19.4% to GBP9.2 million (2016: GBP7.7 million).

EBIT growth was achieved in all segments and business activities, with growth of 25.7% in e-fulfilment and returns management services. In addition, the Group achieved EBIT growth of 6.3% in non e-fulfilment logistics and 13.5% in commercial vehicles. Central logistics costs decreased by GBP0.1 million whilst head office costs increased by GBP0.1 million.

 
 Group EBIT (unaudited)               Six months 
                                     to 31 October 
                                      2017         2016   Change 
-----------------------------  -----------  -----------  ------- 
 
 E-fulfilment & returns             GBP5.3       GBP4.3 
  management services                    m            m   +25.7% 
                                    GBP6.3       GBP5.9 
 Non e-fulfilment logistics              m            m    +6.3% 
 Central logistics costs         GBP(2.5)m    GBP(2.6)m 
-----------------------------  -----------  -----------  ------- 
                                    GBP9.1       GBP7.6 
 Total value-added logistics             m            m   +18.9% 
                                    GBP1.4       GBP1.3 
 Commercial vehicles                     m            m   +13.5% 
 Head office costs               GBP(1.3)m    GBP(1.2)m 
-----------------------------  -----------  -----------  ------- 
                                    GBP9.2       GBP7.7 
 Consolidated total                      m            m   +19.4% 
-----------------------------  -----------  -----------  ------- 
 

Net finance costs

Net finance costs were GBP0.9 million (2016: GBP0.8 million). These costs have increased by 22.0% due to the costs of the two strategic acquisitions, together with significant capital expenditure on a number of new customers and projects, much of which will be recovered from open book customers through depreciation charges in future periods.

Taxation

The tax charge on profit before tax was GBP1.7 million (2016: GBP1.5 million). The effective tax rate in the period of 21.0% (2016: 22.0%) has decreased due to a 1 percentage point reduction in the main UK headline corporation tax rate year-on-year.

Earnings Per Share (EPS)

EPS was 6.3p in the period (2016: 5.3p) an increase of 18.9% due to the strong trading performance in all segments and business areas.

Dividend

An interim dividend for the current year of 2.8 pence per share was approved by the board on 4 December 2017. The dividend will be payable on 5 January 2018 to shareholders on the register at the close of business on 15 December 2017.

Cashflow

Cash generated from operations in the period was GBP12.6 million (2016: GBP12.3 million), an increase of 1.8%. Net cash used in working capital during the period was GBP1.2 million (2016: net cash generation of GBP2.5 million); strong earnings growth was offset by an adverse movement in working capital, driven by a late payment by a single customer. We define net cash used in / generated from working capital as the cash flows generated from changes in: trade and other receivables of GBP(21.2) million (2016: GBP(17.3) million), inventories of GBP(0.1) million (2016: GBP(10.4) million) and trade and other payables of GBP20.1 million (2016: GBP30.2 million), per the cash flow statement.

Tax cash outflows increased by GBP0.5 million to GBP2.0 million (2016: GBP1.5 million), largely as a result of the growth in profitability in the year ended 30 April 2017 compared to the year ended 30 April 2016.

Capital expenditure in the period on property, plant and equipment was GBP6.2 million (2016: GBP15.6 million), compared to a depreciation and impairment charge of GBP3.3 million (2016: GBP2.0 million). Whilst still a significant investment, this decrease in capital expenditure is predominantly due to the start-up capital investment required on two contracts in the prior year. GBP2.6 million (2016: GBP7.2 million) of the capital expenditure was financed on hire purchase or finance lease agreements and GBPnil (2016: GBP1.6 million) was financed by specific bank loans.

Group cash flow in the six months ended 31 October 2016 benefited from the sale of fixed assets to Clicklink, contributing significantly to the overall GBP1.3 million proceeds on sale of fixed assets in that period. There were no significant sales of fixed assets in the six months ended 31 October 2017. Conversely, the joint venture entity required GBP2.3 million of cash investment from Clipper in the six months ended 31 October 2016 across share capital and loans. There was no such funding requirement in the six months ended 31 October 2017.

There were net cash outflows totalling GBP11.8 million in the six months ended 31 October 2017 as a result of the two acquisitions. There were no acquisitions in the six months ended 31 October 2016.

Net debt (see note 12) at 31 October 2017 was GBP38.8 million (2016: GBP30.2 million). The increase in net debt compared to the prior year and since 30 April 2017 (GBP25.0 million) is primarily due to the GBP11.8 million spent on the two new acquisitions, explained above. The Group agreed with its principal bankers to increase its available credit facilities during the period. Consequently, at 31 October 2017, there are further undrawn bank facilities of GBP23.5 million committed and available. See note 12 for further details.

