A market leader in retail logistics - 2018 Full Year Results Presentation 2 August 2018 - Clipper Logistics
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A market leader in retail logistics
2018 Full Year Results
Presentation
2 August 2018
Strengthening our business
Disclaimer
This presentation includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking
statements can be identified by the use of forward-looking terminology, including the terms “believe”, “estimates”, “plans”, “projects”,
“anticipates”, “expects”, “intends”, “may”, “will”, or “should” or, in each case, their negative or other variations or comparable
terminology. These forward-looking statements include matters that are not historical facts and include statements regarding the
Company’s intentions, beliefs or current expectations.
Any forward-looking statements in this presentation reflect the Company’s current expectations and projections about future events. By
their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or
events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and
assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking
statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or
activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the
date of this presentation. No representations or warranties are made as to the accuracy of such statements, estimates or projections.
Please note that the Directors of the Company are, in making this presentation, not seeking to encourage shareholders to either buy or
sell shares in the Company. Shareholders in any doubt about what action to take are recommended to seek financial advice from an
independent financial advisor authorised by the Financial Services and Markets Act 2000.
2
Agenda
1 Highlights and operational developments
2 Financial review
3 Operational review
o Operational update
o Team Clipper
4 Outlook
5 Summary and Q&A
31
Highlights and
operational developmentsHighlights – financial*
Group revenue growth of 17.6% to £400.1m (2017: £340.1m), driven by strong growth in e-fulfilment.
Group EBIT1 growth of 16.3% to £20.9m (2017: £17.9m):
o E-fulfilment & returns management services – EBIT of £11.9m, up 16.0% (2017: £10.2m).
o Non e-fulfilment logistics – EBIT of £14.8m, up 18.9% (2017: £12.4m).
o Commercial vehicles – EBIT of £2.5m, up 4.6% (2017: £2.3m).
Group profit for the year up 14.6% to £14.3m (2017: £12.5m).
EPS of 14.2p, up 13.6% (2017: 12.5p).
Proposed final dividend of 5.6p per share giving total dividend of 8.4p per share, up 16.7% (2017:
7.2p).
Cash generated from operations was £24.5m (2017: £25.7m).
* The highlights are for the 12 months ended 30 April 2018, as compared to the 12 months ended 30 April 2017.
1 Group EBIT is defined as operating profit, including the Group’s share of operating profit in equity-accounted investees, 5
before amortisation of intangible assets arising on consolidation .Operational developments Key new contract wins: o Pretty Little Thing o Halfords o Edinburgh Woollen Mill Significant contract extensions: o Wilko: 5 years o Morrisons: 4 years o Supergroup: 5 years Innovation remains key: o Data analytics o Solutions design European expansion – Poland. Incremental cost issues on major contract: o World’s largest fashion retailer o Rapid growth and activity spikes led to higher labour costs c. £1.9m o Commercials now recalibrated o Extension of services: 315k sq ft to 900k sq ft Start-up costs on new transport contract: o Labour and fleet inefficiencies led to under-performance of c.£1.7m o Now profitable; will achieve full expected run rate by October Profit on sale of freehold: o Freehold site acquired with Tesam sold, as planned; profit £2.2m Other property income: £4.2m o Strengthening of covenant o Will become a recurring revenue stream 6
2 Financial review
Summary income statement
£m Year to 30 April Change
2018 2017 %
Revenue 400.1 340.1 +17.6%
Headline financials
Cost of sales (283.3) (241.1)
Strong top-line performance in the year in all
Gross profit 116.8 99.0 business segments.
Other net gains 2.4 0.4
EBIT is the key metric, and saw further growth
Admin expenses (98.4) (81.9) driven by: continued contract evolution in the
Operating profit before share of equity- logistics business, new acquisitions and property-
20.8 17.5 related transactions, but offset by some non-
accounted investees, net of tax
Share of equity-accounted investees, net of tax (0.9) 0.2
recurring incremental operational costs.
Operating profit 19.9 17.7 Increase in finance costs driven by increased debt
following the two acquisitions.
