A market leader in retail logistics 2019 Interim Results - - PowerPoint PPT Presentation

A market leader in retail logistics

2019 Interim Results

Presentation 5 December 2019

“Continued evolution in a dynamic world”

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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.

Highlights and

• perational developments

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Financial Highlights(1)

Group revenue growth of 11.7% to £254.6m (H1 FY19: £227.9m), driven by strong growth in logistics Underlying EBIT growth of 26.0% excluding the impact of negative goodwill, property related revenue and share based payment charges. Headline Group EBIT growth of 13.5% to £12.1m (H1 FY19: £10.7m):

• E-fulfilment and returns management services – EBIT of £8.4m, up 34.2% (H1 FY19: £6.2m)
• Non e-fulfilment logistics – EBIT of £7.9m, up 8.8% (H1 FY19: £7.3m)
• Commercial vehicles – EBIT of £0.86m, down 5.9% (H1 FY19: £0.91m)

Profit before tax and amortisation up 10.4% to £10.9m (H1 FY19: £9.9m) EPS of 7.8p, up 8.3% (H1 FY19: 7.2p) Interim dividend of 3.5p per share, up 9.4% (H1 FY19: 3.2p)

Note: The highlights are for the 6 months ended 31 October 2019, as compared to the 6 months ended 31 October 2018 (“H1 FY19”) Note (1): All numbers presented above are presented on a comparable pre-IFRS 16 basis. Note (2): There has also been a change in where German overhead costs are costed. In H1 FY19, these were included as a cost to non e-fulfilment

• logistics. These are reclassified to Logistics Central costs in full year FY19 and in H1 FY20. This reclassification has no impact on overall EBIT.

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Summary Income Statement(1)

• Strong top-line performance in the period

driven by e-fulfilment and returns management services

• Key EBIT metric saw continuing growth of

13.5%

• Excluding negative goodwill, property-

related advisory fees and share based payments, EBIT is up 26.0%

• Finance costs up £0.3m, due to HP interest
• Profit before tax and amortisation up 10.4%

to £10.9m (H1 FY19: 9.9m)

• Profit before tax ahead by 9.5% to £10.1m

(H1 FY19: £9.3m)

• EPS ahead by 8.3% to 7.8p (H1 FY19: 7.2p)
• Interim dividend up 9.4% to 3.5p (H1 FY19:

3.2p)

£m 6m to 31 October Change Year to 30 2019 2018 % April 2019 Revenue 254.6 227.9 +11.7% 460.2 Cost of sales (184.3) (164.9) (331.9) Gross profit 70.4 63.0 +11.6% 128.3 Other net gains 3.7 0.1 (0.3) Admin expenses (62.2) (52.3) (108.4) Operating profit before share of equity-accounted investees, net of tax 11.9 10.8 +9.4% 19.5 Share of equity-accounted investees, net of tax (0.4) (0.6) (0.4) Operating profit 11.5 10.3 +11.7% 19.1 EBIT (excluding Non-underlying factors) 9.0 7.2 +26.0% 15.9 Non-underlying factors 3.1 3.5 4.3 EBIT 12.1 10.7 +13.5% 20.2 Less: amortisation of other intangible assets (0.7) (0.6) (1.2) Share of tax and finance costs of equity-accounted investees 0.1 0.2 0.1 Operating profit 11.5 10.3 19.1 Net finance costs (1.3) (1.0) (2.1) Profit before income tax 10.1 9.3 +9.5% 16.9 Income tax (2.2) (1.9) (3.5) Profit for the financial period 7.9 7.3 13.4 Basic earnings per share (p) 7.8 7.2 +8.3% 13.2 Interim dividend per share (p) 3.5 3.2 +9.4%

• Note (1): All numbers presented above are presented on a comparable pre-IFRS 16 basis.

Segmental performance(1)

• Strong organic growth in e-fulfilment driven by:
• Continued migration online and consequent growth in

activity levels on established customers – e.g. ASOS Browns, Dunnes, Westwing, Zara,

• Benefit of prior year contract wins - e.g. Mountain

Warehouse, PrettyLittleThing, Vestel.

