Clipper Logistics plc Annual Report 2017

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FY2017 Annual Report · Clipper Logistics plc

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Annual Report
and Accounts 2017

By the
time you
read this

everything
will have
moved on…

Highlights of the Year

Group revenue

£340.1m

(2016: £290.3m)

+17.2%

2
3
4
.
8

2
0
1
.
2

1
0
6
.
7

Group EBIT*

£17.9m

(2016: £14.7m)

+21.8%

8
.
7

9
.
6

1
4
.
7

1
2
.
0

3
4
0
.
1

2
9
0
.
3

Group profit after tax

£12.5m

(2016: 10.3m)

+20.6%

1
7
.
9

3
.
8

2
.
8

1
2
.
5

1
0
.
3

7
.
3

2013

2014

2015

2016

2017

2013

2014

2015

2016

2017

2013

2014

2015

2016

2017

* 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.

Adjusted earnings per share*

Cash generated from operations

Dividend per share

12.5p

(2016: 10.3p)

+20.5%

8
.
4

7
.
0

5
.
7

£25.7m

(2016: £20.5m)

1
2
.
5

+25.2%

1
0
.
3

1
5
.
8

1
2
.
6

1
0
.
6

7.2p

(2016: 6.0p)

+20.0%

2
5
.
7

2
0
.
5

7
.
2

6
.
0

4
.
8

2013

2014

2015

2016

2017

2013

2014

2015

2016

2017

2015

2016

2017

Earnings per share in 2013, 2014 & 2015
were adjusted for the effect of certain
non-recurring items

Contents

Strategic Report

8 Understanding Clipper
10 Chairman’s Statement
12 Our Markets
16 Our Business Model
18 Our Strategy
20 Risk Management
21 Principal Risks and Uncertainties
23 Viability Statement
24 Our People
28 Sustainability
30 Operating and Financial Review

Governance

36 Board of Directors
38 Corporate Governance Report
42 Nomination Committee Report
43 Audit Committee Report
46 Directors’ Remuneration Report

– Implementation Report on Remuneration
– Directors’ Remuneration Policy (appendix)

60 Directors’ Report
64 Statement of Directors’ Responsibilities
in respect of the Annual Report and
the Financial Statements

Group Financial Statements

65 Independent Auditor’s Report
68 Group Income Statement
68 Group Statement of

Comprehensive Income

69 Group Statement of Financial Position
70 Group Statement of Changes in Equity
71 Group Statement of Cash Flows
72 Notes to the Group Financial Statements

Company Financial Statements

98 Company Statement of Financial Position
99 Company Statement of Changes in Equity

100 Notes to the Company
Financial Statements

112 Directors, Secretary, Registered &

Head Office and Advisors

V…but don’t
worry, our
success is
based on
us always
thinking
ahead.

Consumer expectations are growing,
financial pressures are slowing demand
and competition is increasing. All these
factors combine to give consumers more
choice and to make the retail sector more
competitive and complicated than ever before.

We understand just how business-critical
logistics is. That’s why we’re constantly
challenging conventions to improve clients’
business performance and help them meet
the changing dynamics of retail with cutting-
edge logistics management solutions.

VAnnual Report and Accounts 2017Clipper Logistics plc
Next day
delivery
is a real
challenge...

Over the past couple
of years, there has been
a market shift towards
“Click and Collect”.
Many retailers report that
over 60% of their online
orders are collected by
consumers, rather than
home delivered.

vhttp://www.clippergroup.co.uk/about-us/logistics-evolved/ Clipper Logistics plc ...but our
Click and
Collect
systems
enable
retailers
to deliver
outstanding
customer
service.

vAnnual Report and Accounts 2017Clipper Logistics plc
In fashion
today, returns
are business
critical...

Returns are a real and
growing challenge.
Overall online return
rates are between
25% and 40% in
fashion and footwear.

http://www.clippergroup.co.uk/about-us/logistics-evolved/ Clipper Logistics plc ...but with
Boomerang,
retailers get
what they
need, where
they need
it and when
they need it.

We have taken on the growing problem
of returns management with an agile
and cost-effective solution – Boomerang.
Whether it’s fashion retail, high-value or
general merchandise, Boomerang takes
cost, complexity and risk out of your reverse
logistics process.

It enables our customers to grow and trade
more competitively.

Our work with companies such as ASOS,
SuperGroup and John Lewis, demonstrates
a high level of expertise in managing the
returns process smoothly and efficiently.

Annual Report and Accounts 2017Clipper Logistics plc
For our
customers,
reputation
is everything...

Retailers need to stay
ahead of their competition.
Our in-house experts deliver
customer-specific solutions
relevant to each retailer’s
needs. Our multi-user
sites give smaller retailers
scale, providing access
to resources and market-
leading project expertise
which would otherwise
be out of their reach.

http://www.clippergroup.co.uk/about-us/logistics-evolved/ Clipper Logistics plc ...but we
have the size
and ability
to tackle
any project,
and the
speed and
agility to
act quickly.

Annual Report and Accounts 2017Clipper Logistics plc
Understanding Clipper

Whoosh!
That was the sound
of now passing by.

The speed of change is phenomenal
In e-fulfilment & returns management
services, the logistics requirements of
retailers have changed dramatically:

— 22% of non-food retail sales now take
place online in the UK (source: ONS).

— Effective management of returns is

crucial to protecting a retailer’s brand.

— In clothing and footwear, between

25% and 40% of products sold online
are returned (various sources).

— Click and Collect: over the last three
years, the proportion of online orders
collected in-store has increased from
10% to over 65% for many retailers
(various sources).

Legislative, economic, competitive
and other influences mean that our
customers need a retail-focused
logistics provider to enable them to
continually adapt and evolve to
address these challenges. We have
the credibility and are acknowledged
as a thought leader in the sector.

We’re large and able
We’re experts in retail and high-
value logistics. We have the facilities,
the processes, the experience, the
fleet, and, most importantly, the people
to deliver on contracts of all sizes,
and we see the bigger picture without
neglecting the day-to-day detail.

We’re fast and agile
We have a flexible, ‘flat’ organisational
structure that gives customers direct
access to our senior team. We have
experts in warehouse design, system
design and testing, project management
and implementation, and the
operational management to ensure
rapid delivery of effective solutions.

We’re big and small
Our bespoke approach sees us work
with market leaders, small to medium-
sized enterprises (SMEs), start-ups and
the UK’s fastest emerging brands –
and we deliver the same flexibility
and exceptional service to every
client regardless of their size.

The Group operates from 44 locations
comprising over 8.3 million square feet.
It now has over 3,900 employees,
excluding agency staff.

Reporting segments
The results of the Group are reported
in the following segments:

— Value-added logistics services,

comprising the following business
activities:
— E-fulfilment & returns management

services;

— Non e-fulfilment logistics; and
— Central logistics overheads, being
those costs of the business which
are not meaningfully allocable
to the above business activities,
including directorate, advertising
and promotion, accounting, IT
and the solutions development
team; and

— Commercial vehicles.

Whilst not a segment in its own right,
the Group separately reports
head office costs, representing
the costs of the Executive Chairman,
Chief Financial Officer, Deputy Chief
Financial Officer, Company Secretary,
Non-Executive Directors and plc
compliance costs.

Segment and business activity details
E-fulfilment & returns
management services
This business activity includes the
receipt, warehousing, value-add
processing, 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 the management
of the returns process for customers.

At no time does Clipper take ownership
of customers’ products. The Company
owns the Boomerang brand, under
which returns of products are managed
on behalf of retailers.

During the 2017 financial year, Clipper
entered into a joint venture with
John Lewis, Clicklink Logistics Limited,
(“Clicklink”), which operates a
shared-user, retailer-focused Click and
Collect solution to capitalise on rapid
transition to in-store collections.

Clipper anticipates rapid growth in
this segment, reflecting continuing
migration to online retailing due to
the structural changes taking place
in the retail sector. It is expected that
the proportion of non-food retail sales
taking place online will grow from 22%
currently to 33% by 2022 (source: PwC).

The results of Servicecare are
included in the e-fulfilment &
returns management category.

Strategic Report Clipper Logistics plc Our investment case

1 Sector focus
— Clipper is focused on the provision
of value-added logistics services
to retailers.

— By being thought leaders in the
sector, we identify trends and
opportunities ahead of the
curve and develop products
and services to address them.

— We also have a consistently

profitable and complementary
commercial vehicles business.

2 Highly attractive presence

in online retail

— Structural growth market: in non-food

retail, the penetration of online is
expected to grow from its current level
of 22% of total sales to 33% by 2022.

— We are leaders in this sector,

providing e-fulfilment solutions,
specialised returns management
services through our Boomerang
brand, which has been enhanced
with the acquisitions of Servicecare
and, after the financial year-end,
RepairTech (see note 29 to the
Group Financial Statements).
— Our Clicklink Click and Collect
joint venture provides a service
dedicated to the needs of retailers.

3 Attractive business model
— Value-added consultancy model
with strategic level relationships.
— High level of long-term, open book/

minimum volume guarantee
contracts in UK logistics.

— Highly visible profit and cashflows.
— High levels of cash conversion.
— Capital expenditure predominantly

on behalf of major open book
customers, with corresponding
obligation to repay Clipper over
the term of the contract.

— Complementary commercial

vehicles business is consistently
profitable and cash generative.

4 Clear growth strategy
— Organic growth in all sectors,
but especially e-commerce
related activities.
— European expansion.
— Extension of Boomerang through

the addition of RepairTech.

— Introduction of Click and
Collect through Clicklink.

— Continued research for value-
adding, earnings-accretive
acquisition opportunities.

5 Strong financial profile
— Attractive working capital profile.
— Operating profit growth coupled

with high cash conversion.
— Sustainable dividend policy

at circa 60% of after-tax profits.

Logistics depots
Commercial vehicle sites

We operate from 44 locations
comprising over 8.3 million
square feet.

Non e-fulfilment logistics
This business activity includes receipt,
warehousing, value-add processing,
stock management, picking, packing
and distribution of products on behalf
of customers. Clipper does not take
ownership of customers’ products at
any stage.

Within this category, Clipper handles
high value products, including tobacco,
alcohol and designer clothing. Clipper
also undertakes traditional retail support
services including processing, storage
and distribution of products, particularly
fashion, to high-street retailers.

Central logistics overheads
Central logistics overheads are the
costs of support services specific to the
logistics services segment, but which
are impractical to allocate between
the sub-segment business activities.

Commercial vehicles
The commercial vehicles business,
Northern Commercials, operates
Iveco and Fiat commercial vehicle
dealerships from six locations, together
with three sub-dealerships. It sells new
and used vehicles, provides servicing
and repair facilities, and sells parts.

Vehicles sold and serviced range
from small light commercial vans,
through to articulated tractor units.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Chairman’s Statement
As Chairman of Clipper Logistics plc,
I am pleased to present our 2017
financial results following the
third anniversary of our listing on
the Main Market of the London
Stock Exchange in June 2014.

Steve Parkin
Executive Chairman

Our third year as a listed company
has seen a continuation of our
historical track record of achieving
significant organic growth. Our focus
on delivering cost-effective, innovative
solutions to our blue-chip client base,
predominantly in the retail sector,
and our continued investment in quality
people to implement sector-leading
projects, mean that we are confident in
our ability to continue this momentum.

The Group has achieved a strong
financial performance for the year
under review, and has seen significant
new contracts commence with
high profile retailers, including those
with Halfords and Links of London.
In addition, our commercial vehicles
division continues to perform very well.

We have formalised our joint venture
with John Lewis, for the provision of a
dedicated Click and Collect service
focused on addressing the specific
requirements of retailers. The joint venture
entity, Clicklink Logistics Limited, is owned
on a 50/50 basis by John Lewis and
Clipper, and during the year Clicklink
has extended its service coverage to
the entire Waitrose estate. We are
extending the service to other retailers
on a shared-user platform, and initial
indications of uptake are encouraging.

Following the end of the financial
year, we announced the acquisition of
Tesam Distribution Limited (in May 2017),
and the acquisition of RepairTech Limited
(in June 2017). Both these acquisitions are
expected to be immediately earnings-

enhancing, and demonstrate our ability
to target acquisitions which extend the
breadth of both our customer base
and our service offering, and enhance
returns to our shareholders. I would like
to take this opportunity to welcome the
colleagues and management teams
of both businesses to the Group.

Our goal remains the identification
of key trends in the sectors we serve,
and the development of new services,
processes and solutions that address
the challenges faced by our customers.
Our unrivalled understanding of the
dynamics of the whole retail sector,
and in particular e-retail and multi
and omni-channel retailing, provides
the Group with exceptionally strong
strategic positioning for the future.

Strategic Report Clipper Logistics plc We develop new services,
processes and solutions
that address the
challenges faced
by our customers.

Group revenue

£340.1m
+17.2%

Group EBIT*

£17.9m
+21.8%

We remain confident of our ability to
evolve and develop, and to continue to
deliver strong returns to our shareholders.

Group results
Group revenues increased by 17.2% to
£340.1 million for the year to 30 April
2017 (2016: £290.3 million) and Group
EBIT increased by 21.8% to £17.9 million
(2016: £14.7 million).

Diluted earnings per share were
12.3 pence for the year to 30 April 2017
(2016: 10.3 pence), an increase of 19.4%.

Basic earnings per share were 12.5 pence
(2016: 10.3 pence), an increase of 20.5%.

Net debt was £25.1 million at the year
end (2016: £18.8 million), in line with our
expectations, after planned investment in
capital projects to support new contracts
(much of which involves a back-to-
back commitment from customers
to reimburse this capital over the duration
of their contract). Net debt is defined as
borrowings, less cash, cash equivalents
and non-current financial assets (see
note 20 to the Financial Statements).

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 well-established track
record of identifying areas for innovation
and value-added services within the
sectors we serve, and for delivering on
commitments to our customers.

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

Sean Fahey has decided to retire from
the Group and stepped down as a
director with effect from 28 April 2017.
I would particularly like to thank Sean
for his significant contribution to the
growth of the Group over the last
25 years.

Governance
The Group is proud of its commitment
to high levels of corporate governance.
Alongside the executive management
team of Tony Mannix (CEO), David Hodkin
(CFO) and me, the Company benefits
from the combined experience of its
Non-Executive Directors: Ron Series
(appointed Senior Independent
Non-Executive Director in July 2017),
Stephen Robertson and Mike Russell.

Paul Hampden Smith was Senior
Independent Non-Executive Director
during the year ended 30 April 2017,
but stood down on 12 July 2017.

Dividends
The Board is recommending a final
dividend of 4.8 pence per share,
making a total dividend in respect
of the year ended 30 April 2017 of
7.2 pence per share (2016: 6.0 pence),
an increase of 20.0%.

The proposed final dividend, if
approved by shareholders, will
be paid on 29 September 2017 to
shareholders on the register at the
close of business on 8 September 2017.

