Final Results for the year ended 30 April 2019

Clipper Logistics plc

Final Results for the year ended 30 April 2019

Clipper Logistics plc ("Clipper", the "Group", or the "Company"), a leading provider of value-added logistics solutions, e-fulfilment and returns management services to the retail sector, is pleased to announce its Full Year Results for the year ended 30 April 2019.

Financial Highlights for the year ended 30 April 2019

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.

2. Property-related income comprises profit from property-related advisory services of £3,100,000 (2018: £4.200,000) and £nil (2018: £2,151,000) of profit on disposal of a freehold property.

Percentages are calculated based on the underlying numbers as presented in the preliminary results, not on the rounded figures above.

Operational Highlights for the year ended 30 April 2019

Post Year End Highlights

Steve Parkin, Executive Chairman of Clipper commented:

"The financial year ended 30 April 2019 has seen a continuation of our long-standing track record of achieving significant organic revenue growth, complemented by the benefit of strategic, value enhancing acquisitions made in previous years."

"The Group continues to focus on developing innovative, cost-effective solutions that address the needs of our blue-chip client base, predominantly in the retail sector. We continue to invest in quality people to implement sector leading projects, and this, together with our ability to identify key trends and developments in the sectors we serve, means that we are confident in our ability to continue this momentum."

"We are conscious of the challenging market conditions facing UK retailers and the macroeconomic uncertainty within the UK economy; this may well have some impact in the year ahead, but we remain confident in our ability to continue the momentum in the business and are well-positioned to continue to deliver strong returns to our shareholders."

Forward looking statements

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

PUBLICATION OF ANNUAL REPORT AND ACCOUNTS

Clipper's 2019 Annual Report and Accounts are available on the Company's website: https://www.clippergroup.co.uk/report-accounts/ and will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM.

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

ENQUIRIES

Chairman's Statement

As Chairman of Clipper Logistics plc, I am pleased to present our 2019 financial results.

The financial year ended 30 April 2019 has seen a continuation of our historic track record of achieving significant organic revenue growth, complemented by the benefit of strategic, value-enhancing acquisitions made in previous years.

The Group continues to focus on developing innovative, cost-effective solutions that address the needs of our blue-chip client base, predominantly in the retail sector. We continue to invest in quality people to implement sector-leading projects, and this, together with our ability to identify key trends and developments in the sectors we serve, means that we are confident in our ability to continue this momentum.

Despite the challenging market conditions facing the retail sector, the Group has achieved another strong financial performance, growing revenue by 15.0%. We have commenced significant new contracts with high profile retailers including boohoo.com subsidiary PrettyLittleThing and Sports Direct in the UK, and Mountain Warehouse for whom we have introduced e-fulfilment activities in Europe. In addition, we have seen significant growth in activity with many of our customers including Asda, Browns, Morrisons, Halfords, New Look, Wilko and ASOS in the UK, and Westwing and s.Oliver in Europe.

We will continue to identify key trends in the sectors we serve, and develop new services, processes and solutions that address the needs and challenges of our customers. Clipper's unique understanding of the dynamics of the retail sector, and in particular the e-commerce sector including returns management and Click and Collect, provides the Group with exceptionally strong strategic positioning for the future.

We are particularly pleased with the evolution of our European business, which has won significant contracts with customers including ASOS, Westwing and Mountain Warehouse, as well as organic growth.

In addition, RepairTech, which was acquired in the previous financial year, is performing well and together with Servicecare has seen new contract wins with Vestel and Tech Data. They have established a presence in Europe where we now handle electrical returns for Amazon.

The commercial vehicles business had a disappointing year, with reduced dealer support being provided by the manufacturer. We believe however that this business will continue to contribute to Group profitability and cashflow.

The Group is well positioned to continue to deliver strong returns to our shareholders, despite the challenges that some parts of the retail sector are experiencing.

We are mindful of the wider economic climate, and in particular of the headwinds facing our customers in the retail sector. We continue to monitor the situation closely and engage with our customers to find new ways to pro-actively assist them.

Group results

Group revenue increased by 15.0% to £460.2 million for the year ended 30 April 2019 (2018: £400.1 million), and Group EBIT was £20.2 million (2018: £20.9 million). Group EBIT before Property-related income1 increased by 18.0% to £17.1 million (2018: £14.5 million). Property-related income reduced by £3.3 million to £3.1 million. Diluted earnings per share after the amortisation of intangible assets were 13.1 pence for the year ended 30 April 2019 (2018: 14.1 pence), a decrease of 7.0%. Basic earnings per share were 13.2 pence (2018: 14.2 pence), a decrease of 7.0%.

Net debt was £45.9 million at the year end (2018: £31.7 million). We continue to invest in capital projects to support both new contracts and growth of existing contracts, much of which involves a commitment from customers to reimburse this capital over the duration of the contract. Net debt is defined as borrowings, less cash, cash equivalents and non-current financial assets (see note 20 to the Group Financial Statements). At 30 April 2019, of the headline net debt of £45.9 million, we have £34.9 million of capital to be recovered in full from open book customers over the term of the customer contracts.