EBIT 20.9 17.9 +16.3%
Less: amortisation of other intangible assets (1.1) (0.2) Dividends
share of tax and finance costs of equity-accounted
0.1 (0.0)
Interim dividend of 2.8 pence per share, paid
investees January 2018.
Operating profit 19.9 17.7
Final proposed dividend 5.6 pence per share.
Net finance costs (1.9) (1.6)
Profit before income tax 18.0 16.1 Total dividend 8.4 pence per share (7.2 pence year
to 30 April 2017).
Income tax (3.7) (3.6)
Profit for the financial year 14.3 12.5 +14.6%
Basic earnings per share (p) 14.2 12.5 +13.6%
Diluted earnings per share (p) 14.1 12.3
8Segmental and business activity performance
Revenue
£m Year to 30 April Change
2018 2017 % Continued growth in Logistics:
E-fulfilment & returns management services 159.4 129.9 +22.7%
o Organic growth and new business activities on
Non e-fulfilment logistics 139.1 121.9 +14.1% existing contracts including Antler, ASOS
Total value-added logistics services 298.5 251.8 +18.6%
returns, Asda, Bench, Browns, Haddad,
Morrisons, Philip Morris, Wilko and Zara in the
Commercial vehicles 103.6 91.5 +13.2% UK, and s.Oliver in Germany.
Inter-segment sales (2.0) (3.2)
o Full year benefit of prior year contract wins
Group revenue 400.1 340.1 +17.6% including British American Tobacco (for Vype),
Halfords, Inditex, Links of London, Kidly, Pretty
Green, Secret Sales, SilkFred, Smiffys, Thread
35 and Westwing.
EBIT o Part-year impact of wins in the year including
£m Year to 30 April Change Crosswater, Edinburgh Woollen Mill, M&S
returns operations and River Island in the UK;
2018 2017 % ASOS returns in Poland; and Superdry and
E-fulfilment & returns management services 11.9 10.2 +16.0% Urban Outfitters in the Clicklink joint venture.
Non e-fulfilment logistics 14.8 12.4 +18.9% o A contribution from property related advisory
services and profit on sale of freehold.
Central logistics overheads (5.7) (4.8)
Total value-added logistics services 21.0 17.8 +17.6% o A reduction in contract packing work in the
tobacco sector.
Commercial vehicles 2.5 2.3 +4.6%
Head office costs (2.6) (2.2) o Non-recurring incremental operational costs on
two key contracts.
Group EBIT 20.9 17.9 +16.3%
Steady growth in commercial vehicles.
9Summary cash flow statement
£m Year to 30 April
2018 2017
EBIT1 20.9 17.9 Strong cash flow generated from operations £24.5m
Depreciation & amortisation 6.9 5.1 (2017: £25.7m).
Other non-cash items2 (0.1) 0.6
The working capital outflow in the year is not indicative
Change in working capital (3.2) 2.0
of a change in the working capital needs of the Group,
Cash generated from operations 24.5 25.7 but merely a delay of one day in one large receipt at
Net interest paid (1.9) (1.6) the year end.
Tax paid (4.0) (3.2)
Acquisitions of Tesam (£9.6m) and RepairTech
Net cash flows from operating activities 18.6 20.8
(£2.2m) drove increased bank borrowings of £8.1m,
and interest costs to £1.9m (2017: £1.6m).
Investment in joint venture - (2.0)
Acquisition (11.8) - Cash capex of £7.7m (2017: £4.6m) offset by disposal
Net capital expenditure (1.0) (2.3) proceeds of £6.7m (2017: £2.3m), primarily on
disposal of the freehold property acquired with Tesam.
Net cash flows from investing activities (12.8) (4.3)
Tax increase in line with increased profits
Loan advance to joint venture (0.5) (1.4)
£1.6m raised through share issues to employees
Net drawdown / (repayment of) bank loans 8.1 (6.0) through Sharesave and Numis (£250k).
Finance leases advanced - 4.9
Repayment of capital on finance leases (7.3) (5.7) Dividends paid in line with stated policy at IPO.
Share issue 1.6 0.0
Dividends paid (7.6) (6.4)
Net cash flows from financing activities (5.7) (14.6)
Net increase in cash & cash equivalents 0.1 2.0
1. EBIT is defined as operating profit, including the Group’s share of operating profit in equity-accounted investees, before
amortisation of intangible assets arising on consolidation.