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. The further
development of our new Click and
Collect proposition, together with
recent contract wins and a strong
new business pipeline, place the
Group in an excellent position to
achieve further growth, both in the
UK and internationally.

In addition, the acquisitions of Tesam
Distribution Limited and RepairTech
Limited after the end of the financial
year are expected to be immediately
earnings-enhancing in the year to
30 April 2018.

I look forward to working with all
of the Group’s stakeholders as we
continue to develop the business.

Steve Parkin
Executive Chairman

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Our Markets
The Group serves markets in the
UK – where 89% of Group revenue
is generated – and in mainland
Europe, primarily Germany.

Where we
generate our
revenue

UK retail

62% of Group revenue is derived
from activities in the UK retail
market. Within this market, we
operate across e-commerce and
non e-commerce, in warehousing
and transport and primarily in
fashion and general merchandise.

Size and growth of market
The UK retail market (excluding food
and automotive fuel) was worth
£196.4 billion in 2016, having grown
from £187.7 billion in 2015, growth of
4.6% (source: ONS). Within this, whilst
traditional bricks and mortar retail stores
still account for the majority of retail
sales in the UK, internet sales are
growing at a much faster rate.

According to IMRG, the UK’s total
e-commerce market (which includes
food and travel) has grown from £0.8
billion in 2000 to £114 billion in 2015 and
£133 billion in 2016 (17% annual growth),
with a further 14% growth forecast
in 2017. The Group’s strength in
e-commerce sees us well positioned to
take advantage of this market growth.

1 Logistics

73%

2 Commercial vehicles 27%

A UK retail
B Other EU logistics

85%
15%

C UK sales
D UK aftersales

65%
35%

UK retail market – size (£bn)

UK retail market – share (% share of retail)

200

190

180

170

160

150

171

185

188

196

100

2013

2014

2015

2016

2014

2015

2016

Source: ONS

Internet

Store

Strategic Report Clipper Logistics plc Recent market trends
Over the past year, the UK retail market
has seen various developments, each
bringing its own logistical challenges
to retailers. Those retailers who fail to
adapt or who fail to adapt quickly
can soon find themselves left behind.

Consumer behaviour is continuing
to drive many of the market trends:

— A continuation of the trend towards
omni-channel with consumers often
switching between online and
in-store channels to purchase and
return goods. To illustrate the scale of
the challenge, 30% of multichannel
women’s fashion purchases are
currently returned (source: Clear
Returns). Moreover, a recent KPMG
survey observed that 34% of
respondents who purchased online
opted to return these goods in-store.
These statistics highlights the need for
retailers to ensure all of their reverse
logistics channels:
i. function seamlessly in order to
protect customer experience.
The Connected Consumer Report
by MuleSoft concludes that 61% of
consumers would change their
retailer due to a disconnected
shopping experience. Retailers are
increasingly focusing on ensuring
that returns management is
handled effectively so that their
brands are not damaged by
customers using social media to
comment unfavourably on their
experience. As well as an efficient
returns service, a free returns
service is also vital. A free returns
service was once regarded as a
bonus by consumers but is now
simply regarded as standard; and

ii. efficiently feed back into their

primary Warehouse Management
Systems. Improved efficiency
reduces the amount of working
capital tied up and protects
against margin dilution,
particularly when returned Black

Friday stock can be back on sale
at full price ready for the Christmas
peak. Clear Returns estimated
that a fifth of Black Friday 2016
purchases would be returned,
and that £978 million of retailers’
stock is tied up in the returns cycle
every day during this period.
— Purchases made on a mobile device
(tablets and smartphones) increased
by 28.5% year-on-year in 2016. Within
“mobile”, purchases made on a
smartphone are up 79.1% whilst those
made on a tablet are up 6.8%, with
smartphones peaking at 54% share
of mobile at the end of 2016, the
highest ever share (sources: all IMRG).
This increased mobility means
consumers have total control over
when in the day to complete a
purchase and we have seen a
change in online temporal buying
patterns as a result; 8pm-9pm is now
the most popular hour of the day for
online purchases (source: KPMG,
Retail Survey 2017). This means that
even later picking and packing
cut-off times are needed in the
warehouse for retailers to be able
to deliver against their customers’
expectation for next day delivery
and collection. Consumers’ desire
for next day is also increasing, with
August 2016 seeing the “next day”
delivery option exceeding the
“economy” option for the first time
(source: IMRG).

There have been several retailer-driven
changes too, including:

— improved Click and Collect offerings.
Of UK Click and Collect users, 43 per
cent experienced a service issue
in the year to April 2017, down from
45 per cent in 2016 and 47 per cent
in 2015 (source: YouGov poll). It is
vital that retailers continue to make
improvements in this area since Click
and Collect drives footfall into store;
in the same poll, 23% of users stated
they had made an additional

UK e-commerce market (£bn)

purchase in-store when picking up
a Click and Collect order. Indeed,
retailers have redesigned store
layouts not only to tempt Click and
Collect customers with in-store offers
on their journey through the store,
but by locating changing rooms by
the Click and Collect collection
points in an attempt to try to reduce
the incidence (and therefore the
cost) of returns;

— retailers introducing minimum order
thresholds in order to mitigate the
impact of the increasing logistical
costs of an ever more complex
omni-channel market. Indeed, 62%
of CEOs plan to raise minimum order
thresholds in 2017. Consumers have,
in the main, responded favourably
to this, with 75% of UK adults willing
to exceed a minimum order
value to qualify for free delivery
(sources: all JDA/PwC); and

— retailers following the lead of the
discounters in buying-in months
in advance of the Black Friday
promotional period and only
discounting these specific bought-in
lines, in order to protect against
devaluing core brands. The logistical
challenges facing the retail market
are always at their greatest around
peak and this recent change brings
yet another complexity.

External factors have also impacted
the market, including:

— upward pressure on the costs

of labour through a combination
of factors: the introduction of
the National Living Wage and,
shortly before the year end, the
Apprenticeship Levy and the
squeeze on the availability of
Eastern European workers due
to Brexit uncertainties; and

— macro-economic factors, in part

driven by Brexit and related currency
impacts, driving up the cost of
imports from the Far East and
tightening margins. Conversely,
weaker Pounds Sterling has also
driven an increase in the number
of UK e-commerce orders going
overseas (source: IMRG).

160

120

CAGR of 13.5%

14% growth
forecast

2013

2014

2015

2016

2017

Source: IMRG

Trend

Market size

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Our Markets continued

Developing market trends
In the immediate future, we expect
to see the market continue along
its evolutionary path. As a market
leader in the provision of services to
support retailers’ online and returns
management challenges, the Group
is strategically well-placed to capitalise
on the double digit growth expected
in this sector of the market.

We expect consumers to place even
greater importance on the returns
experience as a key part of their buying
decision. Clipper’s Boomerang offering
is a tried and tested returns offering
which consistently exceeds consumers’
expectations: it takes, on average,
six days for a UK consumer to receive
reimbursement when returning via
online methods; in the year ended
30 April 2017, Clipper sanctioned the
release of 99.3% of refunds within 24
hours of receiving the stock into the
warehouse. In addition to the positive
customer goodwill this generates, an
efficient returns process ensures stock
is returned to a saleable state quickly,
releasing cash tied up in working
capital, and reduces the risk of stock
obsolescence. Boomerang can easily
be linked with Clicklink, Clipper’s Click
and Collect joint venture with John
Lewis, to create a full ‘360 degree’
supply chain and reverse supply
chain process.

From the retailer’s point of view too,
we believe there is further progress to
be made in fully capitalising on reverse
logistics opportunities and freeing up
working capital. The reverse supply
chain working capital cycle needs to
be shortened, returned goods need to
be reverted to prime condition quickly
and readied for sale, and graded stock
needs to be identified and liquidated
quickly whilst ensuring the brand is not
devalued. Clipper’s Boomerang,
Servicecare, Genesis and Clicklink
product offerings can work hand-in-
hand to maximise these benefits
for retailers.

We expect to see continued investment
in automated operations, not only in
tracking and stock checking, but also
in automated warehousing. The capital
outlay required for such automation
programmes can often appear to be
beyond the reach of smaller retailers.
Clipper designs shared-use, modular
solutions for these smaller retailers at
many of its facilities to make these
cutting-edge capital projects much
more accessible, whilst protecting the
customer’s own brand.

Because of the fixed costs associated
with setting up a UK-wide, next day Click
and Collect network, smaller retailers
have historically not been able to offer
such a cost-effective solution to their
customers. Clipper’s award-winning
Clicklink service was conceived with
John Lewis as a genuine multi-user Click
and Collect platform, designed with the
retailer front of mind at every stage of the
process (e.g. timed delivery slots, “retail
ready” cages, full track-and-traceability).
We expect both small and large retailers
to embrace Click and Collect in the
coming years as consumers’ preference
for this service continues to increase.
As the Clicklink network operates seven
days a week, it creates the opportunity
for retailers to offer into store next-day
delivery options for the consumer,
thereby maximising sales.

Despite the certainty that ‘Brexit’ will
happen, we have seen little evidence
that retailers are ready. Research from
Global-e suggests that 51% of retailers
expect, not unreasonably in our
opinion, that cross-border trading
will become more complex when
the UK leaves the EU. And despite this
acceptance, by February 2017, 68% of
British retailers had no Brexit plans in
place. Clipper has a range of ancillary
services which can assist retailers
through this evolving process, including
port deconsolidation services, pre-retail
activities and customs warehousing.

Commercial vehicles

27% of Group revenues are derived from
the UK commercial vehicles market.

Clipper’s commercial vehicles business
sells and maintains Iveco and Fiat
vehicles, principally in certain
geographical territories in the UK under
the terms of its dealership licences.

Clipper derives the majority of its
commercial vehicles revenues from
new and used vehicle sales.

Whilst market size figures are not readily
available for the specific geographical
markets in which we operate, UK-wide
new registration figures are readily
available, and these provide a useful
indicator of market growth and
contraction. The market sectors in
which the commercial vehicles division
operates experienced registrations
growth of 1.5% in the calendar year
2016 compared to the prior year,
as shown in Table 1.

Since all tractor units sold by Northern
Commercials come with a two year
repair and maintenance contract as
standard, new vehicle registrations
also provide a degree of certainty
over future aftersales revenue.

In terms of other aftersales activity,
again market data is not readily
available. However, Table 2 shows how
the number of commercial vehicles on
UK roads has changed over the most
recent two calendar years. Since most
commercial vehicles on UK roads are
required to be inspected every six
weeks under UK law, commercial
vehicle activity on the roads provides
a useful proxy for the relative size of
the aftersales market in the UK.

Strategic Report Clipper Logistics plc 2015

2016

% change

371,830

375,687

22,976

20,922

26,882

19,346

415,728

421,915

+1.0%

+17.0%

-7.5%

+1.5%

2015

2016

% change

3,842,120

4,007,331

569,682

581,645

4,411,802

4,588,976

+4.3%

+2.1%

+4.0%

Table 1

New commercial vehicle registrations

Light commercial vehicles up to 3.5t

Rigid

Articulated

Source: SMMT

Table 2

Commercial vehicles on UK roads

Vans

Trucks

Source: SMMT

Other markets

Other EU logistics
We have operated in the logistics
industry for a number of years in
Germany and we have recently
expanded into Poland. Both businesses
primarily serve the German market with
only limited export activities. Our
businesses primarily serve the fashion
retail market, although we also provide
transport and warehousing services for
customers in various other markets. Our
recent strategic business development
activity has been focused in the
e-commerce retail market for a number
of reasons: alignment with the UK
business; cross-border leveraging of
customers; and to capitalise on the
higher growth areas of the German
market. The German retail e-commerce
market is some years behind the UK
in terms of size, but we expect the
e-commerce trends to largely replicate
those of the UK. In Germany, online
accounted for an overall share of trade
of 14.0% in 2016, up from 12.0% in 2015
and 10.0% in 2014 (source: Twenga).

Clipper’s infrastructure is well placed
to capitalise on this market growth.

It is important to recognise the cultural
differences between the geographical
markets in which we operate. For
example, there are differences in
consumer preference between the
UK retail and German retail market.
A recent Metapack survey reveals
two such differences:

— Click and Collect is popular with

68% of customers in the UK, but with
only 32% of customers in Germany.

— German consumers also utilise

delivery-to-locker services. This is
popular with 31% of German
consumers; the popularity of this
service in the UK is only 10%.

Differences such as these present
logistical challenges to retailers and
highlight that it is important that
solutions providers such as Clipper do
not adopt a “one size fits all” mentality,
but instead design solutions which
address the specific needs of the
retailer, the consumer and the market.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report

Our Business Model
Clipper delivers a broad range of value-add
logistics services tailored to the emerging
and future needs of our customers.

Key inputs

How we create value

Clipper provides customers with
e-commerce fulfilment (including returns)
and non e-commerce fulfilment logistics
services. We operate open book
contract terms for 67% of our customers,
giving us a high level of contractual
certainty. We also operate closed book
contracts for customers, many of whom
we have worked with for several years.

In order to ensure retention of customer
contracts, we continually draw on our
team’s expertise to drive innovation in our
operations. This enables us to retain our
market-leading cost competitive position
and continue to strengthen our brand.

Clipper has developed specialist
services (e.g. pre-retailing services and
reprocessing of garments) to support
our customers in their ever-complex
supply chains and to ensure that
product is ready for sale in the most
efficient and cost-effective manner.

As the challenges of the retail
landscape change to become more
omni-channel focused, developing
innovative solutions like Clicklink and
Boomerang to support our customers
has led to Clipper retaining customers
on a long-term basis as well as winning
new business every year.

The Clipper Way...

…is how we approach all customer briefs. It translates instinct into action and
brings clarity and consistency to the way we work. It’s a straightforward, insightful
and effective approach, and our people are recognised and rewarded for their
ability to apply and demonstrate “The Clipper Way” in every area of our operation.

1
Opportunity
How can
we help?

2
Exploration
We analyse and
identify your business
challenges

3
Solution planning
We design a high
quality, cost-effective
solution for your
needs

4
Implementation
We create and
implement a bespoke
logistics solution

Clipper has a strong brand, long-
standing customer relationships and
an experienced team, which combine
to deliver thought leadership and
innovation in the logistics sector.

Clipper’s focus on the provision of
value-add services to retailers at a
competitive cost has resulted in a
number of long-standing contractual
arrangements with major retailers
such as Asda, ASOS, John Lewis,
Morrisons and SuperGroup.

We work in trusted partnership with
our customers to develop and rapidly
deploy solutions to the challenges
they face. Our team is focused
on addressing tomorrow’s challenges
today and we have strengthened
the team during the year to include
expertise in warehouse automation.

We seek to efficiently use funds
obtained through financing or
generated from operations or
investments. A high degree of
contractual certainty underpins
financial predictability and stability.

Strategic Report Clipper Logistics plc
What makes us different
Clipper is not a generalist 3PL; we are
a retail solutions provider and we are
a thought leader in the retail space.

