A market leader in retail logistics
Logistics evolved: Agility and Ability
2017 Full Year Results Presentation
28 July 2017
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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.
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Agenda
Highlights 1
2
Operational review
o Operational update
o Brand Health
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Summary and Q&A 4
Financial review
o Financial update
o Post year end acquisitions
Highlights – financial*
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* The highlights are for the 12 months ended 30 April 2017, as compared to the 12 months ended 30 April 2016.
1 Group 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 and any exceptional or non-recurring items.
Group revenue growth of 17.2% to £340.1m (2016: £290.3m), driven by strong growth in all divisions.
Group EBIT1 growth of 21.8% to £17.9m (2016: £14.7m):
o E-fulfilment & returns management services – EBIT of £10.2m, up 23.4% (2016: £8.3m).
o Non e-fulfilment logistics – EBIT of £12.4m, up 15.7% (2016: £10.7m).
o Commercial vehicles – EBIT of £2.3m, up 3.5% (2016: £2.3m).
EPS of 12.5p, up 20.5% (2016: 10.3p).
Proposed final dividend of 4.8p per share giving total dividend of 7.2p per share, up 20.0% (2016:
6.0p).
Cash generated from operations: growth of 25.2% to £25.7m (2016: £20.5m).
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Summary income statement
Headline financials
Strong top-line performance in the year in all
business segments.
EBIT is the key metric, and saw further strong
growth driven in particular by continued contract
evolution in the logistics business.
Increase in finance costs driven by investment in
fixed asset base in order to service new contracts
(predominantly open book).
Dividends
Interim dividend of 2.4 pence per share, paid
December 2016.
Final proposed dividend 4.8 pence per share,
giving total dividend of 7.2 pence per share (6.0
pence year to 30 April 2016).
£m Year to 30 April Change
2017 2016 %
Revenue 340.1 290.3 +17.2%
Cost of sales (241.1) (205.7)
Gross profit 99.0 84.6
Other net gains 0.4 0.2
Admin expenses (81.9) (70.3)
Operating profit before share of equity-
accounted investees, net of tax 17.5 14.5
Share of equity-accounted investees, net of tax 0.2 -
Operating profit 17.7 14.5
EBIT 17.9 14.7 +21.8%
Less: amortisation of other intangible assets (0.2) (0.2)
share of tax and finance costs of equity-accounted
investees (0.0) -
Operating profit 17.7 14.5
Net finance costs (1.6) (1.4)
Profit before income tax 16.1 13.1
Income tax (3.6) (2.8)
Profit for the financial year 12.5 10.3 +20.6%
Basic earnings per share (p) 12.5 10.3 +20.5%
Diluted earnings per share (p) 12.3 10.3
Segmental and business activity performance
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Continued strong growth in Logistics:
o Organic growth and new business activities on
existing contracts including ASOS, John Lewis
pre-retail activities, Morrisons, Wilko and Zara.
o Full year benefit of prior year contract wins
including Browns, M&Co, Pep&Co and Ireland’s
largest retailer.
o Part-year impact of wins in the year including
Halfords, Inditex, Links of London, Kidly, Pretty
Green, Silkfred, Smiffys and Westwing.
o Significant increase in Click and Collect
revenues through the collaboration with John
Lewis.
Steady growth in commercial vehicles driven by new
vehicle sales and aftersales.
£m Year to 30 April Change
2017 2016 %
E-fulfilment & returns management services 129.9 97.6 +33.0%
Non e-fulfilment logistics 121.9 108.4 +12.5%
Total value-added logistics services 251.8 206.0 +22.2%
Commercial vehicles 91.5 85.6 +6.9%
Inter-segment sales (3.2) (1.3)
Group revenue 340.1 290.3 +17.2%
£m Year to 30 April Change
2017 2016 %
E-fulfilment & returns management services 10.2 8.3 +23.4%
Non e-fulfilment logistics 12.4 10.7 +15.7%
Central logistics overheads (4.8) (4.7)
Total value-added logistics services 17.8 14.3 +24.6%
Commercial vehicles 2.3 2.3 +3.5%
Head office costs (2.2) (1.9)
Group EBIT 17.9 14.7 +21.8%
Revenue
EBIT
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Summary cash flow statement
Strong cash flow generated from operations £25.7m
(2016: £20.5m).