People and Board

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

The team has a proven track record of identifying key trends within the sectors we serve, and developing relevant cost-effective solutions that address those needs. Further, we have a proven ability to identify strategic acquisitions that enhance Group performance and shareholder value.

I would like to take this opportunity to thank all the employees of the Group for their continued commitment and contribution to the Group's performance.

Governance

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

Ron Series stood down from the role of Senior Independent Director on 7 November 2018. I would personally like to thank Ron for his commitment and valuable contribution.

Dividends

The Board is recommending a final dividend of 6.5 pence per share, making a total dividend in respect of the year ended 30 April 2019 of 9.7 pence (2018: 8.4 pence), an increase of 15.5%.

The proposed final dividend, if approved by shareholders, will be paid on 23 October 2019 to shareholders on the register at the close of business on 20 September 2019.

Outlook

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

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

Steve Parkin

Executive Chairman

1. "Property-related income" comprises profit from property-related advisory services of £3,100,000 (2018: £4.200,000) and £nil (2018: £2,151,000) of profit on disposal of a freehold property.

Operating and Financial Review

Group performance for the year ended 30 April 2019

The Group continued to make good progress in the financial year ended 30 April 2019. Group revenue grew by 15.0% to £460.2 million. Group EBIT for the year was £20.2 million compared to £20.9 million in the prior year. However, EBIT before Property-related income1 increased by 18.0% to £17.1 million, with revenue and EBIT growth in e-fulfilment & returns management services.

Revenue growth was very strong in e-fulfilment & returns management services, where revenue of £233.9 million was 46.8% ahead of the previous year, but we are also pleased that non e-fulfilment revenues grew by 4.4% to £145.3 million.

EBIT from value-added logistics services (excluding Property-related income) increased by 22.8% to £18.0 million, however this was partially offset by performance in the commercial vehicles segment, where EBIT of £1.1m was £1.4m lower than in the previous year.

Property-related income was £3.1 million in the year to 30 April 2019, £3.3 million lower than the prior year. Consequently, total EBIT was 3.1% lower than in the previous year at £20.2m.

The Group entered into a series of contracts with a customer towards the end of the financial year ended 30 April 2019. On consideration of the various agreements it was determined that these agreements should be accounted for as a business combination under IFRS 3. Whether the business combination should be accounted for in the year ended 30 April 2019 or in the year ending 30 April 2020 was debated at length during the audit process. However, on balance it was determined that the business combination should be recognised in the year ending 30 April 2020. The provisional accounting for the business combination is disclosed in note 29 and any negative goodwill, currently estimated at £3.0 million, will be recognised within e-fulfilment & returns management services' operating profit in the year ending 30 April 2020.

1. "Property-related income" comprises profit from property-related advisory services of £3,100,000 (2018: £4.200,000) and £nil (2018: £2,151,000) of profit on disposal of a freehold property.

Group revenue

Group revenue increased by 15.0% to £460.2 million, with strong growth of 27.0% in value-added logistics services revenues being partly offset by a decline in commercial vehicles revenues.

Group EBIT

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

EBIT is the primary KPI by which the management team assesses corporate performance. EBIT is assessed against Board approved budgets.

Another KPI we have introduced in the year is EBIT before Property-related income. The prior year included significant property-related advisory revenues and one-off profits on disposal of a freehold property. The new metric aids comparability of year-on-year profitability. A further KPI is net debt, which is discussed further below.

EBIT margin (%) is not considered by the Directors to be a key metric since the high proportion of open book and minimum volume guarantee contracts within the UK logistics division distorts reported margins. This is due to an element of management fees on certain contracts being relatively fixed in the short term, so that an increase in revenue in periods of increased activity will not necessarily give rise to a proportionate increase in profit, resulting in lower reported margins. Conversely, in periods of reduced activity levels, reported margins would typically increase. Similarly, revenue derived from minimum volume guarantee contracts is fixed at a minimum level, so that a shortfall in activity levels would give rise to a lower cost base and a higher reported margin. In addition, within the commercial vehicles segment, the level of high value, relatively low margin new vehicle sales also distorts reported margins. Accordingly, EBIT is a more relevant measure of financial performance than EBIT margin (%).

Segmental trading overview

Clipper is managed through two distinct operating segments, being value-added logistics services and commercial vehicles. The value-added logistics services segment is further subdivided into two business activities, being e-fulfilment & returns management services and non e-fulfilment logistics.

Value added logistics services

EBIT* represents EBIT excluding Property-related income.

Within the value-added logistics services segment, Group revenue benefited from the full-year impact of operations commenced during the year ended 30 April 2018, volume growth and extension of services on existing contracts, the part-year impact of operations commenced during the year ended 30 April 2019, and further contributions from property-related advisory services.