Clipper understands the need for
agility and can support customers
in implementing rapid change and
start-up operations. Unlike many of
our competitors, our customer portfolio
comprises both large omni-channel
operations as well as shared user sites
with smaller retailers. We pride ourselves
on being able to operate across the
entire retail sector, bringing world
class solutions to large and small
retailers alike.

In addition, our commercial vehicles
division is robustly profitable and cash
generative – its profitability driven by
higher margin aftersales activity,
which is underpinned by legal
requirements governing the inspection
of commercial vehicles.

Whilst Northern Commercials is not
heavily dependent on the logistics
division of the Group, it provides
Clipper with flexibility over fleet
procurement, and margins on
servicing activity are retained
within the Group.

Improve
– Business performance
improvement and
implementation
– Win/win analysis

Revise
– Identify actions
– Process improvements
– Reporting and analysis

Review
– Daily/Monthly/
Annually

We do not believe that ‘one size fits all’.
Clipper retains its entrepreneurial flair
and we work with customers to find
innovative and fit-for-purpose solutions
that help them stay one step ahead of
the market, as illustrated by our joint
venture with John Lewis. Our people,
our breadth of experience in retail and
our approach to innovation means
that we are a new breed of logistics
company, bringing true differentiation
to our customers.

How the value is shared

Shareholders
High growth market sectors, an
attractive business model and a
clear growth strategy combine to
give operating profit growth and
good cash conversion, resulting in
dividend distributions of circa 60%.

Employees
Over 3,900 employees have access
to attractive career progression in
a market-leading logistics business.
The Sharesave scheme enables
employees to share in the financial
success of the business.

Customers
Blue-chip customers in logistics and
commercial vehicles can rely on
Clipper’s established reputation
and high levels of service, particularly
when they need it most through peak
trading periods.

Suppliers
Clipper benefits from its relationships,
built over many years, with large and
small trusted partners and suppliers.
Clipper’s diverse supply base de-risks
Clipper and its customers from
fluctuations in market conditions.

Communities
Clipper’s Corporate Social
Responsibility agenda benefits local
communities by providing employment,
opportunities, reinvesting in the local
communities through sponsorship and
developing green initiatives.

Our business model
in action: ASOS Bridal

What we did
When ASOS launched their bridal
range in 2016, they needed a
robust returns solution. Having
selected us to be their logistics
provider, we began working
together to design a bespoke
solution, perfectly tailored to the
demands of handling delicate,
high value products.

The results
Through this returns initiative,
Clipper and ASOS have salvaged
an average of 68.9% of ‘faulty’
bridal wear returns over a
six-month period (to the end
of March 2017).

The fast turnaround of products
at the Clipper Selby site means
that returned products can
be quickly processed, repaired
if necessary, returned to the
supply inventory and resold.

68.9%

Faulty bridalwear salvaged.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Our Strategy
In order to generate and preserve long-term
value for shareholders, Clipper has developed
the four key growth strategies detailed below.

Build on market-leading
customer proposition to
expand the customer base

Develop new, complementary
products and services

Continue European

expansion

Explore acquisition

opportunities

How will this be achieved?
Through a continued focus on the provision of bespoke,
retail-specific logistics solutions, including retail store
support and high value product logistics, but with
particular focus on the e-fulfilment & returns
management segment of the retail market.

By utilising Clipper’s best-in-class offering and extensive
implementation expertise to capitalise on the long-term
structural growth drivers within the online retail market
and the increasing logistical complexities therein.

By taking advantage of growth opportunities in the retail
logistics sector, where there is the opportunity to provide
innovative solutions to customers that are also profitable
for the Group.

Performance
The full-year benefit was realised from contracts that
went live during the previous year with Browns, M&Co,
Pep&Co and Ireland’s largest retailer.

New contracts went live in the year with John Lewis
(pre-retail and returns), Kidly, Flyers, Links of London, Inditex.
Secret Sales, Halfords and Pretty Green. New contracts
have been secured which will commence in the year to
30 April 2018, including increased services for Halfords.

Further details of the above contract wins can be found
in the Operating and Financial Review on pages 30 to 35.

What’s next?
Clipper has an extensive potential customer pipeline,
and will continue to work with these prospects to secure
further new contract wins.

The successful integration of Servicecare and RepairTech
will continue to enable the Group to further enhance its
customer proposition and expand the customer base.

How will this be achieved?
By continuing to invest in new product and service offerings
which will be value-enhancing to Clipper’s existing and
future customer base.

Performance
Clipper’s returns management services brand Boomerang
saw another successful year with approximately 89% of
product successfully returned to prime stock at first pass.

Clipper has been developing its Click and Collect offering
in collaboration with John Lewis, as well as setting up an
Ancillary Distribution Centre for John Lewis to provide a wider
range of services. The full impact of the Ancillary Distribution
Centre project is not anticipated to be realised until the year
ending 30 April 2018.

Clipper has commenced work on mechanisation and semi-
automation projects to further enhance our service offering.
The full benefit of these will be seen in the coming years.

Further details of the above projects can be found in
the Operating and Financial Review on pages 30 to 35.

What’s next?
Clipper will focus on the successful implementation of its
mechanisation/semi-automation and Click and Collect
projects, and on expanding these services to a wider
customer base (both existing and new customers).

Clipper will continue to innovate and develop solutions
for the problems that retailers face in the ever-changing
retail environment.

How will this be achieved?

Through development of Clipper’s operations in

By considering further acquisitions which are considered

Germany, which consist primarily of retail logistics

value-enhancing to the Group’s client base, market

and transport solutions.

By utilising its existing expertise in e-fulfilment in the more

developed UK online retail market, to assist both mainland

European retailers to move online, and UK retailers to expand

penetration and/or service lines and where the Group

can use its existing expertise, implementation and

delivery platform, scale and reach to generate synergies

and increase profitability.

into Europe – the latter further underpinned by Clipper’s strong

By considering bolt-on acquisitions which provide a

customer relationships and reputation with UK retailers (both

platform for it to take its core technical expertise into

pure-play e-tailers and multichannel high street retailers).

new, adjacent markets.

Through considering other European locations for potential

Performance

We have focused on consolidating the activities of the prior

of our strong business pipeline.

Whilst no acquisitions were undertaken during the year,

the Group acquired Tesam Distribution Limited in May 2017

and RepairTech Limited in June 2017. These acquisitions

coupled with our planned investment in additional

capacity will provide further headroom for the delivery

What’s next

Clipper will continue to explore acquisition opportunities

that enhance shareholder value.

opportunities.

Performance

The Group continued to benefit from operations in Europe

under the Boomerang brand.

year to create a sound platform for the future. We have

appointed a new Managing Director for our mainland

European operations in the year. We have commenced

two new significant customer operations from Kempen,

Germany, and Poznan, Poland.

Further details of the above contract wins can be found

in the Operating and Financial Review on pages 30 to 35.

What’s next?

In the medium term, Clipper will continue to seek opportunities

with new and existing customers to provide services in

Germany, Poland and Ireland, and will consider other strategic

mainland European locations for potential expansion.

Strategic Report Clipper Logistics plc Build on market-leading

customer proposition to

expand the customer base

Develop new, complementary

products and services

Continue European
expansion

Explore acquisition
opportunities

How will this be achieved?

Through a continued focus on the provision of bespoke,

By continuing to invest in new product and service offerings

retail-specific logistics solutions, including retail store

which will be value-enhancing to Clipper’s existing and

support and high value product logistics, but with

future customer base.

particular focus on the e-fulfilment & returns

management segment of the retail market.

Performance

Clipper’s returns management services brand Boomerang

By utilising Clipper’s best-in-class offering and extensive

saw another successful year with approximately 89% of

implementation expertise to capitalise on the long-term

product successfully returned to prime stock at first pass.

structural growth drivers within the online retail market

and the increasing logistical complexities therein.

Clipper has been developing its Click and Collect offering

in collaboration with John Lewis, as well as setting up an

By taking advantage of growth opportunities in the retail

Ancillary Distribution Centre for John Lewis to provide a wider

logistics sector, where there is the opportunity to provide

range of services. The full impact of the Ancillary Distribution

innovative solutions to customers that are also profitable

Centre project is not anticipated to be realised until the year

for the Group.

Performance

ending 30 April 2018.

Clipper has commenced work on mechanisation and semi-

The full-year benefit was realised from contracts that

automation projects to further enhance our service offering.

went live during the previous year with Browns, M&Co,

The full benefit of these will be seen in the coming years.

Pep&Co and Ireland’s largest retailer.

New contracts went live in the year with John Lewis

(pre-retail and returns), Kidly, Flyers, Links of London, Inditex.

Secret Sales, Halfords and Pretty Green. New contracts

have been secured which will commence in the year to

30 April 2018, including increased services for Halfords.

Further details of the above contract wins can be found

in the Operating and Financial Review on pages 30 to 35.

Further details of the above projects can be found in

the Operating and Financial Review on pages 30 to 35.

What’s next?

Clipper will focus on the successful implementation of its

mechanisation/semi-automation and Click and Collect

projects, and on expanding these services to a wider

customer base (both existing and new customers).

Clipper will continue to innovate and develop solutions

for the problems that retailers face in the ever-changing

What’s next?

Clipper has an extensive potential customer pipeline,

retail environment.

and will continue to work with these prospects to secure

further new contract wins.

The successful integration of Servicecare and RepairTech

will continue to enable the Group to further enhance its

customer proposition and expand the customer base.

How will this be achieved?
By considering further acquisitions which are considered
value-enhancing to the Group’s client base, market
penetration and/or service lines and where the Group
can use its existing expertise, implementation and
delivery platform, scale and reach to generate synergies
and increase profitability.

By considering bolt-on acquisitions which provide a
platform for it to take its core technical expertise into
new, adjacent markets.

Performance
Whilst no acquisitions were undertaken during the year,
the Group acquired Tesam Distribution Limited in May 2017
and RepairTech Limited in June 2017. These acquisitions
coupled with our planned investment in additional
capacity will provide further headroom for the delivery
of our strong business pipeline.

What’s next
Clipper will continue to explore acquisition opportunities
that enhance shareholder value.

How will this be achieved?
Through development of Clipper’s operations in
Germany, which consist primarily of retail logistics
and transport solutions.

By utilising its existing expertise in e-fulfilment in the more
developed UK online retail market, to assist both mainland
European retailers to move online, and UK retailers to expand
into Europe – the latter further underpinned by Clipper’s strong
customer relationships and reputation with UK retailers (both
pure-play e-tailers and multichannel high street retailers).

Through considering other European locations for potential
opportunities.

Performance
The Group continued to benefit from operations in Europe
under the Boomerang brand.

We have focused on consolidating the activities of the prior
year to create a sound platform for the future. We have
appointed a new Managing Director for our mainland
European operations in the year. We have commenced
two new significant customer operations from Kempen,
Germany, and Poznan, Poland.

Further details of the above contract wins can be found
in the Operating and Financial Review on pages 30 to 35.

What’s next?
In the medium term, Clipper will continue to seek opportunities
with new and existing customers to provide services in
Germany, Poland and Ireland, and will consider other strategic
mainland European locations for potential expansion.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Risk Management
The Group has a formal risk identification
and management process. This ensures that risks
are properly identified, prioritised, evaluated and
mitigated, in order that the Group can achieve its
strategic objectives and enjoy long-term success.

Risk management process
The Board is ultimately responsible for
managing risk across the Group. The
Board delegates responsibility for
the regular review of the Group’s risk
management system to the Audit
Committee and Senior Management
Team (“SMT”). Risks are formally
reviewed regularly and risk registers
are updated throughout the year.
The SMT has carried out a robust and
detailed assessment of the principal
risks facing the Group.

Principal risks are identified through an
evaluation of likelihood of occurrence
and potential impact. The SMT reviews
specific strategic, operational, financial
and compliance risks in regular SMT
meetings, contract and project reviews
and other key executive management
meetings to enable the SMT and the
Board to ensure that the Group’s
systems are properly aligned with
strategic objectives.

The Group adopts the following process

Identify risk
Identify key risks by category
(including changes since
the last review)

Rate risk
Rate each risk
(by evaluating and assigning
a score to each risk)

Review, monitor
and report risk
management process
Review and monitor risk
management process,
and report to Board
and Audit Committee

Identify risk mitigation
Identify mitigating actions
required for each risk

Execute risk mitigation
Execute agreed
risk mitigation and
process improvements

Strategic Report Clipper Logistics plc Principal Risks and Uncertainties

The Group has identified the following key risks through its risk management process:

Strategic
Risk

Mitigation

Reputation
Clipper’s potential to win new business is influenced
by its reputation for successfully implementing
major customer projects. Reputational damage
from failed or delayed project implementations
may have an adverse impact on Clipper’s ability
to win new business, and thus limit the Group’s
long-term growth and success.

Clipper has developed effective project management and
governance techniques and works closely with customers, using highly
trained and experienced staff, to ensure successful project delivery.

All projects are reviewed and evaluated on a weekly basis by the
relevant SMT members.

Independent brand health reviews are undertaken regularly to
monitor customer perception of, and satisfaction with, Clipper.

People
Failure to develop and retain key staff may
prevent the Group from delivering its objectives.

The Group offers comprehensive training and experiential learning
which includes development, customer relationship and leadership
training. The Group keeps in close contact with employees via flat
structures and effective employee engagement.

The Group ensures that it has competitive terms and conditions
with reward schemes which drive and reward performance and
can respond flexibly to the needs of employees. Exit interviews are
conducted to ensure that learnings from key staff departures can
be incorporated into the future retention strategy.

Operational
Risk

Mitigation

Loss of operational delivery
The Group may not operate / be able to
operate efficiently, thereby harming the
Group’s relationships with customers. Such a
situation could result, for example, from a loss
of focus during periods of major project activity
or due to the loss of operator licences which
are required to run our transport operations.

Dedicated start-up and project teams are used in order to minimise
disruption to the operation during periods of major project activity.
Contractual KPIs are reviewed regularly to ensure operational
effectiveness at all times.

We ensure compliance with operator licence requirements through our
standard operating procedures and driver policies. These include: periodic
driver CPC (certificate of professional competence) training, tachometer
audits, random drug testing and regular internal transport audits.

Health and safety
Our activities are conducted in a variety of
operating environments. A failure to monitor or
manage health and safety risks appropriately
can not only lead to an unsafe working
environment for our people and others who
interact with us, but may cause significant
reputational damage and legal liabilities.

Employees
We rely heavily on agency labour, particularly
in peak activity periods. Uncertainties around
the free movement of labour ahead of Britain’s
exit from the European Union could severely
compromise the provision of resource available
to UK logistics. Additionally, competition for labour
in the vicinity of our depots can increase the
demands on the local labour pool, reducing the
availability of labour and pushing up the cost.

Failure to maintain and enhance
customer relationships
Failure to maintain and enhance customer
relationships or more attractive propositions from
our competitors may lead to the non-renewal of
contracts, and/or may prevent the Group from
winning new work with existing customers.