2. Other non cash items comprise exchange differences ,share based payments, share of joint venture, and movement in fair
value of derivatives 10Summary balance sheet
£m As at 30 April
2018 2017
Intangible assets 37.2 24.8 Investment in fixed assets included new mezzanine
Property, plant & equipment 45.0 38.9 floors at Northampton and Ollerton, site set up costs in
Poland, and the investment in new accounting and
Interest in equity-accounted investees 1.3 2.2
warehouse management software to accommodate
Non-current financial assets 1.9 1.4 further business growth.
Deferred tax assets - 0.3
Non-current assets 85.4 67.6 Net current liabilities position reflects continuing
positive working capital model.
Inventories 22.1 30.0 Net debt: EBITDA = 1.14
Trade & other receivables 73.4 47.7
Cash & cash equivalents 2.3 0.9 Unused bank facility as at 30 April 2018 £27.7m.
Current assets 97.8 78.6
Trade & other payables 102.4 85.1
Borrowings 9.2 7.4
Short term provisions 0.1 0.1
Current tax liabilities 2.5 2.2
Current liabilities 114.2 94.8
Borrowings 26.7 20.0
Long term provisions 1.5 1.3
Deferred tax liabilities 1.5 -
Non-current liabilities 29.7 21.3
Net assets 39.3 30.1
Net debt 31.7 25.1
113 Operational review
Overview
During the year ended 30 April 2018, Clipper set out to:
Target pure-play e-tailers to grow our e-fulfilment & returns business.
Develop omni-channel solutions for our e-comm customers.
Tie in our Technical Services operation to the Boomerang proposition.
Develop software assets to enhance existing services and develop new services.
Develop an internal brand representing common ways of working and operational standards.
13E-fulfilment & returns management update
Pretty Little Thing:
o Fastest growing global e-tailer
o 615,000 sq ft in Sheffield, dedicated site
o Planning expansion, mezzanine build
o Fulfilment & returns, largest ever contract win for Clipper
o Up to 1,500 employees
Wilko:
o New 5 year contract
o Supporting growth with new systems (JDA)
o Mechanisation – Introduction of auto-baggers
Love Knitting:
o New 5 year contract
o Moved operation from Worsley to Selby
o JDA implementation
Morrisons:
o 4 year contract extension
o Awarded online operations for Nutmeg
Philip Morris
o On-boarding of B2B and B2C services for New Generation Products including
NicoCigs
Browns:
o Extended operations to support Browns c.300% YOY sales growth
Brissi:
o New contract - high end furniture and home accessories.
14Boomerang & Clipper Technical Services
RepairTech and Servicecare combined to create Clipper
Technical Services.
Clipper Technical Services and Clipper Logistics offering
integrated Boomerang solution.
Contract wins:
o Hi-Sense – Consumer TV repair
o Servicepower – TV repair
o Toshiba – Loan Pool Management services
o Vestel – Brown goods strategic partner
o TCL – 3rd largest global TV company
Contract extensions:
o Amazon – 3 year extension, including new European work
o Argos – 2 year extension
o Richer sounds - 2 year extension
o Nintendo
European expansion:
o Refurbishment centre set up at Clipper’s Kempen site in
Germany for Amazon 15Clicklink update
Current service offering:
Next Day Click and Collect – Pre 13:00 for 7 days per week:
o John Lewis into Waitrose is the largest contributor for this service
Retail Replenishment Deliveries:
o Often these will include Click and Collect; Superdry and Urban Outfitters/Anthropology are
currently the biggest volume for this service offering
o Many of our customers are utilising Clicklink’s ability to handle both hanging and flat product, as
well as “Out of Hours” deliveries
John Lewis Store Consolidation:
o This is where Clicklink are delivering SOR supplier stock such as Whistles, Mint Velvet, LK
Bennett, Jaegar and Ted Baker into all JL outlets including Northampton ADC for online pre-retail,
and the full store estate.
Returns:
o The collecting and tracking of returns from stores both for online returns and recall stock for all
customers
Other:
o We also adapt to customer requirement from the clearance of stores, to new store builds; transfers
of stock between locations; and return and consolidation of recycling waste
Recent developments:
Inditex Brands launch, Jaeger consolidation.