RISK MANAGEMENT

There are a number of risks and uncertainties facing the business in the second half of the financial year. A risk management process is used by the Group to identify, monitor and manage such risks. The principal risks and uncertainties facing the business are unchanged from those identified in the 2017 Annual Report. Those risks are outlined below:

 
 --   Reputational impact of any failed project implementations; 
 --   Failure to develop and retain key people; 
 --   A loss of focus on operational delivery; 
 --   A failure to manage health and safety risks; 
 --   Availability of agency labour; 
 --   A worsening of a customer relationship may lead 
       to non-renewal of contracts; 
 --   A natural or other disaster on any major site; 
 --   Failure of IT systems or infrastructure; 
 --   Legal and regulatory risks, such as those introduced 
       by the National Living Wage and the Apprenticeship 
       Levy; 
 --   Liquidity risk; 
 --   Credit risk; and 
 --   Fraud risk. 
 

The Group has in place mitigation strategies to deal with all of these risks. Further details can be found on pages 20 to 23 in the 2017 Annual Report.

CONDENSED FINANCIAL STATEMENTS FOR THE 6 MONTHS TO 31 OCTOBER 2017

Interim Group Income Statement (unaudited)

 
      Year                                             Note      6 months        6 months 
     ended                                                          ended           ended 
  30 April                                                     31 October      31 October 
      2017                                                           2017            2016 
   GBP'000                                                        GBP'000         GBP'000 
----------  ----------------------------------------  -----  ------------    ------------ 
 
   340,127   Revenue                                    3         199,685         164,922 
 (241,097)   Cost of Sales                                      (142,027)       (117,238) 
----------  ----------------------------------------  -----  ------------    ------------ 
    99,030   Gross profit                                          57,658          47,684 
       405   Other net gains                                           78              66 
  (81,964)   Administration and other expenses                   (48,280)        (40,127) 
----------  ----------------------------------------  -----  ------------    ------------ 
             Operating profit before share 
              of equity-accounted investees, 
    17,471    net of tax                                            9,456           7,623 
             Share of equity-accounted investees, 
       217    net of tax                                            (598)               - 
----------  ----------------------------------------  -----  ------------    ------------ 
    17,688   Operating profit                                       8,858           7,623 
----------  ----------------------------------------  -----  ------------    ------------ 
    17,928   EBIT                                                   9,210           7,711 
             Less: amortisation of other 
     (177)    intangible assets                                     (478)            (88) 
                      share of tax and finance costs 
      (63)             of equity-accounted investees                  126               - 
    17,688   Operating profit                                       8,858           7,623 
----------  ----------------------------------------  -----  ------------    ------------ 
   (1,657)   Finance costs                              5           (951)           (765) 
        21   Finance income                             6              20               2 
----------  ----------------------------------------  -----  ------------    ------------ 
    16,052   Profit before income tax                               7,927           6,860 
   (3,586)   Income tax expense                         7         (1,663)         (1,511) 
 
    12,466   Profit for the financial period                        6,264           5,349 
----------  ----------------------------------------  -----  ------------    ------------ 
 
     12.5p   Basic earnings per share                   8            6.3p            5.3p 
     12.3p   Diluted earnings per share                 8            6.1p            5.3p 
----------  ----------------------------------------  -----  ------------    ------------ 
 

Interim Group Statement of Comprehensive Income (unaudited)

 
      Year                                           Note      6 months        6 months 
     ended                                                        ended           ended 
  30 April                                                   31 October      31 October 
      2017                                                         2017            2016 
   GBP'000                                                      GBP'000         GBP'000 
----------  --------------------------------------  -----  ------------    ------------ 
    12,466   Profit for the financial period                      6,264           5,349 
             Other comprehensive income 
              (expense) for the period, net 
              of tax: 
              To be classified to the income 
              statement in subsequent periods: 
             Exchange differences on retranslation 
      (57)    of foreign operations                               (100)           (121) 
----------  --------------------------------------  -----  ------------    ------------ 
             Total comprehensive income 
              for the period attributable 
              to equity holders of the parent 
    12,409    company                                             6,164           5,228 
----------  --------------------------------------  -----  ------------    ------------ 
 

Interim Group Statement of Financial Position (unaudited)

 
  30 April                                       Note   31 October     31 October 
      2017                                                    2017           2016 
   GBP'000                                                 GBP'000        GBP'000 
----------  ----------------------------------  -----  -----------    ----------- 
             ASSETS 
             Non-current assets 
----------  ----------------------------------  -----  -----------    ----------- 
    23,252   Goodwill                             15        26,958         23,252 
     1,498   Other intangible assets                         9,833          1,499 
----------  ----------------------------------  -----  -----------    ----------- 
    24,750   Intangible assets                              36,791         24,751 
    38,899   Property, plant and equipment        10        46,703         38,346 
     2,167   Investments                                     1,569          1,950 
     1,450   Non-current financial assets                    1,450              - 
       353   Deferred tax assets                                 -             50 
----------  ----------------------------------  -----  -----------    ----------- 
    67,619   Total non-current assets                       86,513         65,097 
----------  ----------------------------------  -----  -----------    ----------- 
             Current assets 
    29,972   Inventories                                    30,858         37,254 
    47,728   Trade and other receivables                    70,837         57,508 
       862   Cash and cash equivalents            11           926          1,470 
----------  ----------------------------------  -----  -----------    ----------- 
    78,562   Total current assets                          102,621         96,232 
----------  ----------------------------------  -----  -----------    ----------- 
   146,181   TOTAL ASSETS                                  189,134        161,329 
----------  ----------------------------------  -----  -----------    ----------- 
 