These revenue items had a positive impact on EBIT. In addition, EBIT also benefited from improved Clicklink results, particularly throughout the second half of the year as sales price increases took effect.

E-fulfilment & returns management services

EBIT* represents EBIT excluding Property-related income.

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

Revenues from e-fulfilment & returns management services increased by 46.8% from £159.4 million for the year ended 30 April 2018 to £233.9 million for the year ended 30 April 2019, with EBIT before Property-related income growing by 20.1% to £13.6 million. Property-related income was £nil in the year to 30 April 2019, compared to £0.6 million in the previous year. Including the impact of reduced Property-related income EBIT was 14.2% higher than in the previous year. This growth continues the double digit percentage EBIT growth of prior years, and delivers against our stated objective of being a thought leader and a market leader in the provision of value-added services across the e-fulfilment sector.

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

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

The strong net revenue growth translated into significant growth in EBIT and improved results from the Clicklink operation, driven by the full-year impact of Superdry and Urban Outfitters activity, and a part-year impact of price increases with major customers.

However, the favourable impact of this was partly diluted because of (i) vacant warehouse space remaining underutilised and (ii) productivity inefficiencies on a new warehouse management system following the migration of one of our operations between sites.

Late in the financial year under review and into the early months of the new financial year, we have streamlined the Clicklink under-the-roof operation through labour sharing initiatives with one of our Northampton depots, significantly reducing the cost base, the benefits of which will be seen in the current financial year.

Since the year end, we have commenced activities with new customers including Shop Direct and Simba Sleep, we have secured a contract with Amara Living and we shall be commencing the Nutmeg online operation for Morrisons imminently. However, we have received notice that Whistles and Go Outdoors will not be renewing their contracts at the end of their current terms in the year ending 30 April 2020, both of which are due to the services we provide being combined into other operations.

We have also formally notified a customer of our intention not to renew a major current contract when it reaches the end of its current term in March 2020; the effect of this will be immediately earnings-enhancing.

Non e-fulfilment logistics

EBIT* represents EBIT excluding Property-related income.

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

Revenue from non e-fulfilment operations grew by 4.4% for the year ended 30 April 2019, from £139.1 million to £145.3 million, a positive performance given the underlying market headwinds in this sector.

EBIT excluding Property-related income increased by 10.4% to £9.9 million in the year ended 30 April 2019. Property-related income reduced from £5.8 million to £3.1 million, resulting in total EBIT from this activity reducing by 11.8% to £13.0 million.

The following factors contributed positively to the revenue growth:

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

Whilst revenue growth had a favourable impact on EBIT, costs on one specific closed book contract resulted in an adverse contribution to EBIT, as we were unable to recover the fixed costs of the operation through unit rates. This contract has been renegotiated since the year end to give more favourable terms to Clipper going forwards.

Already in the year ending 30 April 2020, we have migrated our Halfords operation from our Daventry facility to our new Crick facility.

Shortly before the year end, those activities we performed for C&A out of our Milton Keynes depot were discontinued. The operation involved pre-retail activity on supplies from the Far East for C&A's mainland Europe customers. The customer has now taken UK out of this supply chain due to Brexit fears. In addition, activities for Pep&Co will cease shortly.

Central logistics overheads

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

Central logistics overheads reduced by £0.2 million (2.4%), from £5.7 million in the year ended 30 April 2018 to £5.5 million in the year ended 30 April 2019.

Whilst we have continued to invest in the operational support and back office functions of the business to accommodate revenue growth, thereby increasing the overhead base, this has been more than offset by a favourable impact of share based payment charges year-on-year of £0.9 million (see below), which contributed a credit of £0.4 million in the year ended 30 April 2019 having contributed a charge of £0.5 million in the prior year.

Overall share based payment charges

Share based payment credits totalling £1.2 million have been credited (2018: £1.2 million charged) primarily to central logistics overheads and head office costs (as appropriate) in respect of the Sharesave Plan and the Performance Share Plan ("PSP") (see note 23 to the Group Financial Statements and page 48 of the Directors Remuneration Report contained in the Company's 2019 Annual Report and Accounts (available to download from www.clippergroup.co.uk/report-accounts/) for further information).

Commercial vehicles

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

The UK commercial vehicles market has been challenging in the year, with new vehicle registrations 1.7% down in calendar year 2018 compared to calendar year 2017. Much of the market decline is undoubtedly due to Brexit uncertainties, whilst concerns around urban clean air zones has also curbed sales.

The overall market contraction has been exacerbated for Iveco dealers specifically because of Iveco's own UK strategy which has focused on margin preservation for Iveco, rather than growing sales and maintaining market share. As a result, our commercial vehicles segment has been unable to be competitive when pitching against other marques and, as a result, sales have declined significantly. We expect to see a strategic shift from Iveco UK in the coming months following the May 2019 appointment of a new business director for UK and Ireland.