The Group has a dedicated team of health and safety professionals
who maintain, audit and review detailed health and safety procedures
and processes. The team advises the Board and SMT. It also provides
leadership and training to encourage a culture which values the early
identification of situations that could lead to accidents.

Clipper and its customers are investing in automation to reduce
reliance on manual labour. In order to maximise the labour pool,
Clipper encourages local links with schools, colleges and
communities, has family friendly policies and is supporting
industry-led initiatives to encourage wider interest in logistics.

Clipper constantly benchmarks wages and benefits against other
employers in the local area to ensure remuneration packages remain
competitive. Wherever practical, we try to open new sites in areas of
lower employment.

Any exposure to increased costs is largely mitigated by open book
contract mechanisms.

The Group holds formal monthly reviews with key customers as well
as maintaining frequent close informal contact with customers and
potential customers. This enables corrective action to be taken quickly
in response to customer feedback and ensures that we remain in
touch with what our competitors are doing. In addition, regular brand
health reviews are carried out which give customers the opportunity
to comment anonymously on any aspect of the customer/company
relationship and service delivery, and how we compare to our
competitors. The Group can then take corrective action, if required.

Members of the SMT attend and speak at industry events and
contribute to various industry publications to ensure we continue
to be perceived as a thought leader to the retail market.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Principal Risks and Uncertainties continued

Operational continued
Risk

Mitigation

Loss of an operational site through disaster
Loss of an operational site as a result of fire, flood
or other disaster would have the potential to
seriously disrupt operations.

Regular safety audits and inspections and remedial action seek to
limit this risk.

In the event of a serious incident, each site has a business continuity
plan which would come into immediate operation.

Failure of IT system or infrastructure
Any significant failure, inefficiencies or breakdown
of our IT systems or infrastructure would seriously
impair our ability to deliver operationally and
would put contract renewals at risk.

Business continuity and disaster recovery plans are kept under review
at all locations and our IT infrastructure is subject to ongoing review
with regular testing of systems. The Group maintains an extensive IT
team, supported, where appropriate, by external expertise. Particular
focus is given to recovery processes and procedures, infrastructure
resilience, innovation and security.

Legal, financial and compliance
Risk

Mitigation

Legal and regulatory
The Group operates in an increasingly regulated
market. As the Group continues its expansion
(particularly in Europe) exposure to regulatory
and legal risk will increase.

Government policy
The introduction of the National Living Wage
(“NLW”) and the Apprenticeship Levy (“AL”) in
the UK have increased the costs of labour in the
logistics industry. Failure to recover these cost
increases could adversely affect the profitability
of the Group.

Financial liquidity
Inadequate cash resources could leave the
Group unable to fund its growth plans, thus
affecting future financial performance.

The Group employs internal and external experts where appropriate,
supported by its Group General Counsel, to set policy and monitor
its application.

Data control is a major area of client and regulatory focus. The
Group’s IT management systems and processes are designed to
ensure controls over system access and data flow movements are
carefully monitored. The Group undertakes appropriate staff training
to ensure legal compliance. Operational sites are audited on a
frequent, cyclical basis to test for instances of non-compliance. System
penetration testing is undertaken by the Group to check the resilience
of its IT systems.

External specialist advice is sought to ensure technical compliance
with financial, taxation, listing and other technical legislation.

Individuals responsible for compliance are identified and are
specifically recruited with recognised qualifications.

The Group’s greatest exposure to the UK NLW is in UK Logistics where
we attract a higher proportion of workers at or near the current NLW
level. All of our UK operations are affected by the AL.

In UK logistics, 67% of activity (by revenue) is on an open book basis,
meaning such upward cost pricing pressures are passed straight through
to the customer. Many of our closed book and minimum volume
guarantee customer contracts include price escalators for regulatory
changes and so these costs can also be passed onto customers.

In addition to the cost mitigations mentioned above, in order to
address the requirements of the AL we commissioned an internal focus
group. Whilst ensuring we complied with AL requirements in April 2017,
this focus group has also identified several potential operational and
financial upsides of AL for the Group.

The Group continually assesses its funding requirements in the context
of its existing operations and growth plans. In the year ended 30 April
2016, the Group entered into modified facilities with its bank to ensure
that expected future growth plans can be funded within these
increased facilities.

The Group will continue to undertake reviews of funding requirements
as its growth plans evolve.

Strategic Report Clipper Logistics plc Legal, financial and compliance continued
Mitigation
Risk

Insurance risk
There may be certain insurable risks for which
Clipper is not insured or is underinsured, whether
arising from unforeseen gaps in insurance
coverage or from conscious decisions to
self-insure. Under-insurance could leave the
Group with significant financial exposure.

A detailed review of insurance coverage and gaps is undertaken at least
once annually with expert guidance provided by our insurance broker.
Members of the SMT responsible for insurance remain in regular contact
with the insurance broker and regularly attend insurance training
courses and seminars. Known gaps in insurance coverage are regularly
presented and discussed at subsidiary board and Group Board levels,
and additional insurance cover is purchased where appropriate.

Employment liabilities
Significant employment liabilities may be
inherited on acquisition of new businesses or
from poorly-executed Transfer of Undertakings
(Protection of Employment) Regulations 2006
(“TUPE”) processes.

All senior human resources staff are recruited with relevant experience
and receive an appropriate level of training on TUPE matters. Each
TUPE project is given an internal project lead and project updates
are regularly provided to the SMT. External legal advice is sought
and expert interims are resourced where necessary.

Our acquisition due diligence always includes an element of human
resources due diligence, whether conducted by external advisors or
by internal staff with an appropriate level of expertise. Acquisition
agreements include seller indemnities for such liabilities.

Fraud risk
Major fraud, including the risks posed from
organised crime, may result in significant
financial loss.

Our accounting procedures manual includes several layers of
checking and control for new customers and suppliers and
changes to suppliers’ bank details, including combinations
of oral and written confirmations from known contacts.

Formal whistleblowing and anti-bribery policies are in place.

Viability Statement

In accordance with provision C.2.2 of
the 2014 revision of the UK Corporate
Governance Code (the “Code”),
the Directors have assessed the
prospect of the Company and the
Group over a longer period than the
12 months required by the ‘Going
Concern’ principle.

Whilst the Board has no reason to
believe the Group will not be viable
over a longer period, the period
over which the Board considers it
appropriate to form a reasonable
expectation as to the Group’s longer
term viability is the three-year period
to 30 April 2020. This period reflects
the period used for the Group’s
business plans and the typical length
of a customer contract, and has
been selected because it gives
management and the Board
sufficient, realistic visibility on the
future in the context of the industry

and market environment. The Board
has considered whether it is aware of
any specific relevant factors beyond
the three year horizon and confirmed
that there are none.

The Board’s assessment has been
made with reference to the resilience
of the Group and its historical ability
to deliver strong operational cash
flows, the Group’s robust balance
sheet, the Group’s current strategy,
the Board’s attitude to risk, and the
principal risks documented in the
Strategic Report. The starting point for
the Board’s review was the annual
strategic planning process, which
results in business plans for the next
three financial years. These plans
are subjected to risk and sensitivity
analysis. The assessment considers
the potential impacts these risks
would have under severe but
plausible scenarios on the Group’s

business model, the Group’s solvency
and liquidity, compliance with
covenants, likely availability to
the business of future bank facilities
and other key financial ratios. The
Board considers that the Group’s
broad spread of customers across
independent market sectors, the
majority of which are underpinned
by long-term agreements with
minimum volume guarantees or
open book terms, acts significantly
to mitigate the impact any of these
risks might have on the Group.

Based on this assessment, the
Directors confirm that they have a
reasonable expectation that the
Company and the Group will be
able to continue in operation and
meet all their liabilities as they fall
due up to 30 April 2020.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Our People
The Group recognises that the
execution of its strategy is dependent
on the commitment and dedication
of its colleagues. The strategic
development of our people is
paramount to our long-term success.

Number of employees >3,900
44

Number of locations

Clipper directly employs over
3,900 people across Europe.
We have comprehensive HR
policies in place to protect
and promote employee welfare
and we are committed to
supporting all human rights
in our business operations as
well as in our relationships
with our customers, suppliers
and other stakeholders.

Strategic Report Clipper Logistics plc Our approach
We recruit individuals with the talents
and results-driven attitude to meet
the high standards of performance
which our customers expect. Robust
recruitment and on-boarding processes
ensure that we select the best
candidates to join our teams, whilst
upholding our principles of respect
for all people, equal opportunities
and dignity at work.

Employee engagement
To encourage employees to give us
their best we strive to provide a
competitive level of pay and other
benefits relative to job and skill level,
including the provision of retail discount
schemes, company contribution to a
pension scheme and life/accident
cover. All employees with six months or
more service are invited to participate
in each iteration of the Sharesave Plan
(see page 92).

We encourage alignment with Group
goals via open communication and
performance management processes.
We have an annual conference for
our senior staff, site employee forums,
health and safety committees, team
briefs, our Company newsletter ‘Evolve’
and highly visible notice boards.

We recognise employee achievements
and loyalty, both informally and
through schemes such as Employee of
the Month and Long Service Awards.

We encourage team working by
involving employees in work-based
project teams, open days and inter-site
competitions, as well as organised
themed events on special occasions.

Clipper engagement survey 2017
In 2017, Clipper carried out a Group-
wide employee engagement survey.
The survey was designed to measure
five key drivers:

— Engagement.
— Commitment.
— Employer advocacy.
— Product advocacy.
— Motivation.

We achieved an impressive participation
rate of 95%. Valuable feedback was
gathered and a benchmark set
to inform future talent management.

74% of colleagues said that they would
speak highly of Clipper as a place of
work, and 94% understood how their
work contributes to the success of
the Company.

Following the results of the engagement
survey a number of Group-wide
strategic actions have been agreed:

— Design and deliver a fully-operational

Intranet facility to enhance the
Company’s communications.

— Design and implement a
communications strategy.

— Build a leadership and management

competency framework.
— Undertake a full re-design of

management and leadership
development training, developing
a comprehensive suite of learning
programmes that significantly
enhance management and
leadership capability.

— Re-design and launch the

Group-wide induction programme.

We also surveyed employee satisfaction
and perception surrounding the
following areas:

— Design a suite of employee
wellness/lifestyle initiatives
(i.e. Better Health At Work).

— Working life.
— Feeling valued.
— Training and development.
— Communication.
— Management capability

and performance.

— Company aims and objectives.
— Efficiency and customer service.

At site level, action plans will be
agreed to enable local HR and
people strategies to be developed
and implemented.

People development
At every level, we provide excellent
opportunities for our employees.
We provide unemployed people in
local communities with the opportunity
for training, qualifications and jobs via
our Clipper Academy programmes.
Existing employees develop via
driver CPC qualifications, NVQs,
apprenticeships and potential team
leader development programmes.

Our staff can then apply to join our
Corporate First Line and Middle
Management Levels 2 and 3 ASPIRE
Programmes. Interest in the programme
continues to increase as we open new
sites, employ new staff and promote
existing staff, and is recognised as an
excellent development tool improving
skill levels and creating a robust
succession pool. We also support
relevant professional qualifications
across a range of disciplines e.g.
operations (CILT), finance (ACCA/
CIMA/ICAEW/ICAS), HR (CIPD), and
health and safety (IOSH/NEBOSH).

Development at senior level is
supported by a senior leadership
development programme.

The Group has continued its investment
in additional project delivery and
senior management resource in order
to deliver significant organic growth
into the future.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Our People continued

Schools and universities
To encourage a greater number and
higher calibre of students to enter the
logistics sector, we have partnered with
a number of universities and colleges.

As a founding member of the Novus
Trust, we continue to support this
initiative aimed at encouraging
students to enter the logistics sector.
We have attended graduate
recruitment fairs, participated in
assessment centres, provided industry
mentors, offered students structured
holiday jobs, and under this scheme
we re-launched our graduate
development programme.

Driver Simulator Training
In 2017, Clipper invested in a fixed
simulator and classroom located at
our Northampton site, two mobile
simulators and a “pop up” classroom
in order to train and develop the skills
of our delivery drivers.

The advanced simulators teach Clipper
drivers how to deal with a range of
situations which could not safely be
replicated on roads, including tyre
blowouts, mechanical issues or adverse
weather conditions. We have the ability
to create our own scenarios, meaning
that our team can be prepared for a
range of circumstances, and every
driver will receive annual CPC training
using the equipment.

Our investment in this state-of-the-art
training technology highlights our
dedication to providing an effective
service for our clients, as well as
maintaining the safety and improving
the skillset of our employees.

Equal opportunities
The Group is committed to the fair and
equal treatment of everyone who works
with and for us. Supported by training,
policies and our five point code of
behaviour we aim to ensure that no
employee or worker is discriminated
against, directly or indirectly, on the
grounds of colour, race, ethnic and
national origins, sexual orientation or
gender, marital status, disability, religion
or belief, or on the grounds of age.
These principles are included in our staff
handbook, induction training and
management programmes (including
ASPIRE) and their impact is reflected in
our truly diverse workforce. We have
comprehensive family friendly policies
which embrace the challenges of
modern-day living and support work/
life balance. We are happy to consider
requests for flexible working and,
wherever possible, will agree shift
patterns which facilitate a balance
between work and family life.

Clipper is a member of the Business
Disability Forum.

Strategic Report Clipper Logistics plc Gender breakdown as at 30 April 2017

Board gender diversity

Total
7

1 Male (7)

100%

Other senior management*
gender diversity

Total
10

1 Male (9)
2 Female (1)

90%
10%

As defined by the Companies Act, this category
includes all employees responsible for planning,
directing or controlling the activities of the
Group, excluding the Company’s Directors.

All employees gender diversity

Total
3,908

1 Male (1,876)
2 Female (2,032)

48%
52%

People
We recognise that our business will
only enjoy continued success with the
commitment and dedication of our
staff. To ensure that they feel valued
and rewarded, we’ve put the following
actions in place:

— We monitor employee turnover
and use this as an indication of
general employee contentment.
— We work with the Business Disability
Forum to ensure all our current and
new staff are cared for.

— We engage in initiatives such as the

Employee benefits and rewards
— We provide a competitive level of

pay and other benefits relative to job
and skill level, including incentive
plans with recognition and reward.

— We value our full and part-time

people and wherever possible we’re
happy to agree working patterns that
offer a work and family life balance.
— We help our employees benefit from
customer and other discount schemes.

— We recognise employee

achievements and loyalty, both
informally and through schemes
such as Employee of the Month,
Recruitment Incentive and Long
Service Awards.

— We’re fully committed to equal
opportunity in employment.

— We encourage the use of ‘green’

transport and operate ‘green travel
plans’ where feasible. We promote
car sharing, walking and cycling to
work, and provide secure, prioritised
and reserved parking facilities.
We’re also looking at our car policies
to encourage the use of newer,
lower emission vehicles.