             EQUITY AND LIABILITIES 
             Current Liabilities 
    85,068   Trade and other payables                      110,612        102,378 
     7,389   Financial liabilities: Borrowings    12         7,813          6,734 
       127   Short term provisions                             281            119 
     2,187   Current income tax liabilities                  1,913          1,793 
----------  ----------------------------------  -----  -----------    ----------- 
    94,771   Total current liabilities                     120,619        111,024 
----------  ----------------------------------  -----  -----------    ----------- 
             Non-current liabilities 
    19,973   Borrowings                           12        33,319         24,914 
     1,367   Long term provisions                            1,417            819 
         -   Deferred tax liabilities                        1,244              - 
----------  ----------------------------------  -----  -----------    ----------- 
    21,340   Total non-current liabilities                  35,980         25,733 
----------  ----------------------------------  -----  -----------    ----------- 
   116,111   TOTAL LIABILITIES                             156,599        136,757 
----------  ----------------------------------  -----  -----------    ----------- 
             Equity shareholders' funds 
        50   Share capital                                      50             50 
        80   Share premium                                     348             68 
      (33)   Currency translation reserve                    (133)           (97) 
        84   Other reserve                                      84             84 
     6,006   Merger reserve                                  6,006          6,006 
     2,038   Share based payment reserve                     2,882          1,338 
    21,845   Retained earnings                              23,298         17,123 
----------  ----------------------------------  -----  -----------    ----------- 
    30,070   TOTAL EQUITY                                   32,535         24,572 
----------  ----------------------------------  -----  -----------    ----------- 
   146,181   TOTAL EQUITY AND LIABILITIES                  189,134        161,329 
----------  ----------------------------------  -----  -----------    ----------- 
 

Interim Group Statement of Changes in Equity (unaudited)

 
                                                                                      Share 
                                                             Currency                 based 
                           Share      Share      Other    translation     Merger    payment    Retained     Total 
                         capital    premium    reserve        reserve    reserve    reserve    earnings    equity 
                         GBP'000    GBP'000    GBP'000        GBP'000    GBP'000    GBP'000     GBP'000   GBP'000 
---------------------  ---------  ---------  ---------  -------------  ---------  ---------  ----------  -------- 
 
 Balance at 
  1 May 2016                  50         56         84             24      6,006        783      15,774    22,777 
 Profit for 
  the period                   -          -          -              -          -          -       5,349     5,349 
 Other comprehensive 
  income                       -          -          -          (121)          -          -           -     (121) 
 Equity settled 
  transactions                 -          -          -              -          -        555           -       555 
 Share issue                   -         12          -              -          -          -           -        12 
 Dividends                     -          -          -              -          -          -     (4,000)   (4,000) 
---------------------  ---------  ---------  ---------  -------------  ---------  ---------  ----------  -------- 
 Balance at 
  31 October 
  2016                        50         68         84           (97)      6,006      1,338      17,123    24,572 
---------------------  ---------  ---------  ---------  -------------  ---------  ---------  ----------  -------- 
 Profit for 
  the period                   -          -          -              -          -          -       7,117     7,117 
 Other comprehensive 
  income                       -          -          -             64          -          -           -        64 
 Equity settled 
  transactions                 -          -          -              -          -        700           5       705 
 Share issue                   -         12          -              -          -          -           -        12 
 Dividends                     -          -          -              -          -          -     (2,400)   (2,400) 
---------------------  ---------  ---------  ---------  -------------  ---------  ---------  ----------  -------- 
 Balance at 
  30 April 2017               50         80         84           (33)      6,006      2,038      21,845    30,070 
---------------------  ---------  ---------  ---------  -------------  ---------  ---------  ----------  -------- 
 Profit for 
  the period                   -          -          -              -          -          -       6,264     6,264 
 Other comprehensive 
  income                       -          -          -          (100)          -          -           -     (100) 
 Equity settled 
  transactions                 -          -          -              -          -        844           2       846 
 Share issue                   -        268          -              -          -          -           -       268 
 Dividends                     -          -          -              -          -          -     (4,813)   (4,813) 
---------------------  ---------  ---------  ---------  -------------  ---------  ---------  ----------  -------- 
 Balance at 
  31 October 
  2017                        50        348         84          (133)      6,006      2,882      23,298    32,535 
---------------------  ---------  ---------  ---------  -------------  ---------  ---------  ----------  -------- 
 