• New contract wins in FY20 – e.g. Amara, Hope&Ivy,

Shop Direct, Simba

• Clicklink: loss of £0.5m (H1 FY19: £0.7m loss):
• Expected to be profitable for the full year due to:
• Seasonality: 40% of annual volume in Nov-Jan
• New customer onboarding
• Non e-fulfilment EBIT favourably impacted by:
• Organic growth, including Browns
• New customer wins, including Ginger Ray, Levi

Strauss, Neon Sheep, SLG, Sports Direct

• Commercial rates on M&S NDC operation and Kuhne

transport improved

• Commercial vehicles EBIT down due to reduced new

vehicles sales, but partly offset by improved dealer support

• Continued investment in solutions development and IT

infrastructure

• Share based payment charge £0.4 million (H1 FY19:

credit £0.7m) 6

£m Including non-underlying factors Underlying(2) 6m to 31 October Change 6m to 31 October Change 2019 2018 % 2019 2018 % E-fulfilment & returns management services 136.5 107.1 +27.5% 136.5 107.1 +27.5% Non e-fulfilment logistics 74.8 76.1

• 1.7%

74.8 73.3 +2.1% Total value-added logistics services 211.3 183.2 +15.4% 211.3 180.4 +17.2% Commercial vehicles 43.6 45.4

• 3.9%

43.6 45.4

• 3.9%

Inter-segment sales (0.4) (0.7) (0.4) (0.7) Group Revenue 254.6 227.9 +11.7% 254.6 225.1 +13.1% £m Including Non-underlying factors Underlying(2) 6m to 31 October Change 6m to 31 October Change 2019 2018 % 2019 2018 % E-fulfilment & returns management services 8.4 6.2 +34.2% 6.7 6.2 +6.7% Non e-fulfilment logistics 7.9 7.3 +8.8% 6.2 5.1 +20.9% Central logistics overheads (3.4) (2.5)

• 33.8%

(3.2) (3.4)

• 5.5%

Total value-added logistics services 12.9 11.0 +17.4% 9.6 7.9 +21.1% Commercial vehicles 0.9 0.9

• 5.9%

0.9 1.0

• 4.9%

Head office costs (1.6) (1.2) (1.5) (1.7)

• 13.8%

Group EBIT 12.1 10.7 +13.5% 9.0 7.2 +26.0%

Revenue EBIT

Note (1): All numbers presented above are presented on a comparable pre-IFRS 16 basis Note (2): Underlying strips out the one-off impacts of the negative goodwill, property-related advisory fees and share based payments, and of reclassifying German overheads from Non e-fulfilment to Central logistics overheads.

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Summary cash flow statement(1)

• EBITDA ahead 17.7%
• Working capital outflow due to higher than

normal accrued revenue and certain short-term

• verdue trade debtors, together with increased

activity levels

• Interest payments increase due to increase in

assets funded on HP, which will largely be recovered from customers through open-book contract mechanisms

• Tax payments increased in UK and Poland due

to payments on account in respect of the current year, reflecting higher profitability

• Business combinations outflow relates to Shop

Direct in FY20, Repairtech in FY19

• Bank loans includes RCF increase, used to fund

increased working capital balances (see above)

• Net finance leases broadly flat
• Dividends increase of £0.9 million due to

increased final dividend for FY19

£m 6m to 31 October Year to 30 2019 2018 April 2019 EBIT 12.1 10.7 20.2 Depreciation & Amortisation 4.9 3.8 8.2 Other non-cash items2 (2.8) (0.0) (0.7) Change in working capital (12.1) (4.4) 0.6 Cash generated from operations 2.2 10.1 28.3 Net interest paid (1.3) (1.0) (1.9) Tax paid (3.2) (1.9) (4.3) Net cash flows from operating activities (2.3) 7.2 22.1 Net capital expenditure (6.4) (10.9) (25.9) Acquisition of subsidiaries (2.9) (0.5) (0.5) Net cash flows from investing activities (9.3) (11.4) (26.4) Net drawdown of bank loans 16.5 8.5 7.2 Finance lease drawdowns 4.5 3.8 18.7 Repayment of capital on finance leases (4.2) (3.4) (10.4) Shares issued 0.1 0.1 0.3 Dividends paid (6.6) (5.7) (8.9) Net cash flows from financing activities 10.3 3.3 6.9 Net increase / (decrease) in cash & cash equivalents (1.2) (0.9) 2.6 Note (1): All numbers presented above are presented on a comparable pre-IFRS 16 basis. Note (2): Other non cash items comprises gain on disposal, negative goodwill, share of equity-accounted investees, share based payments and exchange differences

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Summary balance sheet(1)

• Investment in fixed assets largely to support new
• pen-book contracts under which capital will be repaid
• ver the term of the contract
• Inventories higher in Commercial Vehicles subsidiary,

funded by increased drawings on stocking credit line

• Trade & other receivables reflects: higher accrued

income as the business continues to grow and unbilled reconciliation income on open books; and certain short-term overdue debtors.