Employee wellbeing
— We seek to maintain a safe, clean

and clutter-free working environment
across our operations and offices.
We carry out in-house health and
safety audits and provide checklists
for our management teams at all sites.

Better Health at Work scheme, aimed
at promoting health and well-being
programmes through education
and awareness.

Employee communications
— We actively encourage

communication within the business.
We publish an in-house magazine
covering site updates, company
initiatives and opportunities, and
we always welcome feedback
to central support departments
through all levels of the organisation.

— We have well established monthly
employee forums and health and
safety committee meetings at
each site in order to communicate,
involve and engage with
employee representatives.
— We organise conferences for
our senior people to ensure
they’re focused and understand
their contribution to wider
Group objectives.

Employee training
— We operate an in-house NVQ
certified training programme
(ASPIRE) to develop and support
career advancement and,
where appropriate, we encourage
outside training initiatives and
professional development.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Sustainability
The Group’s framework of
policies and guidelines sets
clear standards to ensure
that we conduct our business
ethically and responsibly.

Emissions per £m revenue

114.7 tonnes
carbon dioxide
equivalent

-10.5%

Operating in a socially responsible
manner is important to us and our
stakeholders and is central to
our values-based culture.

The environment
We’re committed to limiting the
impact that our operations have
on the environment, and we’re
doing this in the following ways:

— by adhering to relevant legislation

and regulations, working to
respected codes of practice, and
regularly reviewing and improving
how we work;

— by continuing with our carbon

management project to reduce
energy consumption and emissions
of greenhouse gases from our
warehouses;

— by investigating fuel use, route
planning and optimum vehicle
design, and introducing a study of
business travel to become more
efficient and minimise emissions;
— by considering the best use of raw

materials and using recycled/
recyclable products where possible.

— by assessing and reducing water

usage through efficient technology
and awareness;

— by continuing to minimise waste

through compacting and material
reuse and recycling;

— by promoting environmental

awareness at all levels of the business
and encouraging appropriate
actions by all staff; and

— by liaising with suppliers, customers

and contractors to improve
environmental management
at all levels of the supply chain.

Strategic Report Clipper Logistics plc Greenhouse gas (“GHG”) emissions
The Group records energy and fuel
use for all areas of the business, based
on invoices received for diesel fuel,
gas oil, electricity and natural gas.
Fuel used for business travel in company
vehicles is also included.

The Group uses the average monthly
price per litre to convert the diesel fuel,
heating oil, and vehicle fuel costs into
litres of fuel used.

The kilowatt-hours figures for gas and
electricity used, and the figures for
litres of each fuel type used, are then
converted into tonnes of CO2 equivalent
(tCO2e) using the relevant DEFRA
conversion factors.

In the year to 30 April 2017, both Scope 1
and Scope 2 emissions increased from
the prior year, driven by an increase in
the warehouse space occupied by the
Group (which led to higher gas and
electricity usage), and an increase in the
transport activities within the UK logistics
business (which increased the amount
of diesel fuel used). However, emissions
per £ million of revenue fell by 10.5%,
as a result of ongoing fuel efficiency
programmes and increased utilisation
of space within our warehouses, which
meant that revenue increased without
a proportionate increase in emissions.

The table below shows a summary
of GHG emissions for the Group:

Emissions
(tonnes CO2e)

Scope 1

Scope 2

Year to
30 April
2017

27,845

11,161

Total emissions

39,006

Year to
30 April
2016

27,089

10,125

37,214

Emissions per
£m of revenue

114.7

128.2

Scope 1 (direct) GHG emissions are derived from
the consumption of gas, oil, and vehicle fuel.

Scope 2 (electricity indirect) GHG emissions
are derived from the consumption of
purchased electricity.

Waste recycling
The Group carefully considers which
raw materials to use and uses recycled/
recyclable products where applicable.
Waste is sorted into plastics, paper/
cardboard, wood and metal. It is
recycled, reused or compacted on site.

Our expanding returns operations sort,
re-process, repair or recycle our clients’
products which are returned from their
customers. These processes help to
reduce the amount of goods which
may otherwise go to landfill.

Commercial
Wherever possible we work with our
customers to build environmental
considerations into our recommended
solutions. This is particularly evident with
our pioneering retail consolidation centres
which greatly reduce final mile deliveries,
congestion and associated emissions
when delivering to shopping centres
and congested city centres. To further
support this initiative, we have invested
in three electric 7.5 tonne vehicles.

Corporate Social Responsibility
(“CSR”) policy
The Group recognises the importance
of environmental protection and is
committed to conducting business
ethically, responsibly and in compliance
with laws, regulations and codes of
practice applicable to our business
activities. The CSR and related policies
are reviewed and amended where
appropriate. We actively promote the
Ethical Trading Initiative base code and
undertake independent auditing of our
facilities and labour providers.

Anti-Slavery and Human Trafficking
We are committed to ensuring that
there is no slavery or human trafficking
in our supply chains or in any part of
our business. Our Anti-Slavery and
Human Trafficking Policy reflects our
commitment to acting ethically
and with integrity in all our business
relationships and to implementing and
enforcing effective systems and controls
to ensure slavery and human trafficking
is not taking place anywhere in our
supply chains.

We believe that, in conjunction with the
rigorous policies implemented by our
clients and suppliers, we can drive out
any aspects of human trafficking and
slavery from our supply chains.

Clipper places paramount importance
on only working with suppliers who treat
their obligations towards modern slavery
with the importance that Clipper does.
We will not work with any organisation
within our supply chain that is unable
to demonstrate a corresponding
commitment to this, irrespective of
whether they are required to do so
statutorily or otherwise. Where possible,
we build long-standing relationships
with our customers and major suppliers,
making clear our expectations of
business behaviour. Clipper has a
Anti-Slavery and Human Trafficking
Policy and all suppliers are notified of
this and are expected to comply with it.

Clipper educates its employees
regarding the types of factors which
can indicate whether any worker
(permanent or temporary) in Clipper’s
supply chain may be subject to undue
influence. In doing so, Clipper actively
encourages employees to report any
suspicious activity to the Group Human
Resources Director, acting in his
capacity as Compliance Manager.

Clipper conducts rigorous checks to
verify the identity of each worker and
verify their right to work in the United
Kingdom. Clipper audits its supplying
temporary work agencies against
legislative compliance, including
compliance with the Modern Slavery
Act. It further complies with audits
conducted by its customers.

The Board believes that driving out
slavery in any form from its supply
chains is fundamental to the aims
of Clipper and, accordingly, have
approved this statement and the
modern slavery policy. This statement
and the accompanying Anti-Slavery
and Human Trafficking policy will be
reviewed annually, unless circumstances
dictate that it should be reviewed and/
or renewed more frequently.

Communities
As a responsible business, we consider
ourselves an integral part of the
communities in which we operate.
Part of this responsibility sees us,
where possible, encouraging a positive
impact and facilitating local initiatives
in the following ways:

— we support a range of charities,

including those that maintain natural
environments for animals and the
safety of local habitats;

— we provide logistical support for relief
aid programmes to vulnerable areas;
— we support local communities at site
level through management and staff
choice, e.g. providing kit to a number
of amateur sports teams;

— we strive to be neighbourly wherever

we operate;

— we recruit from within local areas

and actively promote the business
as an employer of choice;
— we encourage and support

fundraising by our employees; and
— we’ll continue to develop our CSR
and environmental management
processes to improve and enhance
these areas of our business activities.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Operating and Financial Review

Overview of results
The Group continued to make
excellent progress in the financial
year to 30 April 2017.

Group revenue
Within the value-added logistics
services segment, the Group
benefited from:
— the full-year impact of contract wins
secured in the previous financial
year including: Browns, M&Co,
Pep&Co and Ireland’s largest retailer,
although this is partly offset by the
full-year impact of the losses of
Claire’s Accessories, Atterley Road
and Michael Lewis in the previous
financial year;

— organic growth and new business
activities on existing contracts,
including ASOS, John Lewis pre-retail
activities, Morrisons, Wilko and Zara,
in part driven by the ongoing shift
in retail trends towards online
trading which continues to bring
particularly strong organic growth
to e-fulfilment customers;

— the part-year impact of operations
commenced during the year to 30
April 2017, including Halfords, Inditex,
Links of London, Kidly, Pretty Green,
SilkFred, Smiffys and Westwing, and
significant changes to the services
provided to John Lewis out of the
new Ancillary Distribution Centre in
Northampton. These are partly offset
by the part-year impact of the loss of
the Ted Baker contract. The full-year
impact of these activities will be
realised in the year to 30 April 2018,
together with the part-year impacts
of contracts either recently
commenced or currently in the
pipeline and due to go live during
the remainder of calendar year 2017
and early calendar year 2018; and

— a significant increase in Click and

Collect revenues. In the first half of the
year, the geographical coverage of
the collaboration with John Lewis
increased from circa 33% of Waitrose
stores to 100% by August 2016. On
1 November 2016, the Click and
Collect activity was transferred to

Clicklink Logistics Limited (“Clicklink”),
a joint venture with John Lewis. The
joint venture is equity accounted and
the revenue is no longer consolidated
into the Group total. However, in the
second half of the year, Clipper did
provide resources to Clicklink which
are recharged and are included
in Group revenue. The equity
accounting treatment is
explained later in this review.

Revenue growth in commercial
vehicles was driven by:
— a £5.5 million (10.8%) increase in
new vehicle sales. The number of
new units sold increased by 12.3%
year-on-year, but the average
selling price fell slightly by 1.3% due
to the mix of vehicles sold; and
— a £0.4 million increase in aftersales
revenues, comprising servicing,
body shop and parts sales.

Group revenue
Group revenue increased by 17.2% to £340.1 million, with strong growth in all business areas:

Revenue

E-fulfilment & returns management services

Non e-fulfilment logistics

Total value-added logistics services

Commercial vehicles

Inter-segment sales

Group revenue

Year to
30 April 2017
£m

Year to
30 April 2016
£m

129.9

121.9

251.8

91.5

(3.2)

97.6

108.4

206.0

85.6

(1.3)

%
Change

+33.0%

+12.5%

+22.2%

+6.9%

340.1

290.3

+17.2%

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

Group EBIT
The Group grew EBIT strongly in all segments and business activities:

EBIT

E-fulfilment & returns management services

Non e-fulfilment logistics

Central logistics overheads

Total value-added logistics services

Commercial vehicles

Head office costs

Group EBIT

Year to
30 April 2017
£m

Year to
30 April 2016
£m

10.2

12.4

(4.8)

17.8

2.3

(2.2)

17.9

8.3

10.7

(4.7)

14.3

2.3

(1.9)

14.7

%
Change

+23.4%

+15.7%

+24.6%

+3.5%

+21.8%

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

Strategic Report Clipper Logistics plc 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. E-fulfilment EBIT also
includes the contribution from Click
and Collect activities. In the first half of
the year under review, this activity was
a profit centre within the Clipper entity
and so was directly consolidated into
Group EBIT. The activity was transferred
to the Clicklink joint venture on 1
November 2016 and so the Group’s
share of Clicklink’s profits was equity
accounted in the second half of the
year. Under equity accounting, the
Group recognises its share of the post
tax profit of the entity as one figure in
the income statement. RepairTech,
acquired on 15 June 2017, will be
consolidated into the E-fulfilment
& returns management services
business activity from that date.

Non e-fulfilment operations include
receipt, warehousing, picking, packing
and distribution of products on behalf
of customers. 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. Tesam will be consolidated
into the Non e-fulfilment business
activity from the date of acquisition,
24 May 2017.

Clicklink is a
truly ground-
breaking
development
which will
revolutionise
the provision
of Click and
Collect services
to the high street
in Britain.

Steve Parkin
Executive Chairman

Group revenue

£340.1m
+17.2% (2016: £290.3m)

Group EBIT*

£17.9m
+21.8%

(2016: £14.7m)

* 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 EBIT
EBIT is the primary Key Performance
Indicator (“KPI”) by which the
management team assesses corporate
performance. EBIT is assessed against
Board approved budgets. A further
KPI is net debt, which is discussed on
page 33.

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 (%).

Group EBIT increased by 21.8% to £17.9
million for the year ended 30 April 2017.
The Group expects to achieve further
EBIT growth in the coming financial year
due to the full-year benefits of contracts
brought on line in the year to 30 April
2017, the commencement of activities
on further new contracts, organic
growth, a strong new business pipeline
and the impact of post-year end
acquisitions. The acquisitions of Tesam
Distribution Limited (“Tesam”) and
RepairTech Limited (“RepairTech”)
were completed shortly after the
year end (see note 29 to the Group
Financial Statements).

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Operating and Financial Review
continued

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.
There has been additional investment
in such resources during the year
ended 30 April 2017, as mentioned in
the 2016 Annual Report, particularly in
operational delivery and automation.
The central logistics overheads have
increased in the year due to share
based payment charges. In the year,
the reporting structure within the
central logistics management team
has been enhanced, preparing the
business for future growth. Whilst
incremental investment is likely to be
required in the logistics overheads base
as the business continues to grow, we
do not expect significant stepped
increases in the overheads base in
the foreseeable future, other than
in respect of share based payment
charges (see below).

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

Head office costs represent the cost of
the Executive Chairman, Chief Financial
Officer, Deputy Chief Financial Officer,
Group General Counsel, Non-Executive
Directors and plc compliance costs. The
year-on-year increase in head office
costs is attributable to incremental share
based payment charges and the costs
associated with the acquisition of Tesam.

Share based payment charges totalling
£0.8 million (2016: £0.5 million) have
been charged to central logistics
overheads, commercial vehicles 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). Since listing on the London
Stock Exchange in June 2014, the
Group invites certain employees to
participate in an annual iteration of the
PSP and all employees to participate in
an annual iteration of the Sharesave
Plan. Each scheme vests over a three
year period. As a result, the year ended
30 April 2017 included a full year of
charges in respect of options granted
in the year ended 30 April 2015 and
the year ended 30 April 2016, together
with a part year of charges in respect
of options granted in the year ended
30 April 2017; the prior year only
incurred a full year of charges in
respect of options granted in the year
ended 30 April 2015 and part-year
charges in respect of options granted
in the year ended 30 April 2016.

Net interest charges
Net interest charges for the year to
30 April 2017 increased by 16.1% to
£1.6 million (2016: £1.4 million), the
increase being attributable to an
increase in assets financed under hire
purchase contracts in the value-added
logistics services operating segment.

Taxation
The effective rate of taxation of 22.3%
(2016: 21.2%) is higher than the average
standard UK rate of corporation tax
applicable in the year of 19.9%
(2016: 20.0%) principally due to
certain expenditure incurred which
is disallowable for tax purposes and
the higher rate of effective tax to
which the German business is subject.

Profit after tax
The profit after tax for the year to
30 April 2017 was £12.5 million (2016:
£10.3 million), an increase of 20.6%.

Earnings per share
Earnings per share were 12.5 pence
for the year to 30 April 2017 (2016:
10.3 pence).