Interim Group Statement of Cash Flows (unaudited)

 
      Year                                            Note      6 months          6 months 
     ended                                                         ended             ended 
  30 April                                                    31 October        31 October 
      2017                                                          2017              2016 
   GBP'000                                                       GBP'000           GBP'000 
----------  ---------------------------------------  -----  ------------      ------------ 
 
             Profit before tax from operating 
    16,052    activities                                           7,927             6,860 
             Adjustments to reconcile profit 
              before tax to net cash flows: 
               Depreciation and impairment 
     4,725      of property, plant and equipment                   3,264             1,977 
               Amortisation and impairment 
       548      of intangible assets                                 655               293 
               Gain on disposal of property, 
     (260)      plant and equipment                                 (38)              (18) 
               Share of equity-accounted investees, 
     (217)      net of tax                                           598                 - 
       557     Consideration received                                  -                 - 
     (238)     Exchange differences                                (190)             (447) 
                                                      5, 
     1,636     Net finance costs                       6             931               763 
               Movement in fair value of derivative 
      (10)      financial instruments                                  -              (10) 
       832     Share based payments charge            14             596               421 
             Working capital adjustments 
               (Increase) / decrease in trade 
   (7,895)      and other receivables                           (21,174)          (17,307) 
   (3,049)     (Increase) / decrease in inventories                 (88)          (10,380) 
               Increase / (decrease) in trade 
    12,989      and other payables                                20,079            30,181 
----------  ---------------------------------------  -----  ------------      ------------ 
    25,670   Cash generated from operations                       12,560            12,333 
         3   Interest received                                         2                 2 
   (1,606)   Interest paid                                         (856)             (644) 
   (3,234)   Income tax paid                                     (2,005)           (1,541) 
----------  ---------------------------------------  -----  ------------      ------------ 
             Net cash flows from operating 
    20,833    activities                                           9,701            10,150 
----------  ---------------------------------------  -----  ------------      ------------ 
             Investing activities 
             Purchase of property, plant 
   (4,028)    and equipment                           10         (3,575)           (6,782) 
             Proceeds from sale of property, 
     2,112    plant and equipment                                     86             1,319 
     (551)   Purchase of intangible assets                         (134)             (305) 
             Proceeds from sale of intangible 
       167    assets                                                   -               166 
   (1,950)   Investment in joint venture                               -           (1,950) 
         -   Loan advance to joint venture                             -   -         (385) 
             Acquisition of subsidiary undertakings 
         -    net of cash acquired                    15        (11,773)                 - 
----------  ---------------------------------------  -----  ------------      ------------ 
             Net cash flows from investing 
   (4,250)    activities                                        (15,396)           (7,937) 
----------  ---------------------------------------  -----  ------------      ------------ 
             Financing activities 
         -   New bank loans                                           17                 - 
         -   Debt issue costs paid                                  (90)                 - 
             Net drawdown of revolving credit 
         -    facility                                            14,500             5,000 
     4,879   Finance leases advanced                                   -             2,107 
        24   Shares issued                                           268                12 
   (6,400)   Dividends paid                           9          (4,813)           (4,000) 
             Non-current financial assets 
   (1,450)    advanced                                                 -                 - 
   (5,995)   Repayment of bank loans                               (398)             (109) 
             Repayment of capital on finance 
   (5,677)    leases                                             (3,725)           (2,718) 
----------  ---------------------------------------  -----  ------------      ------------ 
             Net cash flows from financing 
  (14,619)    activities                                           5,759               292 
----------  ---------------------------------------  -----  ------------      ------------ 
             Net increase (decrease) in 
     1,964    cash and cash equivalents                               64             2,505 
----------  ---------------------------------------  -----  ------------      ------------ 
             Cash and cash equivalents at 
   (1,102)    start of period                                        862           (1,102) 
----------  ---------------------------------------  -----  ------------      ------------ 
             Cash and cash equivalents at 
       862    end of period                                          926             1,403 
----------  ---------------------------------------  -----  ------------      ------------ 
 

Notes to the Interim Financial Statements

   1.   Accounting policies 

Basis of preparation

Clipper Logistics plc ('the Company') is a public limited company incorporated and domiciled in the United Kingdom. The condensed interim financial statements have been prepared in accordance with the Disclosure and Transparency rules of the Financial Conduct Authority ("FCA") and where applicable IAS 34 "Interim Financial Reporting (as adopted by the EU)".

As required by the Disclosure and Transparency rules of the FCA, the condensed interim financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 30 April 2017. These statements do not include all the information required for full annual financial statements and should be read in conjunction with the full annual report for the year ended 30 April 2017. The financial information for the half year ended 31 October 2017 and for the equivalent period in 2016 has not been audited or reviewed.