• Net debt £64.4m - higher than the Board’s expectation,

primarily due to increased trade debtors and accrued income

• Working capital increased expected to reverse by year

end

£m At 31 October At 30 April 2019 2018 2019 Intangible assets 39.7 37.7 37.3 Property, plant & equipment 66.1 51.2 61.5 Interest in equity-accounted investees 0.5 0.7 0.9 Non-current financial assets 1.9 1.9 1.9 Non-current assets 108.2 91.5 101.6 Inventories 31.2 24.7 24.0 Trade & other receivables 116.9 94.7 96.4 Cash & cash equivalents 2.3 2.1 3.5 Current assets 150.3 121.5 123.9 Trade & other payables 140.0 120.7 126.0 Borrowings 12.0 10.6 12.3 Short term provisions

• 0.1

0.2 Current tax liabilities 0.1 2.9 0.8 Current liabilities 152.0 134.3 139.3 Borrowings 56.6 35.5 39.1 Long term provisions 2.1 1.6 1.6 Deferred tax liabilities 3.0 0.9 2.3 Non-current liabilities 61.7 38.0 43.0 Net assets 44.8 40.7 43.2 Note (1): All numbers presented above are presented on a comparable pre-IFRS 16 basis.

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Impact of IFRS 16 (1)

• All numbers presented in this pack prior to this point

have been presented on a pre-IFRS 16 basis. The numbers on this page and the next page demonstrate the impact the adoption of IFRS 16 has had on the results for H1 FY20

• IFRS 16 took effect for the Group on 1 May 2019
• The adoption of IFRS 16 materially affects the financial

statements of the Group

• In H1 FY20 £17.2 million of Operating lease costs (and

various other expenses of leases which would historically have been taken to the income statement) are replaced by £12.8 million of depreciation and £4.2 million of finance costs.

• This results in EBIT increased by £4.4 million and PBT

increased by £0.2 million

• Whilst IFRS 16 has no impact on actual cash outflows,

the various captions in the cashflow statement are significantly affected, as shown in the table.

Income statement for H1 FY20 £m EBITDA EBIT PBT PAT Under IAS 17 17.0 12.1 10.1 7.9 Add back costs expensed under IAS 17 17.2 17.2 17.2 17.2 Depreciation

• (12.8)

(12.8) (12.8) Finance costs

• (4.2)

(4.2) Deferred tax

• 0.0

Total IFRS 16 adjustments 17.2 4.4 0.2 0.2 Under IFRS 16 34.2 16.6 10.4 8.1 Statement of cashflows for H1 FY20 £m Operating activities Investing activities Financing activities Net cashflows Under IAS 17 (2.3) (9.3) 10.3 (1.2) Add back operating lease cash outflows 12.5

• 12.5

RoU assets acquired

• (2.0)

2.0

• Repayment of capital on finance leases
• (12.5)

(12.5) Total IFRS 16 adjustments 12.5 (2.0) (10.5)

• Under IFRS 16

10.2 (11.3) (0.1) (1.2)

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Impact of IFRS 16 (2)

• IFRS 16 resulted in the recognition of £164.6 million

right of use assets at 1 May 2019. These assets have further increased in H1 FY20 by £2.0 million but reduced by depreciation of £12.8 million.

• At 31 October 2019, net debt is increased by £183.4

million as a result of adopting IFRS 16.

Statement of Financial Position @ 1 May 2019 £m Right of use asset Net debt Other assets Other liabilities Net assets Under IAS 17

• (45.9)

220.0 (130.9) 43.2 Derecognise IAS 17 balances

• (4.7)

9.7 5.0 Recognise new RoU asset 164.6

• 164.6

Recognise new lease costs (193.8)

• (193.8)

Recognise deferred tax

• 4.1
• 4.1

Total IFRS 16 adjustments 164.6 (193.8) (0.6) 9.7 (20.1) Under IFRS 16 164.6 (239.7) 219.4 (121.2) 23.1 Statement of Financial Position @ 31 October 2019 £m Right of use asset Net debt Other assets Other liabilities Net assets Under IAS 17

• (64.4)

254.3 (145.2) 44.8 Derecognise IAS 17 balances

• (5.2)

10.6 5.4 Recognise new RoU asset 154.0

• 154.0

Recognise new lease costs (183.4)

• (183.4)

Recognise deferred tax

• 4.1
• 4.1

Total IFRS 16 adjustments 154.0 (183.4) (1.1) 10.6 (19.9) Under IFRS 16 154.0 (247.8) 253.2 (134.6) 24.9

Operational review

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Evolving Solutions for Retail

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Collaboration

World Retail Congress 2020

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Brand Health Insight Retailer reaction - we detected a real confidence and an openness to challenge convention

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Collaboration seen as central to this….