Head office costs

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

Head office costs decreased by £0.6 million (22.9%), from £2.6 million in the year ended 30 April 2018 to £2.0 million in the year ended 30 April 2019. The year-on-year decrease in head office costs is largely due to the £1.4 million impact of share-based payments (see above) - which contributed a credit of £0.8 million in the year ended 30 April 2019 having contributed a charge of £0.6 million in the prior year - although this is partly offset by the increased investment we have made in the senior management team and certain costs relating to one-off events and projects.

Overview of P&L performance for the year ended 30 April 2019

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

Net finance costs

Net finance costs for the year ended 30 April 2019 increased by 8.4% to £2.1 million (2018: £2.0 million), the increase being attributable to the increased average net debt following increases in our average debtor levels due to the revenue growth in the value-added logistics services segment, certain overdue debtors and increased accrued income.

Profit Before Tax and Amortisation ("PBTA")

PBTA is defined as profit before income tax, before amortisation of intangible assets arising on consolidation. Whilst not considered a KPI by management, this measure is used by market analysts. PBTA was £18.1 million (=£16.9m PBT plus £1.2m amortisation of other intangible assets) for the year ended 30 April 2019, a decrease of 5.0% on the year ended 30 April 2018 PBTA of £19.1 million (=£18.0m PBT plus £1.1m amortisation of other intangible assets).

Taxation

The effective rate of taxation of 20.8% (2018: 20.5%) is higher than the average standard UK rate of corporation tax applicable in the year of 19.0% (2018: 19.0%) principally due to certain expenditure incurred which is disallowable for tax purposes and the higher effective rate of tax to which the German and Polish businesses are subject.

Profit after tax

The profit after tax for the year ended 30 April 2019 was £13.4 million (2018: £14.3 million), a decrease of 6.1%.

Earnings per share

Earnings per share were 13.2 pence for the year ended 30 April 2019 (2018: 14.2 pence). Adjusted to remove amortisation of intangible assets arising on consolidation, earnings per share were 14.4 pence (2018: 15.2 pence).

Current trading and outlook

In the year ending 30 April 2020, we expect revenue to benefit from:

In addition to the revenue impacts, we expect EBIT to benefit in the year ending April 2020 from:

However, as a result of the net anticipated EBIT improvements elsewhere, we expect the share-based payment P&L impact to return to a charge in the year ending 30 April 2020 and beyond, compared to a credit in the year ended 30 April 2019, partially offsetting overall profit gains elsewhere.

Whilst the business is still in a robust position, we remain mindful of the political and economic uncertainty facing our core markets.

The adoption of the new leasing accounting standard (IFRS 16) in the year ending 30 April 2020 will significantly reduce the Group's future operating lease charges, will significantly increase the Group's future depreciation and finance costs, and will also affect the deferred tax charge / credit (see page 80 of the Company's 2019 Annual Report and Accounts (available to download from www.clippergroup.co.uk/report-accounts/)).

Balance sheet and cash flow

Capital expenditure and fixed assets

We incurred expenditure of £26.4 million in the year ended 30 April 2019 (2018: £12.7 million) on intangible assets and property, plant & equipment. £25.8 million of this was incurred in the logistics services segment (2018: £12.3 million) and £0.6 million (2018: £0.7 million) in the commercial vehicles segment.

Approximately £7.7 million (2018: £7.7 million) of the additions were purchased in cash and £18.7 million (2018: £5.0 million) were purchased through HP and finance leases.

Noteworthy capital additions in the year were a pick tower in Poland, new site development at Crick and Peterborough, a conveyor in Ollerton and an additional mezzanine floor at Northampton.

In the year ended 30 April 2019, we disposed of assets with a net book value of £0.4 million, on which we generated a profit on disposal of £0.1 million.

In the prior year, we disposed of assets with a net book value of £4.5 million, on which we generated a profit on disposal of £2.2 million. Substantially all of the £4.5 million net book value related to the disposal of a freehold property which the Group had acquired earlier in the period as part of the purchase of Tesam.

Clipper's outstanding capital expenditure commitment at 30 April 2019 was £8.6 million (2017: £17.9 million), reflecting the timing of investments in new and existing customer contracts.

The adoption of the new leasing accounting standard (IFRS 16) in the year ending 30 April 2020 will significantly increase the Group's reported total non-current assets (see page 80 of the Company's 2019 Annual Report and Accounts (available to download from www.clippergroup.co.uk/report-accounts/)).

Cash flow

Cash generated from operations was £28.3 million (2018: £24.5 million).

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

In the year ended 30 April 2019, we generated £0.6 million of cash inflow from working capital (2018: £3.2 million outflow).

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

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

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

Two significant one-off cash flows arose in the prior year (ended 30 April 2018): firstly, there was the acquisition of Tesam for a cash consideration of £9.6 million (net of cash acquired); and secondly, there was the acquisition of RepairTech for a cash consideration of £2.2 million (net of cash acquired). There was also £0.5 million of deferred consideration paid in respect of the latter in the year ended 30 April 2019 and a £0.5 million increase in the loan to Clicklink, disclosed as a non-current financial asset (see note 27 to the Group Financial Statements).