The information for the year ended 30 April 2017 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The financial statements are prepared on the going concern basis.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Business Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described above. The Group has considerable financial resources together with strong trading relationships with its key customers and suppliers. As a consequence, the Directors believe that the Group is well placed to manage its business risk successfully.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

New standards and interpretations

The following accounting standards and interpretations became effective, and were adopted by the Group, for the current reporting period:

 
 International Accounting Standards         Effective Date 
  (IAS / IFRSs) 
 Annual Improvements to IFRSs - 2014-2016   1 January 2017 
  Cycle 
 

The application of these standards has not had a material effect on the net assets, results and disclosures of the Group.

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

   2.   Financial risks, estimates, assumptions and judgements 

The preparation of the condensed interim financial information requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30 April 2017.

   3.   Revenue 

Revenue recognised in the income statement is analysed as follows:

 
      Year                                          6 months        6 months 
     ended                                             ended           ended 
  30 April                                        31 October      31 October 
      2017                                              2017            2016 
   GBP'000                                           GBP'000         GBP'000 
----------  ----------------------------------  ------------    ------------ 
 
             E-fulfilment & returns management 
   129,854    services                                76,146          58,924 
   121,930   Non e-fulfilment logistics               65,691          61,301 
----------  ----------------------------------  ------------    ------------ 
   251,784   Value-added logistics services          141,837         120,225 
    91,515   Commercial vehicles                      58,795          45,627 
   (3,172)   Inter-segment sales                       (947)           (930) 
----------  ----------------------------------  ------------    ------------ 
   340,127   Revenue from external customers         199,685         164,922 
----------  ----------------------------------  ------------    ------------ 
 
   4.   Segment information 

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

 
 --   Value-added logistics services 
 --   Commercial vehicles, including sales, servicing 
       and repairs 
 

Within value-added logistics, the Chief Operating Decision Maker also reviews performance of three separate business activities:

 
 --   E-fulfilment & returns management services 
 --   Non e-fulfilment logistics 
 --   Central logistics overheads, being the costs of 
       support services specific to the Value-added logistics 
       segment, but which are impractical to allocate between 
       the sub-segment activities 
 

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 table presents profit information for continuing operations regarding the Group's business segments:

 
      Year                                          6 months        6 months 
     ended                                             ended           ended 
  30 April                                        31 October      31 October 
      2017                                              2017            2016 
   GBP'000                                           GBP'000         GBP'000 
----------  ----------------------------------  ------------    ------------ 
 
             Operating profit 
             E-fulfilment & returns management 
    10,232    services                                 5,328           4,316 
    12,431   Non e-fulfilment logistics                6,263           5,901 
   (4,832)   Central logistics                       (2,526)         (2,594) 
----------  ----------------------------------  ------------    ------------ 
    17,831   Value-added logistics services            9,065           7,623 
     2,342   Commercial vehicles                       1,441           1,270 
   (2,245)   Head office costs                       (1,296)         (1,182) 
----------  ----------------------------------  ------------    ------------ 
    17,928   Group EBIT                                9,210           7,711 
             Amortisation of other intangible 
     (177)    assets                                   (478)            (88) 
             Share of tax and finance costs 
      (63)    of equity-accounted investees              126               - 
----------  ----------------------------------  ------------    ------------ 
    17,688   Operating profit                          8,858           7,623 
   (1,657)   Finance costs                             (951)           (765) 
        21   Finance income                               20               2 
----------  ----------------------------------  ------------    ------------ 
    16,052   Profit before income tax                  7,927           6,860 
----------  ----------------------------------  ------------    ------------ 
 
   5.   Finance costs 
 
      Year                                             6 months        6 months 
     ended                                                ended           ended 
  30 April                                           31 October      31 October 
      2017                                                 2017            2016 
   GBP'000                                              GBP'000         GBP'000 
----------  -------------------------------------  ------------    ------------ 
 
       438   On bank loans and overdrafts                   215             209 
       766   On hire purchase agreements                    471             321 
        97   Amortisation of debt issue costs                50              49 
       299   Commercial vehicle stocking interest           180             153 
        57   Other interest payable                          35              33 
             Total interest expense for financial 
              liabilities measured at amortised 
     1,657    cost                                          951             765 
----------  -------------------------------------  ------------    ------------ 
 
   6.   Finance income 
 
      Year                                            6 months        6 months 
     ended                                               ended           ended 
  30 April                                          31 October      31 October 
      2017                                                2017            2016 
   GBP'000                                             GBP'000         GBP'000 
----------  ------------------------------------  ------------    ------------ 
 
         -   Bank interest                                   2               - 
         3   Other interest                                  -               2 
             Amounts receivable from related 
        18    parties                                       18               - 
----------  ------------------------------------  ------------    ------------ 
             Total interest income for financial 
        21    assets measured at amortised cost             20               2 
----------  ------------------------------------  ------------    ------------ 
 
   7.   Taxation 

Tax has been provided on the profit before taxation, at the estimated effective rate for the full year of 21.0% (Year ended 30 April 2017: 22.3%).