Capital expenditure and fixed assets
Of total tangible and intangible fixed
asset additions of £20.2 million (2016:
£16.2 million), £19.4 million (2016: £15.5
million) related to the logistics services
segment and £0.8 million (2016: £0.7
million) related to the commercial
vehicles segment. A large proportion of
expenditure in the year ended 30 April
2017 was incurred at the Northampton
shared-use facility where John Lewis
is the anchor customer. Capital
expenditure of £1.5 million was incurred
on the Click and Collect collaboration
with John Lewis in the first half of the year
when this operation sat within the Clipper
entity. On 1 November 2016, when the
operation was transferred into Clicklink,
those assets acquired earlier in the year
were sold by Clipper to Clicklink at their
fair value, accounting for £1.2 million of
the £2.3 million proceeds from sale of
non-current assets in the year.

Clipper’s outstanding capital
expenditure commitment at 30 April
2017 was £4.7 million, significantly
reduced from the equivalent figure
of the prior year (2016: £16.7 million).

Strategic Report Clipper Logistics plc Cash flow
Cash generated from operations
was £25.7 million (2016: £20.5 million),
an increase of 25.2%.

The Group’s business model gives rise
to high levels of cash generation. In the
UK logistics business, 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 negative investment
in 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. Net cash
generated from working capital in
the year ended 30 April 2017 was
£2.0 million (2016: £0.6 million).

£1.95 million was subscribed for share
capital on the formation of the Clicklink
joint venture in the year ended 30 April
2017 (2016: £nil). A further £1.45 million
loan was advanced to Clicklink on its
formation. This loan is disclosed as a
non-current financial asset (see note 27
to the Group Financial Statements).

No deferred consideration was paid
in the year (2016: £2.2 million).

There has been significant investment
in the fixed assets base this year, as
noted above, particularly on open-
book contracts. However, providing
the commercial terms are acceptable,
Clipper typically funds a significant
proportion of such capital expenditure
using hire purchase and finance
leases, and so not all of the fixed asset
investment actually results in a cash
outflow. Cash capital expenditure,
including intangible assets, for the year
ended 30 April 2017 was £4.6 million
compared to £5.9 million in the year
ended 30 April 2016.

In line with the stated dividend payment
policy, a final dividend for the year
ended 30 April 2016 of £4.0 million
(4.0 pence per share) and an interim
dividend of £2.4 million (2.4 pence per
share) for the year ended 30 April 2017
were paid in the year to 30 April 2017.
These compare to a final dividend for the
year ended 30 April 2015 of £3.2 million
(3.2 pence per share) and an interim
dividend of £2.0 million (2.0 pence per
share) for the year ended 30 April 2016,
both paid in the year to 30 April 2016.

Net debt
In addition to EBIT, net debt
is considered a KPI for the Group.
As with EBIT, net debt is assessed
against Board-approved budgets.

The Group had £25.1 million of net
debt outstanding at 30 April 2017 (2016:
£18.8 million) (see note 20 to the Group
Financial Statements), in line with the
Board’s expectations. The increase in
net debt compared with the prior year
was driven primarily by the need to
invest in capital assets to service
significant new contracts. 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 us over the term of the
contract, together with finance
charges and a management fee.

The Group opened the year with
£6.1 million of bank loans. The Group
repaid £6.0 million of bank loans in
the year, but took out £2.0 million of
funding loans in respect of capital
expenditure. The Group ends the year
with £2.1 million of bank loans. Net bank
debt at 30 April 2017 was £2.1 million
(2016: £7.9 million).

Logistics
E-fulfilment & returns
management growth
Clipper’s ability and agility, particularly
in respect of omni-channel, multi-
channel, returns management, Click
and Collect and mechanisation already
mentioned in this Annual Report, have
enabled the Group to significantly grow
revenues and earnings, and to once
again outperform market growth (the
UK e-commerce market grew by 17%
in the calendar year 2016). Revenues
from e-fulfilment & returns management
services increased by 33.0% from £97.6
million for the year to 30 April 2016 to
£129.9 million for the year to 30 April 2017,
with EBIT growing by 23.4% from £8.3
million to £10.2 million over the same
period. This is a particularly pleasing
performance as two of the principles
underpinning the Group’s core
strategies are to be a market leader
in the e-commerce sector, and to be
a thought leader in the provision of
value-added services across the sector.

Organic growth in activities with
ASOS, Morrisons, Wilko and Zara, the
full-year impact of those operations
commenced in the year ended
30 April 2016 – Browns, Click and Collect
(including Clicklink), Pep&Co and
Ireland’s largest retailer – and the new
operations commenced in the year
ended 30 April 2017 – Inditex, John Lewis
returns and forward orders activity,
Kidly, SilkFred, Smiffys and Westwing –
have all contributed favourably to the
growth in this business activity year-on-
year. Partly offsetting this is the full-year
impact of contract losses of Claire’s
Accessories and Atterley Road in the
previous financial year.

This business activity saw the launch
of a collaboration with John Lewis in
September 2015 providing John Lewis
with a Click and Collect service
which is absolutely focused on the
requirements of the retailer: it is fully
integrated with the retailer systems, has
full track-and-trace, has timed delivery
schedules and provides ease of
same-day returns through Boomerang.
The operation comprises automated
parcel sortation and transport
distribution services, and initially served
115 Waitrose stores, 33% of the total
Waitrose store estate. The remaining
67% of the Waitrose store estate was
added from August 2016. This operation
was transferred into Clicklink, a joint
venture entity, on 1 November 2016
in order to formalise the arrangement
and to enable the opening up of the
network to third party customers.
Clicklink has already commenced
performing certain activities for other
third party customers and these income
streams are expected to increase
significantly over the coming months
as Clicklink is in advanced discussions
with a number of customers.

Despite the increasingly challenging
logistics demands of the Black Friday
to Cyber Monday weekend in the UK
outlined previously, Clipper delivered
another successful 2016 Black Friday
to Cyber Monday trading period for its
clients and maintained excellent service
levels throughout. In order to mitigate
some of the labour challenges around
this weekend, one of the roles of
Clipper’s new Engineering and
Technology Director is to increase
Clipper’s investment in automation,
thereby decreasing Clipper’s reliance
on agency labour providers through
the peak trading period.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Operating and Financial Review
continued

Clipper had been providing e-commerce
fulfilment services to Tesco in a property
leased by Tesco in Daventry. As a result of
space elsewhere in its property portfolio,
Tesco opted to relocate the activity into
its Fenny Lock site from August 2016. The
compensation received for the early
termination of our contract means
Clipper’s profit and loss account for
the year ended 30 April 2017 was not
adversely impacted by this. The Daventry
lease has now been assigned to Clipper
and the Group fulfils the new Halfords
contract out of this site.

In this business activity, since the year
end on 30 April 2017:

— Wilko has committed to taking
incremental space at Ollerton,
Browns has committed to taking
incremental space at Enfield, and
Smiffys has committed to taking
incremental space at Kempen;

— agreement has been reached with
M&S to provide certain services
out of Clipper’s Ollerton facility;
— ASOS has signed up for certain
services out of Clipper’s Poznan
facility in Poland; and

— RepairTech has been acquired.
The key management team has
been retained and will continue
to manage the operations.

Non e-fulfilment logistics is central
to the Group’s future strategy too
The Group will continue to develop
and deliver truly value-added services
to address the needs of retailers in
traditional bricks and mortar logistics,
including receipt of inbound product,
storage, store-readiness of product, and
distribution to retail destinations. This
business activity also includes transport
and high value logistics activities.

Revenue from non e-fulfilment
operations grew by 12.5% for the year
ended 30 April 2017, from £108.4 million
to £121.9 million, with EBIT increasing by
15.7%, from £10.7 million to £12.4 million.

Within non e-fulfilment, the full-year
effect of the contracts secured in the
prior year with M&Co and Pep&Co,

contributed to revenue and EBIT
growth, as did organic growth on
existing contracts with Haddad, John
Lewis pre-retail activities, M&S, and
Philip Morris. The transport operations
at Rotherham and tobacco contract
packing operations at Brighouse also
performed particularly strongly, partly
as a result of one-off Tobacco Product
Directive work. This strong business
growth was partly offset by the
part-year impact of the loss of the
Hobbycraft and Ted Baker contracts,
lost during the year to April 2017 and
the full-year effect of the loss of the
Michael Lewis and H&M contracts,
lost in the prior year.

Additionally, in the year to 30 April 2017
operations began:

— on a forward orders activity for

John Lewis in the new Northampton
Ancillary Distribution Centre;

— on new storage activities for Halfords,
with subsequent agreement reached
on a new eight year contract for
warehousing activities, including
e-commerce; and

— under new contracts with Links of

London and Pretty Green.

In this business activity, since the
year end on 30 April 2017 we have
commenced a new transport
activity with Crosswater.

Tesam, acquired shortly after the year
end, will be reported within this business
activity from the year ending 30 April
2018. The key management team has
been retained and will continue to
manage the operations.

Investment in key personnel
The Group differentiates itself by
providing consultancy-led, value-
added services to its actual and
prospective client base. Clipper is
now established as a thought leader
within the logistics sector, and this is
evidenced both by customers’ buy-in
to Clipper’s innovative approach,
and by brand health reviews
conducted by an independent
market research consultancy.

The Group is central to the
achievement by its customers of
their own objectives and goals.

Accordingly, the Group invests in
recruiting, training and developing
people who are specialists in their
relevant fields. These include information
technology, solution design, facilities
specification, implementation and
management, e-commerce and
returns management, and project
management specialists.

In the year ended 30 April 2017, there
were significant changes to the senior
team within the logistics business
including the appointment of a new
Chief Operating Officer, a new Group
Human Resources Director and an
Engineering and Technology Director
(all non-statutory director roles) and a
new Managing Director in Germany.
Since the year end, the Group has
further bolstered its senior management
team with the appointment of a new
Senior Operations Director in UK
Logistics following the retirement of
the incumbent. The appointment of a
new Managing Director at Servicecare
took effect in April 2016. These strategic
appointments have been implemented
to improve the service offering to
existing customers and to deliver
new opportunities to meet the
growth aspirations of the Board.

The Group has a Senior Leadership
Development Programme to enhance
the skills of its senior team, and to
assist with succession planning.

Commercial vehicles
The commercial vehicles business
delivered EBIT of £2.3 million in the year
to 30 April 2017 (2016: £2.3 million), an
increase of 3.5% on the previous year.

Northern Commercials operates from
six dealership locations and has three
sub-dealers. Main dealerships are
located in Brighouse, Manchester,
Northampton, Dunstable, Tonbridge
and Brighton. Thus, the business
operates across the north of
England and into Wales, through the
midlands, and into the south-east.

Strategic Report Clipper Logistics plc The business sold 2,012 new vehicles in
the year to 30 April 2017 (2016: 1,792),
and 393 used vehicles (2016: 443).
However, due to a change in mix of
vehicles sold, the average selling price
of a new vehicle in the year to 30 April
2017 was £28,225 compared to £28,608
in the prior year, a decrease of 1.3%.
Conversely, the average selling price of
a used vehicle was £10,794 compared
to £10,653 in the prior year, an increase
of 1.3%. Servicing saw increases in
revenue between the year ended
30 April 2016 and the year ended
30 April 2017, with a 4.0% increase in
the number of hours sold, and parts
sales increased by 2.0%.

Key customers of Northern Commercials
include Access Hire Nationwide, Allied
Bakeries, Asda, Clancy Docwra, Dawson
Rental, Leeds Commercial, Ryder,
Variety Club (the Children’s Charity),
and many other household names.

The business is measured by
manufacturers on certain key
performance measures throughout
the year:

— Through its Product Improvement

Publications, Iveco notifies dealers
of certain recall improvements.
The dealer is then measured on
the proportion of those recall
improvements which have been
actioned as vehicles pass through
the workshop. Northern Commercials
successfully actioned 93.3% of recall
improvements in the year, compared
to the Iveco-set target of 80%.

— MOT pass rate at Northern

Commercials’ dedicated Test station
in Brighouse of 100% (target: 98%).

— Assistance Non-Stop: Northern

Commercials averaged 41 minutes
to arrive in providing breakdown
assistance compared to a network
target of 48 minutes.

— Dealers are set a target of five days
per annum for technician training.
Northern Commercials was fully
compliant in the year.

Current trading and outlook
As noted previously, the Group secured
a number of significant contract wins
in the two years ended 30 April 2017,
the full-year benefit of which will not be
realised until the years to 30 April 2018
and 30 April 2019.

Looking ahead to the 2018 financial
year, there is a strong new business
pipeline in the Group. Since the year
end, additional contracts have been
won within both E-fulfilment & returns
management services and Non
e-fulfilment logistics, both in the UK
and Europe, through a focus on retail
specialisms and provision of cost-
effective, value-added solutions.
These contract wins will more than
compensate for the contract losses
mentioned earlier in this report.
Shareholders will be updated once
these new contracts have been agreed.

Recent key appointments leave the
Group ideally positioned to proactively
and reactively scale-up its activities as
necessary. The recent management
changes have already seen us able to
cross-fertilise Clipper’s, Servicecare’s
and Germany’s customers and activities
and will allow us to generate further
synergistic opportunities in the future.

The recent acquisitions of Tesam
and RepairTech are expected to be
immediately earnings enhancing.
Across the two acquisitions, there is
significant customer overlap with the
existing Clipper Group portfolio and
so the Group expects to enhance its
reputation with these customers, and
also to leverage existing customers
with additional service lines.

The commercial vehicles business
is expected to continue its steady
growth in profitability in the year to
30 April 2018.

The Board is confident in the Group’s
prospects for the full year ahead.
Current trading is in line with the
Directors’ strategic plan, and the
Board is confident of achieving
another period of excellent financial
performance in the year to 30 April 2018.

Approved by the Board and signed
on its behalf by:

David Hodkin
Chief Financial Officer
27 July 2017

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Board of Directors

Steve Parkin
Executive Chairman

Tony Mannix
Chief Executive Officer

David Hodkin
Chief Financial Officer

Steve, a fashion logistics specialist,
founded Clipper in 1992. As Executive
Chairman, Steve is responsible for
the strategic direction of the Group.
Steve has extensive experience of retail
logistics. He holds and pursues strategic
level discussions with major retailers.
In addition, Steve drives the Group’s
acquisition strategy. Steve is the
chairman of the Nomination Committee.

David joined Clipper as Group
Chief Financial Officer in 2003. David
held a variety of board level roles prior
to joining Clipper, including Group
Finance Director of Symphony Group
plc, Finance Director of Kunick Leisure
Limited, and held a number of senior
roles in Magnet Limited.

David is a member of the Chartered
Institute of Management Accountants.

Tony was appointed Chief Executive
Officer of the Group in May 2014. Tony
joined Clipper in 2006 as Managing
Director of the UK logistics division. Tony
has over 25 years’ experience in the
logistics sector, and held a number of
senior roles with Roseby’s plc (which
became part of Homestyle Group plc),
ultimately becoming Logistics Director.