Net debt

In addition to EBIT, net debt is considered a KPI for the Group.

The Group had £45.9 million of net debt outstanding at 30 April 2019 (2018: £31.7 million) (see note 20 to the Group Financial Statements), an increase of £14.3 million. The increase in net debt was driven primarily by the £18.7 million of assets acquired on HP and finance contracts in the year ended 30 April 2019, which more than offset the positive cash flows from operating activities, net of cash flows from investing activities and dividends paid.

It is worth noting that where an open book customer has a strong credit rating, Clipper will often fund the initial capital requirements on the condition that the customer commits to repaying this over the term of the contract, together with finance charges and a management fee. At 30 April 2019, Clipper has £34.9 million (2018: £22.4 million) of capital contracted to be recovered from open book customers over the remaining term of the customer contracts.

The adoption of the new leasing accounting standard (IFRS 16) in the year ending 30 April 2020 will significantly increase the Group's reported net debt (see page 80 of the Company's 2019 Annual Report and Accounts (available to download from www.clippergroup.co.uk/report-accounts/)).

David Hodkin

Chief Financial Officer

Director's Statement on the Basis of Preparation - Announcement

Whilst the financial information included in this announcement has been prepared on the basis of the requirements of IFRSs in issue, as adopted by the European Union and effective at 30 April 2019, this statement does not itself contain sufficient information to comply with IFRS.

These financial results do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Group Income Statement, Group Statement of Comprehensive Income, Group Statement of Financial Position, Group Statement of Changes in Equity, and Group Statement of Cash Flows, and selected notes for the year ended 30 April 2019 have been extracted from the Group's audited Financial Statements for the year then ended.

The financial information contained within the preliminary announcement for the year ended 30 April 2019 was approved by the Board on 29 August 2019. Statutory accounts for the year ended 30 April 2019 were approved on the same date and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on these Financial Statements. Their report was unqualified and did not contain a statement under s.498 (2) or (3) of the Companies Act 2006.

Statement of Directors' Responsibilities in respect of the Annual Report and THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the Group and Company Financial Statements in accordance with applicable law and regulations.

Company law requires the directors to prepare group and parent company financial statements for each financial year. Under that law they are required to prepare the group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected to prepare the parent company financial statements in accordance with UK accounting standards, including FRS 101 'Reduced Disclosure Framework'.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the directors are required to:

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a strategic report, directors' report, directors' remuneration report and corporate governance statement that comply with that law and those regulations.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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

We confirm that to the best of our knowledge:

We consider the Annual Report and the Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

Group Income Statement

For the year ended 30 April

Group Statement of Comprehensive Income

For the year ended 30 April

Group Statement of Financial Position

At 30 April

Group Statement of Changes in Equity

For the year ended 30 April

Group Statement of Cash Flows

For the year ended 30 April

1. The cashflows for the year ended 30 April 2018 for these items have been re-presented for ease of comparability with the presentation convention adopted in the year ended 30 April 2019. Purchases of property, plant and equipment and intangible assets are now presented gross of the related finance lease drawdown in this year's Group Financial Statements, having previously been presented net of the related finance lease drawdown. In the prior year, purchase of property, plant and equipment was reported as £(6,849,000), purchase of intangible assets was reported as £(844,000) and finance leases advanced in respect of purchases of property, plant and equipment and intangible assets was reported as £nil.

Notes to the GROUP STATEMENT

1. General information

The results comprise those of Clipper Logistics plc and its subsidiaries for the year ended 30 April 2019 and does not constitute the Group's statutory accounts for the years ended 30 April 2019 or 2018, but is derived from those accounts. Both the Company Financial Statements and the Group Financial Statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("IFRSs").

Statutory accounts for the years ended 30 April 2019 and 30 April 2018 have been reported on by the auditor. Their reports for both years (i) were unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their audit report and (iii) did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 30 April 2018 have been filed with the Registrar of Companies. The statutory accounts for the year ended 30 April 2019, which were approved by the Board on 29 August 2019, will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The Group Financial Statements for the year ended 30 April 2019 were authorised for issue by the Board of Directors on 29 August 2019 and the Group Statement of Financial Position was signed on the Board's behalf by David Hodkin.

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

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

2. Summary of significant accounting policies

The results for the year have been prepared on a basis consistent with the accounting policies set out in Clipper's Annual Report and Accounts for the year ended 30 April 2018.

In the current year, IFRS 15, IFRS 9 and amendments arising from the annual improvements to IFRSs 2016-2018 cycles have been adopted. There has been no material impact, although there have been some minor changes to disclosure.

The Group will adopt IFRS 16 'Leases' for the first time in the year ending 30 April 2020. IFRS 16 will primarily change lease accounting for lessees. Lease agreements will give rise to the recognition of an asset representing the right to use the leased item and a loan obligation for future lease payables. Lease costs will be recognised in the form of depreciation of the right to use asset and interest on the lease liability replacing rental costs charged on a straight-line basis.