   8.   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 shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the potentially dilutive instruments into ordinary shares.

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

 
      Year                                              6 months        6 months 
     ended                                                 ended           ended 
  30 April                                            31 October      31 October 
      2017                                                  2017            2016 
   GBP'000                                               GBP'000         GBP'000 
----------  --------------------------------------  ------------    ------------ 
 
             Profit attributable to ordinary 
    12,466    equity holders of the parent company         6,264           5,349 
 
 Thousands                                             Thousands       Thousands 
             Basic weighted average number 
   100,011    of shares                                  100,216         100,007 
----------  --------------------------------------  ------------    ------------ 
     12.5p   Basic earnings per share                       6.3p            5.3p 
----------  --------------------------------------  ------------    ------------ 
             Diluted weighted average number 
   101,710    of shares                                  102,072         100,869 
----------  --------------------------------------  ------------    ------------ 
     12.3p   Diluted earnings per share                     6.1p            5.3p 
----------  --------------------------------------  ------------    ------------ 
 
   9.   Dividends 
 
      Year                                          6 months        6 months 
     ended                                             ended           ended 
  30 April                                        31 October      31 October 
      2017                                              2017            2016 
   GBP'000                                           GBP'000         GBP'000 
----------  ----------------------------------  ------------    ------------ 
 
             Final dividend for the year ended 
     4,000    30 April 2016 of 4.0p per share              -           4,000 
             Interim dividend for the year 
              ended 30 April 2017 of 2.4p per 
     2,400    share                                        -               - 
             Final dividend for the year ended 
         -    30 April 2017 of 4.8p per share          4,813               - 
 
     6,400   Total dividends paid                      4,813           4,000 
----------  ----------------------------------  ------------    ------------ 
 

An interim dividend for the current year of GBP2,808,000 at 2.8p per share was approved by the board on 4 December 2017. The dividend will be payable on 5 January 2017 to shareholders on the register at the close of business on 15 December 2017.

10. Property, plant and equipment

During the six months ended 31 October 2017, the Group acquired assets with a cost of GBP6,150,000 (six months ended 31 October 2016: GBP15,643,000). Of the assets acquired, GBP2,575,000 (2016: GBP7,244,000) was funded by hire purchase or finance lease arrangements in the period and GBPnil (2016: GBP1,617,000) was funded by bank loans secured on the specific assets. Included in the additions during the period are assets in the course of construction amounting to GBP1,833,000 (2016: GBP9,309,000), the majority of which will be funded by finance lease arrangements when complete.

11. Cash and cash equivalents

 
  30 April                                     31 October     31 October 
      2017                                           2017           2016 
   GBP'000                                        GBP'000        GBP'000 
----------  --------------------------------  -----------    ----------- 
 
       862   Cash and cash equivalents                926          1,470 
         -   Bank overdraft                             -           (67) 
----------  --------------------------------  -----------    ----------- 
       862   Total cash and cash equivalents          926          1,403 
----------  --------------------------------  -----------    ----------- 
 

12. Financial liabilities - Borrowings

 
  30 April                                      31 October     31 October 
      2017                                            2017           2016 
   GBP'000                                         GBP'000        GBP'000 
----------  ---------------------------------  -----------    ----------- 
 
             Non current: 
     1,694   Bank loans                              1,304          1,029 
         -   Revolving credit advances              14,500         10,500 
             Obligations under finance leases 
    18,643    or hire purchase agreements           17,919         13,797 
     (364)   Unamortised debt issue costs            (404)          (412) 
----------  ---------------------------------  -----------    ----------- 
    19,973                                          33,319         24,914 
----------  ---------------------------------  -----------    ----------- 
 
             Current: 
         -   Bank overdrafts                             -             67 
       797   Bank loans                                809          1,511 
             Obligations under finance leases 
     6,592    or hire purchase agreements            7,004          5,156 
----------  ---------------------------------  -----------    ----------- 
     7,389                                           7,813          6,734 
----------  ---------------------------------  -----------    ----------- 
 
    27,362     Total borrowings                     41,132         31,648 
       862   Less: cash and cash equivalents           926          1,470 
     1,450            loans to related party         1,450              - 
----------  ---------------------------------  -----------    ----------- 
    25,050   Net debt                               38,756         30,178 
----------  ---------------------------------  -----------    ----------- 
 

The principal lender has security over all assets of the Group's UK operations.

The Group's obligations under finance leases or hire purchase agreements are secured by the lender's charge over the relevant assets.