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Customers are asking – how can logistics help to drive further change?

Thinking differently…Collaboration and knowledge sharing: Shared usage WMS shared costs Simplification - faster / better / cheaper / slicker processes Data - Analysis, MI & forecasting Service evolution and innovation The Environmental Social Governance agenda: Workforce transparency Environmental credentials Wider social impact Brand values that will rub off on their own

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Strategic Developments – Supported by Clipper Brand Health insight Shared use solutions (to include automation & robotics) for fulfilment & returns “collaborative best of breed” Shared networks Clicklink as the premium offer & with high street fulfilment on a shared platform Retailer brand protection & promotion the retail brand should be “front & centre” not the logistics solution The above leads to the creation of “Fulfilled by Clipper…….” & challenges the Amazon impact & their commoditised approach

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Clipper Retail Club - ETA

A platform to share knowledge and collaborate

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Market Changes

Tomorrow’s best known brands and retailers will be a new breed, grown out of a new way of interacting with customers. They are agile and reactive, and many were born on social media. Social’s reach means success can come quickly, but getting sustained exposure and standing out in a crowded market can be challenging. Many traditional barriers to entry have disappeared, but in their place new difficulties have emerged. There is little advice, guidance or help for new brands just starting out – especially from a trusted, expert source.

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Recent Developments

New contracts in period Amara Living – development of additional 137,000 sq ft mezzanine floor at the ADC Northampton – migration from another fulfilment provider (Delamode) Simba Sleep – new customer for Swadlincote SLG – new customer for Swadlincote - Jan 2020 go-live Operational capacity in Ireland expanded by 40% to accommodate retail customers growth forecast M&S contractual re-structure completed for operations at Peterborough Zara Home – creation of 30% more space/capability to accommodate forecasted growth PLT Sheffield – further site developments in process to significantly expand the operating space – go-live planned April 2020. Full bedding-in of Westwing (Poznan) in preparation for first Black Friday & peak Robotic/automation projects being developed at Burton, Sheffield and Ollerton

Technical Services Developments in 2019

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ARGOS The Technical Services Division successfully won and implemented the Argos laptop repair and refurbishment work. NINTENDO Set up as a “specialist centre of excellence” to carry out refurbishment in addition to our existing in country repair contract. HISENSE In addition to the repair services we now have agreement to manage their service SWAP stock via Servicecare. Previously TV returns were jobbed off but now Servicecare refurbish TVs and wither offer for sale or utilise as “service / swap stock”. JOHN LEWIS PARTNERSHIP BOX IN BOX Developed a ‘box in box’ repair operation at the Clipper ADC Northampton - plans are in place to expand the range supported JOHN LEWIS PARTNERSHIP eCommerce Successfully set up an on line store for JLP graded electrical/electronic returns – a first for John Lewis. AMAZON DE New product lines being added to service schedule SHOP DIRECT Set up operations to sell B and C grade TVs via Servicecare eCommerce channels VESTEL UK Won the business for large format displays and microwaves (Sharp) to add to the current portfolio.

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Black Friday Overview

Source: Retail Week – 2nd Dec 2019

Clipper results: Customer A: – Black Friday week volume on-line 2019 compared to 2018 – up 65% – peak throughput per hour Black Friday - 418 units/minute Customer B:

• Black Friday period – online activity up 45% (yoy)

Customer C:

• Black Friday period – online activity up 57% (yoy)

Clicklink:

• Black Friday – week 1 – parcel up 16% (yoy)
• Non - JLP customer traffic up 130% (yoy)

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Outlook

Notwithstanding the current political uncertainty and challenges faced by certain high street retailers, Clipper is confident of its ability to continue to grow strongly. Clipper’s logistics infrastructure is well placed to capitalise on increasing trends towards collaboration amongst retailers. Trend towards online retailing, particularly in Continental Europe, will continue to be a key growth driver. Rapidly growing European businesses will be a major source of further organic growth. Strategic acquisitions continue to be researched. We anticipate our full year results to 30 April 2020 will be broadly in line with the Board’s expectations.

Q&A

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