Favourable working capital profile maintained.
£1.95m was subscribed for share capital on the
formation of the Clicklink joint venture in the year. A
£1.45m loan was advanced to Clicklink on its
formation.
£2.2m of deferred consideration paid in the prior year
relating to the acquisition of Servicecare.
Capex incurred on new contracts, including John Lewis
ancillary shed, largely recoverable over contract terms
through open book mechanism.
Dividends paid in line with stated policy at IPO.
£m Year to 30 April
2017 2016
EBIT1 17.9 14.7
Depreciation & amortisation 5.1 4.8
Other non-cash items2 0.6 0.5
Change in working capital 2.0 0.6
Cash generated from operations 25.7 20.5
Net interest paid (1.6) (1.4)
Tax paid (3.2) (2.1)
Net cash flows from operating activities 20.8 17.1
Investment in joint venture (2.0) -
Acquisition - (2.2)
Net capital expenditure (2.3) (5.7)
Net cash flows from investing activities (4.3) (7.9)
Loan advance to joint venture (1.4) -
Net drawdown / (repayment of) bank loans (6.0) (3.9)
Finance leases advanced 4.9 0.2
Repayment of capital on finance leases (5.7) (3.2)
Dividends paid (6.4) (5.2)
Net cash flows from financing activities (14.6) (12.1)
Net (decrease) / increase in cash & cash equivalents 2.0 (2.9)
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 and any exceptional or non-recurring items.
2. Other non cash items comprise exchange differences ,share based payments, share of joint venture, and movement in fair
value of derivatives
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Summary balance sheet
Investment in fixed assets mainly incurred on new
open book contracts.
Net current liabilities position affects continuing positive
working capital model.
Net debt: EBITDA < 1.1
Unused bank facility as at 30 April 2017 £28.0m.
£m As at 30 April
2017 2016
Intangible assets 24.8 24.9
Property, plant & equipment 38.9 25.6
Interest in equity-accounted investees 2.2 -
Non-current financial assets 1.4 -
Deferred tax assets 0.3 -
Non-current assets 67.6 50.5
Inventories 30.0 26.2
Trade & other receivables 47.7 39.9
Cash & cash equivalents 0.9 0.7
Current assets 78.6 66.8
Trade & other payables 85.1 72.2
Borrowings 7.4 6.6
Short term provisions 0.1 0.1
Current tax liabilities 2.2 1.7
Current liabilities 94.8 80.6
Borrowings 20.0 12.9
Long term provisions 1.3 0.8
Deferred tax liabilities - 0.2
Non-current liabilities 21.3 13.9
Net assets 30.1 22.8
Net debt 25.1 18.8
Acquisition – Tesam Distribution Limited
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Acquired 24 May 2017.
Background:
o A provider of warehousing and distribution services to M&S.
o Operates from three sites in and around Peterborough totalling more than 1.1m square feet of space.
o Established in 1984 and employs c.250 people.
o Highly competitive cost base with capacity for mezzanine floor expansion.
o Management retained.
Financials:
o Revenue of £19.6m*.
o EBIT of £1.8m*.
Consideration
o Gross consideration of £11.75m, funded from existing cash and bank facilities.
o Assets acquired include cash of approximately £3.4m and a freehold property which will be sold and is
expected to realise £2.7m, meaning net cash consideration of £5.65m.
* Audited results for the year ended 30 June 2016
Acquisition – RepairTech Limited
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Acquired 15 June 2017.
Background:
o Specialist provider of consumer electronic repair services based in Southam, Warwickshire.
o Complementary to Servicecare and Boomerang service offerings.
o Enhances the range of services available to existing Clipper customers, as well as attracting new
RepairTech clients to the Group.
o Management retained.
Financials:
o Revenue of £3.2m*.
o EBIT of £644k*.