The maturity analysis of the bank loans and revolving credit advances is as follows:

 
  30 April                                  31 October     31 October 
      2017                                        2017           2016 
   GBP'000                                     GBP'000        GBP'000 
----------  -----------------------------  -----------    ----------- 
 
 
       797   In one year or less                   809          1,511 
     1,694   Between one and five years         15,804         11,529 
         -   After five years                        -              - 
     (364)   Unamortised debt issue costs        (404)          (412) 
----------  -----------------------------  -----------    ----------- 
     2,127                                      16,209         12,628 
----------  -----------------------------  -----------    ----------- 
 

The Group's bank facilities were increased in October 2017. The Group has access to a committed overdraft of GBP8,000,000 and a non-amortising revolving credit facility of GBP30,000,000 repayable in January 2021. At 31 October 2017 GBP14,500,000 (2016: GBP10,500,000) of the revolving credit facility was drawn.

13. Financial instruments

Derivative financial instruments

As part of the novation of bank facilities previously held by the Group's former parent, the Company took on an interest rate swap, the principal of which amortised quarterly to October 2016. The financial liability was categorised as being at fair value through profit or loss.

Fair value of financial instruments

The book value of trade and other receivables, trade and other payables, cash and cash equivalents, derivative financial instruments & current borrowings equates to fair value.

The table below sets out the book value and fair value of the Group's other financial assets and liabilities:

 
  30 April                             31 October     31 October 
      2017                                   2017           2016 
   GBP'000                                GBP'000        GBP'000 
----------  ------------------------  -----------    ----------- 
             Non-current borrowings: 
    19,973   Book value                    33,319         24,914 
    19,100   Fair value                    32,485         24,280 
----------  ------------------------  -----------    ----------- 
 

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

 
 -   Derivatives: interest rate swaps are marked to market 
      using listed market prices; 
 -   Interest-bearing loans and borrowings: fair value 
      is calculated based on discounted expected future 
      principal and interest flows; and 
 -   Trade and other receivables / payables: the notional 
      amount for trade receivables / payables with a remaining 
      life of less than one year is deemed to reflect 
      their fair value. 
 

Long term borrowings are classified as Level 2 (items with significant observable inputs) financial liabilities under IFRS 13. Derivative financial instruments consist of interest rate swaps and are also classified as Level 2. There have been no transfers between Level 1 and Level 2 financial instruments during the period.

14. Share based payments

There have been no options granted in the six months ended 31 October 2017. Details of grants in prior periods are set out in the 2017 Annual Report. During the six months ended 31 October 2017 the Company issued 261,677 ordinary shares for aggregate consideration of GBP268,000 to satisfy share options. At 31 October 2017 options over 28,349 ordinary shares (2016: nil) were exercisable.

The charge for share based payments in the six months ended 31 October 2017 is GBP596,000 (2016: GBP421,000).

The increase in deferred tax asset during the period in relation to share based payments amounted to GBP251,000, which has been recognised in the share based payment reserve.

15. Business combinations

   15.1.           Tesam Distribution Limited 

On 24 May 2017, the Group acquired 100% of the voting shares of Tesam Distribution Limited ("Tesam"), in exchange for cash consideration. Tesam is an unlisted company based in the UK. Tesam is a provider of a variety of warehousing and distribution services to the retail sector, which operated from three sites in and around Peterborough totalling more than 1.1m square feet. The Group acquired Tesam to enhance its geographical coverage and customer base.

Purchase consideration:

 
                              GBP'000 
----------------------------  ------- 
Cash paid on completion        11,750 
Total consideration payable    11,750 
----------------------------  ------- 
 

Analysis of cash flows on acquisition:

 
                                                  GBP'000 
------------------------------------------------  ------- 
Cash paid                                          11,750 
Net cash acquired with the subsidiary (included 
 in cash flows from investing activities)         (2,177) 
Net cash flow on acquisition of Tesam               9,573 
------------------------------------------------  ------- 
 

Acquisition:

 
                                                     Fair value 
                                                     recognised 
                                                 on acquisition 
                                                        GBP'000 
----------------------------------------------  --------------- 
Assets: 
Property, plant and equipment (at fair value)             4,655 
Intangible assets                                         7,850 
Cash and cash equivalents                                 2,177 
Trade receivables (at cost and fair value)                    4 
Other receivables                                           122 
 
Liabilities: 
Trade payables                                            (557) 
Other payables                                          (1,900) 
Short term provisions                                   (1,035) 
Current tax liability                                     (147) 
Deferred tax liability                                  (1,424) 
Total identifiable net assets/(liabilities) 
 at fair value                                            9,745 
----------------------------------------------  --------------- 
Goodwill arising on acquisition                           2,005 
----------------------------------------------  --------------- 
Total consideration                                      11,750 
----------------------------------------------  --------------- 
 

The fair values above are considered to be provisional.

The goodwill of GBP2,005,000 comprises the value of expected synergies arising from the acquisition. Goodwill is allocated entirely to the value-added logistics services segment.