Tony has particular experience of
operating in complex retail logistics
environments, includingthe design
and specification of both distribution
centres and warehouse management
systems. Tony began his career in
logistics with the Burton Group, after
workingin the construction industry
following his graduation with a
degree in architectural engineering.

Ron Series

Senior Independent

Non-Executive Director

Stephen Robertson

Independent

Non-Executive Director

Mike Russell

Independent

Non-Executive Director

Ron joined the Group as Non-Executive

Stephen joined the Group as

Mike Russell was appointed

Director in 2014 and was appointed

Non-Executive Director in 2014.

Non-Executive Director of Clipper’s

Senior Independent Non-Executive

Stephen has many years of experience

former parent company in 2011, and

Director in July 2017. Ron has previously

in the retail industry and held executive

was appointed Non-Executive Director

held executive and non-executive

positions at Kingfisher plc, WH Smith plc

of the Company in 2014. He qualified

positions with a number of companies

and Woolworths Group plc. Stephen

as a Chartered Certified Accountant

with international operations in

was previously Director General of

with a subsidiary of Imperial Chemical

transport, logistics, shipping, real estate

the British Retail Consortium and is

Industries, following which he held

and information technology. Included

currently chairman of Retail Economics.

the position of Finance Director

among them are Tuffnells Parcels Express

Stephen’s current non-executive

of a subsidiary of Allied Lyons plc.

Limited where he was chairman during

directorships include Timpson Group plc,

He joined Asda Stores Limited as Chief

its ownership by 3i and UK-listed

companies such as Davies and

Sofology and Hargreaves Lansdown

Accountant in 1986 and subsequently

plc. Stephen will take over as chairman

became Finance Director of the Stores

Newman plc and LEP Group plc. He has

of the Remuneration Committee in

Division. He was appointed Group

also held executive positions at iSOFT

August 2017 and is a member of the

Finance Director of Nurdin & Peacock

Group Limited (listed on the Australian

Audit Committee.

Securities Exchange), SIAC Group and

Viridian Group and was involved in the

successful restructuring of Nakheel PJSC,

the real estate arm of Dubai World. Most

recently, he advised the Lonmin plc

board on its successful capital raising.

Ron is a member of the Remuneration

Committee and the Nomination

Committee. Ron will join the Audit

Committee in August 2017.

plc, a FTSE 250 company, in early

1996 prior to the sale of the business

to Booker plc. From 1997 to 2011, he

was an executive director of Prize

Food Group, a private equity-backed

business, initially as Group Finance

Director and, from 2005, as Chief

Executive Officer. Mike is stepping down

as chairman of the Remuneration

Committee in August 2017 and was

appointed chairman of the Audit

Committee in July 2017. He is also a

member of the Nomination Committee.

Clipper Logistics plc GovernanceSteve Parkin

Executive Chairman

Tony Mannix

Chief Executive Officer

David Hodkin

Chief Financial Officer

Ron Series
Senior Independent
Non-Executive Director

Stephen Robertson
Independent
Non-Executive Director

Mike Russell
Independent
Non-Executive Director

Steve, a fashion logistics specialist,

Tony was appointed Chief Executive

David joined Clipper as Group

founded Clipper in 1992. As Executive

Officer of the Group in May 2014. Tony

Chief Financial Officer in 2003. David

Chairman, Steve is responsible for

joined Clipper in 2006 as Managing

held a variety of board level roles prior

the strategic direction of the Group.

Director of the UK logistics division. Tony

to joining Clipper, including Group

Steve has extensive experience of retail

has over 25 years’ experience in the

Finance Director of Symphony Group

logistics. He holds and pursues strategic

logistics sector, and held a number of

plc, Finance Director of Kunick Leisure

level discussions with major retailers.

senior roles with Roseby’s plc (which

Limited, and held a number of senior

In addition, Steve drives the Group’s

became part of Homestyle Group plc),

roles in Magnet Limited.

acquisition strategy. Steve is the

ultimately becoming Logistics Director.

chairman of the Nomination Committee.

David is a member of the Chartered

Tony has particular experience of

Institute of Management Accountants.

operating in complex retail logistics

environments, includingthe design

and specification of both distribution

centres and warehouse management

systems. Tony began his career in

logistics with the Burton Group, after

workingin the construction industry

following his graduation with a

degree in architectural engineering.

Stephen joined the Group as
Non-Executive Director in 2014.
Stephen has many years of experience
in the retail industry and held executive
positions at Kingfisher plc, WH Smith plc
and Woolworths Group plc. Stephen
was previously Director General of
the British Retail Consortium and is
currently chairman of Retail Economics.
Stephen’s current non-executive
directorships include Timpson Group plc,
Sofology and Hargreaves Lansdown
plc. Stephen will take over as chairman
of the Remuneration Committee in
August 2017 and is a member of the
Audit Committee.

Ron joined the Group as Non-Executive
Director in 2014 and was appointed
Senior Independent Non-Executive
Director in July 2017. Ron has previously
held executive and non-executive
positions with a number of companies
with international operations in
transport, logistics, shipping, real estate
and information technology. Included
among them are Tuffnells Parcels Express
Limited where he was chairman during
its ownership by 3i and UK-listed
companies such as Davies and
Newman plc and LEP Group plc. He has
also held executive positions at iSOFT
Group Limited (listed on the Australian
Securities Exchange), SIAC Group and
Viridian Group and was involved in the
successful restructuring of Nakheel PJSC,
the real estate arm of Dubai World. Most
recently, he advised the Lonmin plc
board on its successful capital raising.
Ron is a member of the Remuneration
Committee and the Nomination
Committee. Ron will join the Audit
Committee in August 2017.

Mike Russell was appointed
Non-Executive Director of Clipper’s
former parent company in 2011, and
was appointed Non-Executive Director
of the Company in 2014. He qualified
as a Chartered Certified Accountant
with a subsidiary of Imperial Chemical
Industries, following which he held
the position of Finance Director
of a subsidiary of Allied Lyons plc.
He joined Asda Stores Limited as Chief
Accountant in 1986 and subsequently
became Finance Director of the Stores
Division. He was appointed Group
Finance Director of Nurdin & Peacock
plc, a FTSE 250 company, in early
1996 prior to the sale of the business
to Booker plc. From 1997 to 2011, he
was an executive director of Prize
Food Group, a private equity-backed
business, initially as Group Finance
Director and, from 2005, as Chief
Executive Officer. Mike is stepping down
as chairman of the Remuneration
Committee in August 2017 and was
appointed chairman of the Audit
Committee in July 2017. He is also a
member of the Nomination Committee.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Corporate Governance Report

Compliance with the Code
The Board recognises the importance
of high standards of corporate
governance and is committed to
managing the Group’s operations
in accordance with the Code. A full
version of the Code can be found
on the Financial Reporting Council’s
website www.frc.org.uk. The Company
complied with the provisions of the
Code throughout the year ended
30 April 2017, except for provisions
A.4.2 and E.1.1.

In April 2016 the Financial Reporting
Council published a revised 2016
UK Corporate Governance Code
(“2016 Code”) which will apply to
premium listed companies in respect
of accounting periods commencing
on or after June 2016. This will apply
to the Company in the financial year
ending 30 April 2018.

This Report, which incorporates
reports from the Nomination and
Audit Committees on pages 42 to 45
together with the Strategic Report
on pages 8 to 35, the Directors’
Remuneration Report on pages 46
to 59 and the Directors’ Report on
pages 60 to 63, describes how the
Company has applied the relevant
principles of the Code.

The role of the Board
During the year the Board consisted
of four Non-Executive Directors and
four Executive Directors. Sean Fahey
resigned as a director with effect from
28 April 2017 and, since the year end,
Paul Hampden Smith resigned with
effect from 12 July 2017. Biographies
and profiles of the current members of
the Board appear on pages 36 and 37.

The Board is responsible for leading
and controlling the Group and has
overall authority for the management
and conduct of the Group’s business,
strategy and development. The Board
is also responsible for ensuring the
maintenance of a sound system of
internal control and risk management
(including financial, operational and
compliance controls and for reviewing
the overall effectiveness of systems in
place) and for the approval of any
changes to the capital, corporate and/
or management structure of the Group.

The Code indicates at A.4.2 that the
chairman should hold meetings with
non-executive directors without the
executive directors present. Since Steve
Parkin as Executive Chairman also has
an executive function, he has not met
with the Non-Executive Directors as
a group without the other Executive
Directors present, but the Senior
Independent Director has done so.
The Chairman has met with individual
Non-Executive Directors on a one to
one basis from time to time, at which
meetings Board performance
and other appropriate matters
were discussed. The Chairman has
also discussed the Board evaluation
review with the then senior
independent director without the
other Executive Directors present.

The Board delegates to management
the day-to-day running of the business
within defined risk parameters. Board
meetings are scheduled to coincide with
key events in the corporate calendar
and this includes the interim and final
results and annual general meeting.

Steve Parkin
Executive Chairman

Chairman’s introduction

Dear Shareholder,
I am pleased to present
the Company’s Corporate
Governance Report for the
year ended 30 April 2017.

The Board recognises, understands
and is committed to the high standards
of corporate governance across the
Group that are expected of all
premium listed companies and
follows an approach which complies
with the provisions of the UK Corporate
Governance Code dated September
2014 (the “Code”). The report which
follows describes how, for the year
ended 30 April 2017, the Group has
complied with the main provisions
of the Code.

Steve Parkin
Executive Chairman

Clipper Logistics plc GovernanceThe Board has adopted a formal
schedule of matters reserved for its
approval and has delegated other
specific responsibilities to its Committees.
The formal board agenda currently
includes regular reports from the
Chief Executive Officer and the Chief
Financial Officer on the operational
and financial performance of the
Group, together with feedback from

the Non-Executive Directors on their
engagement with the business.
It includes a rolling agenda of reports
from the Nomination Committee,
the Audit Committee and the
Remuneration Committee together
with various other key operational,
strategic, governance and risk topics.
The latter are regularly updated to
ensure the Board is responsive to the

operational and strategic issues
affecting the business. The Board does
not delegate key strategic, operational
and financial issues or other matters
specifically reserved to the Board.

The following matters (amongst others)
were considered or dealt with at Board
meetings during the year:

Strategy and management

Financial and contracts

Governance

— approval and consideration of
strategic initiatives and plans,
including potential acquisitions;

— Brexit and its impact;
— automation and its role in

the business;

— European strategy review;
— growth strategy;
— health and safety record;
— approval of Senior Management
Team (“SMT”) restructuring; and
— succession and recruitment of the
Chief Operating Officer and other
members of the SMT.

— review of contract performance;
— Black Friday performance;
— financial review;
— approval of capital projects and
contracts of material importance;
— review of IT and cyber integrity; and
— review of insurance cover including

cyber cover and professional
indemnity.

— full risk review;
— legal and governance updates;
— adoption of new share

dealing code;

— Board and committee evaluation;
— review of The Market Abuse

Regulation; and

— external audit and review of
agency providers and terms.

All Directors have access to the advice
and services of the Company Secretary
who has responsibility for ensuring
compliance with the Board’s
procedures. All Directors have the right
to have their opposition to or concerns
over any Board decision noted in the
minutes. The Board has adopted
guidelines by which Directors may

take independent professional advice
at the Company’s expense in the
performance of their duties.

The Board has a full programme
of Board meetings planned for the
financial year ending 30 April 2018.
At these meetings, the Board will
review the Group’s long-term strategic

direction and financial plans and
monitor on a regular basis the Group’s
performance against an agreed
business plan.

In addition, the Board will agree
key objectives for the Group on
an annual basis and will monitor
performance against these objectives.

Meetings and attendance
In the year under review, the Board held seven meetings and various Board committee meetings were also held with
attendance as follows:

Director

Role

Steve Parkin

Tony Mannix

David Hodkin

Sean Fahey

Executive Chairman

Chief Executive Officer

Chief Financial Officer

Chief Information Officer

Paul Hampden Smith

Senior Independent Director

Stephen Robertson

Non-Executive Director

Mike Russell

Ron Series

Non-Executive Director

Board
Meetings

Audit
Committee
Meetings

Remuneration
Committee
Meetings

Nomination
Committee
Meetings

7/7

3/3

2/2

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Corporate Governance Report continued

The Chairman is responsible for ensuring
that the Directors receive accurate,
timely and clear information. Prior to
each scheduled Board meeting, a
Board pack is circulated, This Board
pack includes an update on key
performance targets, trading
performance against budget and
detailed financial data and analysis.
Board packs are generally distributed
in sufficient time for Directors to review
their papers in advance. If Directors are
unable to attend a Board meeting for
any reason, they nonetheless receive
the relevant papers and are consulted
prior to the meeting and their views
made known to the other Directors.

Conflicts of interest
In line with the requirements of the
Companies Act, each Director has
notified the Board of any situation in
which he has, or could have, a direct
or indirect interest that conflicts, or
may conflict, with the interests of the
Company (a situational conflict).
These were considered and approved
by the Board in accordance with the
Company’s Articles of Association and
each Director informed of any relevant
authorisation and the terms on which
it was given. In furtherance of this
obligation, each Director has notified
the Board of all his business interests
and those of his connected persons.
The Board has formal procedures to
deal with Directors’ conflicts of interest.

The Board reviews and, where
appropriate, approves certain situational
conflicts of interest reported to it by
Directors, and a register of such
situational conflicts is maintained and will
be reviewed by the Board going forward.

Board Committees
Subject to those matters reserved for
its decision, the Board has delegated
to its Nomination, Audit, Remuneration
and Executive Committees certain
authorities. There are written terms
of reference for each of these
Committees available on request
from the Company Secretary. Separate
reports for each of the Nomination,
Audit and Remuneration Committees
are included in this Annual Report and
Accounts from pages 42 to 59.

Role of the Executive Chairman
and Chief Executive
The Board is chaired by Steve Parkin who
is Executive Chairman. The Executive
Chairman is responsible for the
leadership and overall effectiveness
of the Board and setting the Board’s
agenda, having regard to the interests
of all stakeholders and promoting high
standards of corporate governance.
Tony Mannix is the Chief Executive Officer
and is responsible for implementing the
Board’s strategy and leading the SMT.
The role is distinct and separate to that of
Executive Chairman and clear divisions
of accountability and responsibility have
been agreed by the Board.

Role of the Senior
Independent Director
The Code recommends that the board
of directors of a company with a
premium listing on the Official List should
appoint one of the non-executive
directors to be the senior independent
director to provide a sounding board
for the chairman and to serve as an
intermediary for the other directors when
necessary. The senior independent
director should be available to
shareholders if they have concerns
which contact through the normal
channels of the chairman, chief
executive officer or other executive
directors has failed to resolve or for
which such contact is inappropriate.

Having served as Senior Independent
Director since May 2014, Paul Hampden
Smith resigned in July 2017. Ron Series
has now been appointed Senior
Independent Director.