Waitrose Collect project continues.
Added Consignor to CMS integrations.
Additional investment in capacity. 16Non e-fulfilment update
American Golf: won retail fulfilment, to go into Worsley alongside e-
commerce operation.
Superdry: 5 year contract extension.
Morrisons: 4 year contract extension – awarded wholesale
operations for secure general merchandise (“SGM”).
Halfords: extended relationship, opening second warehouse shortly
after the year end.
Extended relationship with Zara for retail fulfilment:
o Site capacity increased with second mezzanine
o Circa 700,000 sq ft of warehousing
Pep & Co: extended relationship. Pep & Co have increased high
street footprint by 173 stores in 2017/18.
Edinburgh Woollen Mill: 1,200 store transport network went live in
Sept 2017.
Crosswater: new contract – bathroom fitments.
Neon Sheep: new contract – same group as Mountain Warehouse,
opportunities for growth.
17New developments and innovation
Data Analytics
Working with Superdry and LIDA (Leeds Institute of Data Analytics):
o Project 1: development of methodologies and tools to support sales planning and replenishment.
o Project 2: returns data analytics.
Solutions Design/IT
Expanded on template solution in conjunction with JDA to create rapid roll out capability for new
customers: now includes e-comm, retail, returns and pre-retailing. Inbuilt continuous improvement.
Current IT projects include:
o Data Centre: working towards moving to an externally managed service – maintain robust 24x7 service
level with increased levels of security and support.
o Implementing Office 365 – increased security and added functionality for users.
Environmental
11 x natural gas powered artics and 16 x long semi trailer double deck trailers will enter the fleet in Q4
2018 which will save c. 500 tonnes of CO2 per year, and increase the carrying capacity of each trailer
by 30%, decreasing the number of trunks required.
Delivery Mates
2 x electric bikes x 7 days a week for Browns. Skateboards for last part of delivery. Enhances speed
of delivery from DC to store, store to store, and store to VIC (Very Important Customer).
Plan to extend offering – additional riders – wider geographical coverage.
18Team Clipper
19Team Clipper - background
• Cultural programme to develop a “one-team” ethos.
• Key drivers: collaboration, continuous improvement, engagement,
motivation and performance improvement.
• An operationally- and functionally-led programme designed to
achieve higher engagement across the entire organisation.
20Graduate Scheme
• Our new Graduate scheme has now been in operation for
12 months.
• In 2018 we will have 30 graduates/under-graduates on
the programme.
• Partnered with Sheffield Hallam University – creation of a
bespoke Clipper Logistics Degree.
• Funded through the Apprenticeship Levy.
21Management Apprenticeship Programme
• 3.5 year programme.
• School leavers (18 years+).
• Partnered with Sheffield Hallam University – BA Hons in
Management – Clipper Management Degree.
• End-point Assessment through Institute of Leadership and
Management – Level 6.
22Fresh Start - overview
• Clipper Logistics response to 2 key challenges:
> Brexit’s forecasted labour shortage
> Our Corporate and Social Responsibilities (CSR)
• We are offering work opportunities to people who are:
> mentally and physically disabled
> Ex-offenders
> Ex-military
> Ex-homeless
> Refugees
> Retirees
> Full-time parents
23Fresh Start update • Launched in early summer of 2018. • 8 Key partners on board – and expanding. • Significant operational and customer engagement. • Fresh-start champions employed on sites to support workers during their early period of employment. • Targeting 5% of new recruits over next 12 months through Fresh Start.
4 Outlook
Outlook
Headwinds facing retailers:
o Brexit
o Economic uncertainty
o Transition online
BUT:
o Creates opportunities: online and leveraging Clipper’s shared use model
Strong pipeline: conservative view taken on:
o Conversion rate
o Time to go-live
Strong strategic positioning in e-commerce.
Growing European business: Significant contract wins.
Clipper Technical Services: winning new business.
Search for complementary acquisitions.
Resilient business model: FY18 issues were non-recurring.
Management confident of continuing to deliver significant returns to shareholders.
265 Summary and Q&A
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