Consideration
o Gross consideration of £3.0m, £2.5m funded from existing cash and bank and £0.5m deferred.
o Assets acquired include cash of £0.3m, meaning net cash consideration of £2.7m.
* Unaudited results for the year ended 31 March 2017
E-fulfilment update
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Additional e-comm capability created for further M&S product groups
Record volumes for Zara e-fulfilment during summer sale
Secret Sales go-live
Pretty Green go-live
Full start up of 5 Inditex brands
Set up fulfilment solution for BAT Vype
Set up fulfilment solution for PML NicoCigs
SilkFred go-live
Non e-fulfilment update
BAT warehouse & transport contract extended to end 2020.
Transport services extended to a sole supply agreement (ex
DHL).
Philip Morris – supplementary contract to encompass NicoCigs
– to 2020.
Morrisons Nutmeg – womenswear launched and in addition we
have increased capability to support 20% volume growth.
Crosswater – new transport operation.
TAPA (Transported Asset Protection Association) – Top tier
accreditations attained for FSR (Freight) and TSR (Truck) – only
UK operator to be awarded both accreditations at the top tier.
Further developments to support Halfords – pick & pack and
pre-retail.
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Clicklink
Full onboarding of Urban Outfitters – all store replen & Clicklink.
Onboarding of Pull & Bear (Inditex brand) – trial to assess benefit to wider group.
Trial to full roll out for another major fashion player – store replen & Clicklink.
Ted Baker in John Lewis with full roll out being explored.
We now have 12 retail customers using the service with another 12 actively engaged.
The carton volume forecast for the key Autumn/Winter retail trading period shows a circa 25% uplift
when compared to 2016. Furthermore the non-JLP volumes are expected to be circa 17% of the total
by Christmas – demonstrating penetration into the wider sector.
New marketing initiative created to demonstrate the value of interlinking Clicklink & Boomerang – not
only for e-fulfilment but also for store replenishment – a 7 day service creates opportunities for store
inventory reductions.
John Lewis returns management now fully embedded in the ADC.
National Returns Centre in development for large UK retailer.
Returns trial underway for UK fashion retailer.
Record volumes for ASOS Boomerang.
Boomerang
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New developments
Automation/Infrastructure
“Carrypick” pilot scheme being developed for major fashion customer.
“Autostore” concept development – working closely with 3 existing customers on evaluation.
ASOS Boomerang operation undergoing expansion of operational capability to support growth in
volumes.
Sorter developments underway to support the Clicklink extensive customer growth.
Mezzanine expansion underway at the new Northampton site to support shared use growth.
Ollerton mezzanine expansion underway to accommodate Wilko e-fulfilment growth.
Solutions Design/IT
Developed an e-comm/retail template solution in conjunction with JDA to create rapid roll out
capability for new customers.
Continuous Improvement Programme enhanced - introduction of “The CI Framework”, “The Process
Excellence Model” & “The Clipper Way” – sharing of best practice & collaboration.
Driving training enhanced with Virtual Reality simulator systems.
Servicecare
Commenced bicycle refurbishment for Amazon.
Attained accreditation from Morphy Richards to add to our manufacturer portfolio.
Enlarged our small domestic appliance refurbishment capability.
Rebuilt the Genesis eBay store.
Clipper continues to enhance visibility, innovate and boost capabilities
• ClickLink
• Boomerang roll out – with extended services via
Servicecare & RepairTech
• “Now is History” campaign – thought leadership
• Future Forum – thought leadership events
• Investment in IT capabilities
• JDA developments
• Processes in place to benefit Tier 2 clients
• New Ops Board appointments: o Emma Dempsey (COO)
o Ant Everett (Engineering & Technology)
o Paul Thirkell (Senior Operations)
Speed and efficiency are important but retailers say chasing Amazon isn't the way
We’re getting carried away thinking that we
need to provide what Amazon do – none of us
have the investment capability they do and in
many cases, speed isn't always what the
customer wants
I don’t
actually
think
people
want next
day!