None of the goodwill recognised is expected to be deductible for income tax purposes.

Intangible assets recognised consist of customer relationships.

   15.2.           RepairTech Limited 

On 15 June 2017, the Group acquired 100% of the voting shares of RepairTech Limited ("RepairTech"), in exchange for cash consideration. RepairTech is an unlisted company based in the UK. RepairTech is a specialist provider of consumer electronic repair services based in Southam, Warwickshire. The Group acquired RepairTech to enhance its returns management service offering.

Purchase consideration:

 
                                             GBP'000 
-------------------------------------------  ------- 
Cash paid on completion                        2,500 
Deferred consideration payable in the year 
 ending 30 April 2019                            500 
-------------------------------------------  ------- 
Total consideration payable                    3,000 
-------------------------------------------  ------- 
 

Analysis of cash flows on acquisition:

 
                                                  GBP'000 
------------------------------------------------  ------- 
Cash paid                                           2,500 
Net cash acquired with the subsidiary (included 
 in cash flows from investing activities)           (300) 
Net cash flow on acquisition of RepairTech          2,200 
------------------------------------------------  ------- 
 

Acquisition:

 
                                                     Fair value 
                                                     recognised 
                                                 on acquisition 
                                                        GBP'000 
----------------------------------------------  --------------- 
Assets: 
Property, plant and equipment (at fair value)               159 
Intangible assets                                           994 
Cash and cash equivalents                                   300 
Inventories                                                  34 
Trade receivables (at cost and fair value)                  488 
Other receivables                                           272 
 
Liabilities: 
Trade payables                                            (257) 
Other payables                                            (343) 
Current tax liability                                     (178) 
Deferred tax liability                                    (169) 
Total identifiable net assets/(liabilities) 
 at fair value                                            1,300 
----------------------------------------------  --------------- 
Goodwill arising on acquisition                           1,700 
----------------------------------------------  --------------- 
Total consideration                                       3,000 
----------------------------------------------  --------------- 
 

The fair values above are considered to be provisional.

The goodwill of GBP1,700,000 comprises the value of expected synergies arising from the acquisition. Goodwill is allocated entirely to the value-added logistics services segment.

None of the goodwill recognised is expected to be deductible for income tax purposes.

Intangible assets recognised consist of customer relationships and the acquired order book.

16. Related party disclosures

The company owns 50% of the issued capital and voting rights of Clicklink Logistics Limited ("Clicklink"), a customer of the Group and a provider of services to the Group.

The condensed financial statements include the following in respect of Clicklink:

 
      Year                                         6 months        6 months 
     ended                                            ended           ended 
  30 April                                       31 October      31 October 
      2017                                             2017            2016 
   GBP'000                                          GBP'000         GBP'000 
----------  ---------------------------------  ------------    ------------ 
             Income statement: 
     4,701   Revenue credited                         7,579               - 
       410   Costs charged                              646               - 
        18   Finance income credited                     18               - 
 
             Statement of financial position: 
     1,450   Non-current financial assets             1,450               - 
       282   Trade and other receivables              1,527             385 
       135   Trade and other payables                   182               - 
----------  ---------------------------------  ------------    ------------ 
 

Directors' remuneration and other related party transactions are in line with the disclosures set out in the 2017 Annual Report.

DIRECTORS' RESPONSIBILITY STATEMENT IN RESPECT OF THE CONDENSED INTERIM FINANCIAL STATEMENTS

The Directors confirm that to the best of our knowledge:

 
 --   This condensed set of financial statements for the 
       six months ended 31 October 2017 and for the equivalent 
       period in 2016 has been prepared on the basis of 
       the accounting policies set out in the 2017 Annual 
       Report and in accordance with IAS 34 Interim Financial 
       Reporting as adopted by the European Union. 
 --   the interim management report includes a fair review 
       of the information required by: 
       o   paragraph DTR 4.2.7R of the Disclosure Guidance 
            and Transparency Rules of the Financial Conduct 
            Authority, being an indication of important events 
            that have occurred during the first six months 
            of the current financial year and their impact 
            on the condensed set of financial statements; 
            and a description of the principal risks and uncertainties 
            for the remaining six months of the financial 
            year; and 
       o   paragraph DTR 4.2.8R of the Disclosure Guidance 
            and Transparency Rules, being related party transactions 
            that have taken place in the first six months 
            of the financial year and that have materially 
            affected the financial position or performance 
            of the Group during that period, or any changes 
            in the related party transactions described in 
            the last annual report that could do so. 
 

The Directors of Clipper Logistics plc are listed in the 2017 Annual Report.

This report was approved by the Board for release on 7 December 2017 and is available on the Company's website www.clippergroup.co.uk under "Investor News" then "Results and Presentations".

By order of the Board

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR LLFEDFALRIID

(END) Dow Jones Newswires

December 07, 2017 02:00 ET (07:00 GMT)

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