The adoption of IFRS 16 will have a material impact on the Group's reported results. In the year ending 30 April 2020, IFRS 16 is expected to increase operating profit by between £7m and £8m, finance costs by between £7m and £8m, all resulting in a reduction in profit before tax of between £0.5m and £1m, partially offset by deferred tax.

3. Revenue

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

Comparative information has not been restated and continues to be reported under IAS 18.

The following practical expedients have been applied:

On adoption of IFRS 15, the Group has assessed its customer contracts and concluded that some of its activity within Technical Services is that of an agent rather than a principal and therefore it is more appropriate to recognise the commission element as revenue. The impact of this is a £5m reclassification between revenue and cost of sales. Other than this there has been no material impact on the adoption of IFRS 15.

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

Revenue recognised in the income statement is analysed as follows:

Non e-fulfilment logistics revenue includes £3,100,000 (2018: £4,200,000) in respect of property-related advisory services.

Geographical information - revenue from external customers:

Geography is determined by the location of the end customer.

The Group has no customers that in the years ended 30 April 2019 or 30 April 2018 accounted for greater than 10% of the total Group revenue.

Contract balances

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

The contract assets primarily relate to the Group's right to consideration for work completed but not billed as at 30 April 2019. The contract assets are transferred to receivables when the rights become unconditional. The contract liabilities primarily relate to the advance consideration received from customers.

The amount recognised in revenue in the year ended 30 April 2019 from performance obligations satisfied in previous periods is £16,016.000. The amount of contract assets at 1 May 2018 transferred to trade receivables in 2019 amounted to £5,991,000.

4. Segment information

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

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

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

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

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

The following tables present profit information for continuing operations regarding the Group's business segments for the two years ended 30 April 2019:

Earnings before interest & tax ("EBIT"):

Amortisation of other intangible assets:

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

Operating profit and profit before income tax:

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

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

Capital expenditure:

Capital expenditure comprises additions to property, plant and equipment (note 14) and intangible assets (note 12).

Depreciation:

Amortisation:

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

5. Staff costs

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

Key management compensation (including Executive Directors):

Directors' emoluments:

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

6. Group operating profit

This is stated after charging:

Operating profit is stated after (charging) or crediting:

Profit on sales of property, plant and equipment includes £nil (2018: £2,151,000) of profit realised on the sale of a freehold property.

7. Dividends 

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these Financial Statements. The proposed dividend is payable to all shareholders on the Register of Members on 20 September 2019. The payment of this dividend will not have any tax consequences for the Group.

8. Finance costs

9. Finance income

10. Income tax expense

a. Tax charged in the income statement:

The adjustment to the amounts provided in the previous year relates to a greater proportion of capital expenditure being treated as eligible for capital allowances and the election of 'roll-over' relief against a chargeable gain arising on a property disposal.

b. Tax relating to items charged or credited to other comprehensive income:

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

c. Reconciliation of income tax charge:

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

d. Deferred tax in the statement of financial position:

Legislation to reduce the UK corporation tax rate from 19% to 17% with effect from 1 April 2020 was substantively enacted at 30 April 2018. A rate of 17% (2018: 17%) has been applied in the measurement of the Group's UK deferred tax assets and liabilities in the year.

11. Earnings per share

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

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

12. Intangible assets

The average remaining useful life of contracts and licences at 30 April 2019 is 7.5 years (2018: 8.5 years).

13. Impairment test for goodwill

The carrying amount of goodwill has been allocated to each CGU as follows:

A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of a CGU is determined based on value-in-use calculations.

The value-in-use calculations have used pre-tax cash flow projections based on the Board approved business plans for the three years ending 30 April 2022.

The Board approved business plans for the value-added logistics services segment take into account the annualised impact of contract wins in the year ended 30 April 2019 as well as confirmed new and ceasing contracts. The key judgment is the assumed new contract wins during the business plan period, which has been based on historical experience.

Subsequent cash flows are extrapolated using an estimated long-term growth rate of between 3.0% and 5.0% (2018: 3.3%) to perpetuity (2018: 2028). The cash flows have then been discounted using a pre-tax risk adjusted discount rate of between 8.5% and 10.3% (2018: 8.5% and 10.3%). The forecasts of foreign operations are translated at the exchange rate ruling at the year end.

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

14. Property, plant and equipment

Included within property, plant and equipment are amounts held under finance lease contracts. At 30 April 2019, the net book value of these assets was £39,681,000 (2018: £28,257,000). Total additions include £18,698,000 (2018: £5,129,000) under finance lease contracts or specific bank loans.

Additions to plant, machinery, fixtures & fittings include £2,843,000 (2018: £1,587,000) in respect of assets in the course of construction.

15. Interest in equity-accounted investees

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

Share of loss after tax for the period arises from nine months audited accounts and three months unaudited management accounts.