Next day is important
as an option, but it
doesn't stack up to
be the default
65% of customers expect delivery in 2-3
days, only 15% want it next day
Omnichannel: The future of department store retailing
Extracts from Clipper Brand Health 2017
They are focused on omnichannel capability, not just execution of delivery
0%
1000%
2000%
3000%
4000%
5000%
6000%
Same day delivery Specific time slots Click & Collect
Do you offer, or plan to offer any of the following customer collection or delivery options in the next 12 months?
2016 2017CEO Viewpoint 2017:
The Transformation of Retail
Companies with strong
Omnichannel operations retained
89% of customers, as oppose to
33% for those with weak ones via
Omnichannel customers spend
71% more than those with one
channel
Smaller players don’t have the luxury of investment – a concern
• 68% of retailers have started to join the dots, but have
a long way to go to build an integrated omnichannel
view of the customer journey*
• 74% of retailers say returns are eroding profits**
• 33% plan to raise online order prices to cope with
demand**
• 74% of firms reported that they did not expect to have
robotics and automation introduced into their supply
chain for six or more years**
We can’t make automation pay
We need a single pool of stock first and
that’s a long way off
Returns are an issue but
they are a long way down
the list Having staff in store
prepare product doesn't
make sense but it’s our
best bet at the moment
* & , Mastering the culture of click and expect,
featured in ‘The future of E-commerce’, raconteur.net
** & , CEO Viewpoint 2017: The Transformation of Retail
*** &MHI, Accelerating Change: How innovation is driving digital
“always-on” supply chains Extracts from Clipper Brand Health 2017
“The cost of investing in technology, particularly as
some firms see a widening gap between their own capabilities and those that have already invested in digital
automation, means there is likely to be consolidation of
one sort or another. While competition will prevent partnerships between some players – and most firms have pushed beyond their initial product range – the requirement for
a business model that scales, but duplicates costs, will
mean utility models of warehousing and delivery
are likely to be considered.” ‘Robots at the forefront of retail efficiency’
It’s created a growing ‘collaboration imperative’
We need to learn
from people who
have done it
before
We all need a rich and
exciting high street,
why compete on
things like logistics?
We have to be open to new
ways of working
We would entertain any option to
reduce cost and risk
You’ve got about a
third of lorries on
the road that are
empty, it’s crying
out for somebody to
solve it
Extracts from Clipper Brand Health 2017
The bigger picture – the need to innovate and upskill workforces
The winners will be those who are able to participate fully in innovation-driven ecosystems by
providing new ideas, business models, products and services, rather than those who can offer
only low-skilled labour or ordinary capital.
Klaus Schwab
‘The Fourth Industrial Revolution’
Our hypothesis answers a market need and packages Clipper’s various services
It gives you an opportunity to
share learnings with others
It’s a real alternative to
what Amazon are
doing
Makes Clicklink
and Boomerang
make sense – it’s
a one stop shop
idea
Clipper have an opportunity here to
be like a broker for businesses
looking to scale
It would make
automation affordable
The hypothesis:
• Shared user service – with
innovate use of systems &
automation at its heart
• Focused on ‘Innovation &
Improvement’
• Formulated for growing and
scaling businesses
• One-stop-shop to omni-
channel growth
• Matches retailers looking for
partners – connects those in
need of growth with those
seeking enhanced efficiencies
• Maximise economies of scale
Extracts from Clipper Brand Health 2017
Build on market leading customer proposition to expand the
customer base • Bespoke, retail specific logistics solutions
• Focused on e-fulfilment and returns
• Be selective about which opportunities offer the greatest
value
Develop new, complementary products and services • Further develop and commercialise automation / semi-
automation
• Continue to invest in new product and service offerings o Support Booomerang & Clicklink
Explore acquisition opportunities • To support market penetration and enhance value
• Bolt-on acquisitions which extend technical expertise
Continue European expansion • Development of Clipper Germany
• To assist mainland European retailers to move online
• To assist UK retailers to move into Europe
& is fully aligned with the Clipper strategic objectives
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