Summarised financial information from Clicklink's audited accounts for the year ended 31 January 2019 is set out below:

16. Inventories

See below for the movements in the provision for obsolescence:

The cost of inventories recognised as an expense amounted to £89,917,000 (2018: £108,599,000).

Included within commercial vehicles is £1,001,000 (2018: £941,000) relating to assets held under hire purchase agreements.

17. Trade and other receivables

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

See note 26 on credit risk of trade receivables, which explains how the Group manages and measures credit quality of trade receivables that are neither past due nor impaired.

See below for the movements in the provision for impairment:

Concentrations of credit risk with respect to trade receivables are limited due to the Group's customer base being large, unrelated and blue chip. Due to this, management believes there is no further credit risk provision required in excess of normal provision for doubtful receivables. The average credit period taken on sale of goods or services is 31 days (2018: 31 days).

The Group applies the simplified approach permitted by IFRS 9, which requires the application of a lifetime expected loss provision to trade receivables. The provision calculations are based on historic credit losses applied to older balances. This approach is followed for all receivables unless there are specific circumstances which would render the receivable irrecoverable and therefore require a specific provision. A provision is made against trade receivables until such time as the Group believes the amount to be irrecoverable, after which the trade receivable or contract receivables balance is written off.

The ageing analysis of trade receivables was as follows:

18. Cash and cash equivalents

19. Trade and other payables

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

20. Financial liabilities: borrowings

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

The principal lender has security over all assets of the Group's UK operations. The Group's principal bank facilities were increased in January 2019 and now total £45,000,000 consisting of:

In addition to the Revolving Credit Facility above, other items included within bank loans at 30 April 2019 are as follows:

The amounts which are repayable under hire purchase or finance lease instalments are shown below:

It is the Group's policy to acquire certain of its property, plant and equipment and inventories under finance leases or hire purchase agreements. The average contract term is 4.8 (2018: 4.7) years. At 30 April 2019 £30,380,000 (2018 £22,756,000) of the Group total of such obligations is denominated in Pounds Sterling and the remainder is denominated in Euros. The interest on the variable rate leases is based on a margin above Bank Base Rate or LIBOR. The Group's obligations under finance leases are secured by the lessor's charge over the assets.

Changes in liabilities from financing activities

21. Provisions

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

Onerous contracts

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

Uninsured losses

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

Dilapidations

Provisions are established over the life of leases to cover remedial work necessary at termination under the terms of those leases. Two warehouses have leases that expire 18 and 14 years from the balance sheet date and an office lease expires 12 years from the balance sheet date. All other leases expire in 10 years or less.

22. Share capital

During the year the Company issued 253,999 ordinary shares to satisfy employee share options, for aggregate consideration of £350,000. The new shares rank pari passu with all existing ordinary shares in issue. See also note 23 below.

23. Share based payments

The Clipper Performance Share Plan ("PSP") was approved by shareholders on 29 September 2014. The PSP enables selected directors and employees of the Group to be granted awards in respect of ordinary shares. Share Awards under the PSP will ordinarily be structured as nil cost share options with the vesting of Share Awards being subject to performance conditions measured over a period of at least three years. A summary of the principal terms of the PSP, including vesting conditions, is contained in the Directors' Remuneration Report on pages 46 to 57 of the Company's 2019 Annual Report and Accounts (available to download from www.clippergroup.co.uk/report-accounts/).

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

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

At 30 April 2019, the range of exercise prices for the various schemes were 193.34p - 379.74p (2018: 140.40p - 379.74p). At April 30 2019, the weighted average remaining contractual life was 2.7 years (2018: 2.0 years)

At 30 April 2019, PSP options over 507,568 (2018: 572,532) and Sharesave options over 105,776 (2018: 85,783) of the above shares were exercisable.

The fair value of the share options is measured at the grant date, using the Black-Scholes model and taking into account the terms and conditions upon which the instruments were granted.

The key inputs to the model are:

The expected life of the options has been estimated as six months beyond vesting date. Volatility has been calculated on a rolling three year period up to the week prior to grant. The dividend yield is calculated by applying dividends paid in the preceding 12 months to the share price at the grant date.

The cost of the options is recognised over the expected vesting period. The total credit for the year ended 30 April 2019 relating to employee share based payment plans was £1,178,000 (2018: charge of £1,219,000). The fair value of share options at 30 April 2019 to be amortised in future years was £1,538,000 (2018: £2,830,000).

All share based payments in both years are equity settled.

24. Commitments and contingencies

Operating lease commitments - land and buildings:

Operating lease commitments - vehicles, plant and equipment:

25. Capital commitments

26. Financial instruments and financial risk management objectives and policies

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

Credit risk

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

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

At 30 April 2019 there were no significant concentrations of credit risk (2018: £nil). The Group's maximum exposure to credit risk, gross of any collateral held, relating to its financial assets is equivalent to their carrying value. All financial assets have a fair value which is equal to their carrying value, as a consequence of their short maturity. The Group did not have any financial instruments that would mitigate the credit exposure arising from the financial assets designated at fair value through profit or loss in either the current or the preceding financial year.

Interest rate risk

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

Interest rate sensitivity

The Group's borrowings are largely denominated in Pounds Sterling and the Group is therefore exposed to a change in the relevant interest rate. With all other variables held constant, the impact of a reasonably possible increase in interest rates of 50 basis points (2018: 50 points) on that portion of borrowings affected would be to reduce the Group's profit before tax by £189,000 (2018: £132,000).

Foreign currency risk

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

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

Capital management

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

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

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

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

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

Liquidity risk

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

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

Estimation of fair values

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

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

27. Related party disclosures

Clicklink Logistics Limited (see note 15) is a supplier of logistics services to the Group. The Group provides certain resources to Clicklink, principally people and vehicles, under the terms of the joint venture agreement. Amounts charged for these resources are included in revenue.

Branton Court Stud LLP, in which Steve Parkin is a partner, receives management, recharge of expenditure and administration services from the Group. Additionally, in the current year, the Group recognised a credit from Branton Court Stud LLP of £977,000 in respect of Branton Court's contribution to costs incurred by the Group in respect of of a one-off event.

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

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

Knaresborough Investments Limited, a company controlled by Steve Parkin, receives management and administration services from the Group. 

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

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

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

Trust Electric Heating Limited, a supplier to the Group, shares a common director with Clipper Logistics plc.

Key management compensation is disclosed in note 5.

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

During the year, the Group entered into a framework agreement with Styles & Wood Limited, a company which shares common directors. A payment of £2.0 million was advanced in relation to the agreed works on 27 June 2018. The agreement was subsequently cancelled and the payment was returned by the 20 August 2018.

During the year, £46,000 was received from Steve Parkin in relation to repaying Clipper for personal expenditure incurred on a company credit card. At 30 April 2019 £4,000 was outstanding and this was settled on 26 July 2019

The Group advanced two petty cash amounts totalling £27,000 to David Hodkin in the year in exchange for personal cheques from David Hodkin. In both cases, there was a short period of time elapsing between David's withdrawal of the cash and Clipper's subsequent cashing of the cheque. As at 30 April 2019, £nil was outstanding.

During the year £590,000 was recharged to Branton Court Stud LLP for management time of Directors and other key management personnel in proportion to the time spent on non-Clipper related activities. (2018: £285,000 charged to Branton Court LLP and £285,000 charged to Knaresborough Investments Limited).

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

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

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

1. Amounts charged to Branton Court Stud LLP represent recharges of costs with no element of mark up.

28. Business combinations

28.1 Tesam Distribution Limited

On 24 May 2017 the Company acquired the entire issued share capital of Tesam Distribution Limited ("Tesam") in exchange for cash consideration. Tesam operated as a provider of a variety of warehousing and distribution services to the retail sector. With effect from 30 April 2018 the Tesam operations have been hived-up into Clipper Logistics plc.

Purchase consideration and cash flows:

Acquisition:

The goodwill of £1,320,000 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.

Professional fees and costs in relation to the acquisition were £159,000 and have been charged to the income statement.

28.2 RepairTech Limited

On 15 June 2017 the Company acquired the entire issued share capital of RepairTech Limited ("RepairTech") in exchange for cash consideration. RepairTech is a specialist provider of consumer electronic repair services based in Southam, Warwickshire.

Purchase consideration:

Acquisition:

The goodwill of £1,379,000 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.

Other intangible assets recognised consist of the acquired order book.

Professional fees and costs in relation to the acquisition were £62,000 and have been charged to the income statement.

29. Subsequent events

In April 2019, the Group entered into a series of contracts with a customer, which when combined represented a business combination in accordance with IFRS 3 'Business Combinations'. The acquisition consists of premises, assets and a workforce, together carrying out a logistics service business that will be outsourced to the Group. The business acquired is an unincorporated entity. Several areas required significant judgment by management, in particular that the transfer of employees under TUPE and the lease of the premises commenced only after the year end, limiting the ability of the Group to control the relevant activities of the acquired business. On balance the Group has concluded that the effective date of the business combination is 1 July 2019 and that this series of transactions should be reflected within the first half of the year ending 30 April 2020. This is when management have concluded that control has passed to the Group. The Group has carried out a provisional fair value exercise of the business combination, which will give rise to provisional 'negative goodwill' of £2,951,000. The 'negative goodwill' will be recognised within the Group income statement in the first half of the year ending 30 April 2020.

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

Purchase consideration and cash flows:

Acquisition:

As part of the series of transactions, the customer paid the Group consideration in return for the Group assuming certain potential liabilities. This resulted in the net consideration payable being less than the provisional fair value of net assets acquired, principally the customer relationship, which gave rise to 'negative goodwill'.

Professional fees and costs in relation to the acquisition are expected to not exceed £50,000.