The Code indicates (at E.1.1) that the
senior independent director should
attend meetings with a range of major
shareholders to listen to their views in
order to help develop a balanced
understanding of their issues and
concerns. Whilst the Senior Independent
Director (and the other Non-Executive
Directors) are available to meet with
shareholders to discuss issues and
concerns, no such meetings have been
requested. Notwithstanding this, we
have maintained dialogue with our
major shareholders and, overall, the
Board believes that appropriate steps
have been taken throughout the year
to ensure that members of the Board,
including the Non-Executive Directors,
develop an understanding of the views
of major shareholders. These steps
include attending the AGM, receiving
feedback on other shareholder
meetings and analysts’ and brokers’
briefings on a regular basis.

Board balance and independence
The Code recommends that at least
half the board of directors of UK listed
companies, excluding the chairman,
should comprise non-executive
directors determined by the board
to be independent in character and
judgement and free from relationships
or circumstances which may affect,
or could appear to affect, the
director’s judgement.

The Board regards all of the
Non-Executive Directors as
Independent Non-Executive Directors
within the meaning of the Code
and free from any business or other
relationship that could materially
interfere with the exercise of their
independent judgement. The Board
believes that the current directorate
will enhance considerably its ability
to develop the Group’s operations.

Clipper Logistics plc GovernanceRole of the Company Secretary
Guy Jackson is the Company Secretary.
The role of the Company Secretary,
under the direction of the Chairman,
is to develop, implement and maintain
good corporate governance practices.
This includes supporting the Chairman
and Non-Executive Directors as
appropriate, managing Board and
Nomination Committee meetings,
ensuring that appropriate levels of
directors’ and officers’ insurance is in
place and that the Group is compliant
with statutory and regulatory
requirements.

Development
There have been no new appointments
to the Board since the last AGM. The
Group has an induction and training
process for new Directors. New Directors
will receive a detailed induction on
joining the Board, including meeting
other members of the Board and the
SMT. New directors will be encouraged
to visit the Group’s sites and to provide
feedback to the Board. The Group’s
Company Secretary periodically
reports to the Board on any new
legal, regulatory and governance
developments that affect the Group
and, where necessary, actions are
agreed. External lawyers have provided
updated training to the Directors and
Senior Management Team on the
changes to the Company’s share
dealing code, insider dealing and other
regulatory matters to ensure compliance
with the new EU regulation on Market
Abuse. This is supplemented by advice
and training provided on certain
matters by the Company Secretary.

Board evaluation
The effectiveness of the Board is
essential to the success of the Group.
During the year an evaluation process
was developed and implemented.
The evaluation process was based
on a series of questions devised for the
purpose by the Senior Independent
Director and the Company Secretary
and circulated to the Directors.
The process reviewed issues such as:
the assessment and monitoring of
the Company’s strategy; the mix of
knowledge and skills on the Board;
succession; and the effectiveness of
the Board and the Directors. Separate
questionnaires were devised for
each of the Audit, Remuneration
and Nomination Committees, and
circulated to Committee members.

The results were collated by the
Company Secretary and considered
by the Senior Independent Director.
The performance of the Board as a
whole and of each of its principal
Committees was considered.

The Board is satisfied that each Director
remains competent to discharge his
responsibilities as a member of the Board.

Election of Directors
The Board can appoint any person to
be a Director, either to fill a vacancy
or as an addition to the existing Board
provided that the total number of
Directors does not exceed 12, the
maximum prescribed in the Company’s
Articles of Association. Any Director so
appointed by the Board shall hold office
only until the next following Annual
General Meeting and shall then be
eligible for election by the shareholders.

In accordance with the Articles of
Association, at every Annual General
Meeting of the Company, one-third of
the Directors, or the number nearest to
but not less than one-third, shall retire
from office. The Directors to retire shall
be, first, those who wish to retire, and
then those who have been longest
in office since their last appointment
or re-appointment. When a Director
retires at an Annual General Meeting
in accordance with the Articles, the
Company may, by ordinary resolution
at the meeting, fill the office being
vacated by re-electing the retiring
Director. If the Company does not fill the
vacancy at the meeting, the retiring
Director shall nevertheless be deemed
to have been re-elected, except in
the cases identified by the Articles.
The Company intends to continue this
practice but will review it regularly.

David Hodkin and Stephen Robertson
will be offering themselves for re-election
at the 2017 AGM to be held at Clipper
Logistics, 11th Floor, Central Square,
29 Wellington Street, Leeds, LS1 4DL
on 25 September 2017 at 11.00am,
full details of which will be issued
under separate cover.

External appointments and
time commitment
The Executive Directors may accept
outside appointments provided
that such appointments do not in any
way prejudice their ability to perform
their duties as Executive Directors of
the Company.

The Non-Executive Directors’
appointment letters are not specific
about the maximum time commitment,
recognising that there is always the
possibility of an additional time
commitment and ad hoc matters that
may arise from time to time, particularly
when the Group is undergoing a period
of increased activity. The average time
commitment inevitably increases where
a Non-Executive Director assumes
additional responsibilities such as being
appointed to a Board Committee or as
a Non-Executive Director on the Boards
of any of the Company’s subsidiaries.

Communications with shareholders
The Board considers effective
communication with its investors,
whether institutional, private or
employee shareholders, to be extremely
important and we have set ourselves
the target of providing information
that is timely, clear and concise.

During the year to 30 April 2017, the
Company met regularly with analysts
and institutional investors and such
meetings will continue. The Executive
Chairman, Chief Executive Officer
and Chief Financial Officer have led
responsibility for investor relations and
they meet institutional investors
regularly to provide an opportunity
to discuss, in the context of publicly
available information, the progress
of the Group. They are supported by
members of the SMT, where required,
and the Company’s retained financial
PR advisers, Bell Pottinger, and corporate
brokers, Numis Securities, who, amongst
other matters, assist in organising
presentations for analysts and
institutional investors and ensure that
procedures are in place to keep the
Board regularly informed of such
investors’ views. Reports from analysts
and brokers are circulated to the Board.

The formal reporting of our full and
half yearly results will be a combination
of presentations, group calls and
one-to-one meetings in a variety of
locations where we have institutional
shareholders. All the Non-Executive
Directors and, in particular, the Chairman
and Senior Independent Director,
are available to meet with major
shareholders, if they wish to raise issues
separately from the arrangements as
described above. The Company’s
investor website is regularly updated
with news and information, including
this Annual Report and Accounts which
sets out our strategy and performance
together with our plans for growth.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Activities of the Nomination
Committee in 2017
The Committee met twice during
the financial year and considered
the succession plans for executive
Board Directors and also the need to
strengthen the Senior Management
Team, taking into account the strategic
objectives of the Group. In that regard,
whilst no main Board appointments
were made, after appropriate
searches the Board, acting on the
recommendation of the Committee,
appointed Emma Dempsey as Chief
Operating Officer in March 2017. Emma
has a wealth of experience in retail
logistics consultancy, retail supply chain
and the third party logistics sector.

In March 2017 Sean Fahey (Chief
Information Officer) indicated that, after
over 20 years as a Director of Clipper,
he would retire at the end of the financial
year. The Board would like to thank
Sean for his service and his dedication to
Clipper over the years. Sean’s resignation
as a Director took effect on 28 April 2017.
He will remain with the Group until at
least September 2017.

Nomination Committee Report

Composition
The UK Corporate Governance Code
recommends that a majority of the
members of a nomination committee
should be independent non-executive
directors. The Nomination Committee
is chaired by Steve Parkin and its other
members are Ron Series and Mike Russell.

Roles and responsibilities
Under normal circumstances,
it is intended that the Nomination
Committee will meet not less than
twice a year to assist the Board in
discharging its responsibilities relating
to the composition and make-up of
the Board and any committees of
the Board. It is also responsible for
periodically reviewing the Board’s
structure and identifying potential
candidates to be appointed as
Directors or Committee members as
the need may arise. The Nomination
Committee is responsible for evaluating
the balance of skills, knowledge and
experience and the size, structure
and composition of the Board and
Committees of the Board, retirements
and appointments of additional and
replacement Directors and Committee
members and makes appropriate
recommendations to the Board on
such matters.

Diversity
Whilst the Group pursues diversity,
including gender diversity, throughout
the business, and the Board endorses
the aspirations of the Davies Review
on Women on Boards, the Board is not
committing to any specific targets.
Instead, the Board will engage
executive search firms which have
signed up to the voluntary code of
conduct setting out the seven key
principles of best practice to abide by
throughout the recruitment process
and will continue to follow a policy of
appointing talented people at every
level to deliver high performance.
It is Group policy (whether it be at
employee or Board level) to make
all appointments based on the best
candidate for the role regardless of
gender or other diversity. The Board will
also ensure that its own development in
this area is consistent with its strategic
objectives and enhances Board
effectiveness.

Steve Parkin
Chairman, Nomination
Committee

Committee Chairman’s introduction
As Chairman of the Nomination
Committee (the “Committee”), I am
pleased to present the report of the
Committee for the year ended 30 April
2017. The Committee is a key committee
of the Board whose role is to keep the
composition and structure of the Board
and its committees under review.
The Committee’s role also includes
enhancing the quality of nominees
to the Board and ensuring that the
recruitment and appointment process
is conducted with rigour and integrity.

The Committee is proactive
in discharging its responsibilities,
cognisant of the importance of
succession planning and the need
to align Board and executive
leadership skills to the Company’s
long-term strategy. I hope this report
gives you a helpful insight into how
the Committee intends to carry out
its responsibilities in the year ahead.

Steve Parkin
Chairman, Nomination Committee

Clipper Logistics plc GovernanceAudit Committee Report

Composition
The Code recommends that an
audit committee should comprise at
least three, or in the case of smaller
companies, two independent
non-executive directors (other than
the chairman) and that at least one
member should have recent and
relevant financial experience. Clipper’s
Audit Committee is chaired by Mike
Russell and its other members are now
Ron Series and Stephen Robertson.
By virtue of his former executive roles,
the Directors consider that Mike Russell
has recent and relevant financial
experience. The Company is therefore
compliant with the Code in this regard.
Other Directors or senior financial
management attend meetings of
the Audit Committee by invitation.

Roles and responsibilities
The Audit Committee assists the
Board in discharging its responsibilities
with regard to:

— agreeing the scope of the annual
audit and the annual audit plan
and monitoring the same;

— monitoring, making judgements
and recommendations on the
financial reporting process and
the integrity and clarity of the
Group’s Financial Statements;
— considering the appointment
of the Group’s auditor and its
remuneration including reviewing
and monitoring independence
and objectivity and agreeing
and monitoring the extent of the
non-audit work that may be
undertaken; and

— reviewing and monitoring the
adequacy and effectiveness
of the internal control and risk
management policies.

The Audit Committee gives due
consideration to laws and regulations,
the provisions of the Code and the
requirements of the Listing Rules.

The ultimate responsibility for reviewing
and approving the Annual Report
and Accounts and the half-yearly
reports remains with the Board.

The Board has requested that the
Audit Committee advise them in
ensuring that the Financial Statements,
when taken as a whole, are fair,
balanced and understandable
and provide the information necessary
for shareholders to assess the Group’s
position and performance, business
model and strategy.

Activities during the year ended
30 April 2017
During the year, the Audit Committee
met three times. A summary of the main
areas dealt with by the Committee
is set out below:

— review and approval for

consideration by the Board of
the financial results for the year
ended 30 April 2016;

— findings from the external audit
for the year ended 30 April 2016;

— approval of the auditors’

remuneration in respect of the year
ended 30 April 2016;

— discussion around the UK Corporate

Governance Code on risk
management, internal control,
viability and going concern;

— auditor’s confirmation of

independence;

— review of auditor’s effectiveness; and
— discussion with the external auditor

over the audit planning, with
particular reference to significant
risks highlighted in the planning
documents, together with the audit
scope and timetable.

Since the year end, the Audit
Committee has reviewed and
approved for consideration by the
Board this Annual Report and reviewed
the findings from the external audit
for the year ended 30 April 2017.

Mike Russell
Chairman, Audit Committee

Committee Chairman’s introduction
The Audit Committee (the
“Committee”) was established by
a resolution of the Board dated
16 May 2014, at which meeting terms
of reference were considered and
adopted. The Board further resolved
to appoint Mike Russell and Stephen
Robertson to the Audit Committee
under the chairmanship of Paul
Hampden Smith. Following Paul
Hampden Smith’s resignation as a
Director on 12 July 2017, I agreed to
succeed him as Chairman of the
Committee. Ron Series will join the
Committee in August 2017. Under its
terms of reference, the Audit Committee
is required to meet at least three times
in each year at appropriate times in
the reporting and auditing cycle.
In the year ended 30 April 2017, the
Audit Committee has met three times.

The primary function of the Audit
Committee is to assist the Board in
fulfilling its responsibilities to protect
the interests of shareholders with
regard to the integrity of the financial
reporting, audit, risk management
and internal controls.

In this report, I explain how the Audit
Committee has discharged these
responsibilities, with specific reference
to the requirement of the UK Corporate
Governance Code, (the “Code”) to
address significant financial statement
reporting issues and to explain how
the Audit Committee assessed external
audit effectiveness and safeguards in
relation to the provision by the auditor
of non-audit services.

Mike Russell
Chairman, Audit Committee

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Audit Committee Report continued

As part of their review process, the
members of the Audit Committee are
provided with a draft of the full Annual
Report and Accounts enabling them
to ensure that the figures are consistent
with those in the Financial Statements
or are sourced from appropriate data.
As important, the Audit Committee
assesses whether the words used are
consistent with its understanding of the
Group’s business obtained through
Board and Audit Committee meetings
and other interaction they have had
with management, using their
experience to assess whether the
Annual Report taken as a whole is fair,
balanced and understandable. This
additional review by the Audit
Committee, supplemented by advice
from external advisors during the
drafting process, assists the Board
in determining that the report is fair,
balanced and understandable at
the time that it is approved. The
Audit Committee considers the
appropriateness of preparing the
Financial Statements on a going
concern basis, including consideration
of forecast plans and supporting
assumptions.

Significant issues considered in
relation to the Financial Statements
The Audit Committee, together with
the Board, considered what were the
significant risks and issues in relation
to the Financial Statements and how
these would be addressed. The most
significant risk identified is set out below:

Revenue recognition
— The Group has a multiplicity of

complex contract mechanisms.
As a result, there could be a risk
of misstatement of revenue.
— To mitigate this risk, the revenue

recognition methodology adopted
is kept under regular review to
ensure that it remains appropriate.

Assessment of effectiveness
of external audit
The Audit Committee oversees the
relationship with the external auditor
and considers the re-appointment
of the Group’s auditor, before making
a recommendation to the Board to
be put to shareholders.

Prior to recommending the
re-appointment of KPMG LLP at the
forthcoming AGM to the Board, the
Audit Committee conducted a review
of the external auditor’s performance
and ongoing independence taking into
consideration input from management,
responses to questions from the Audit
Committee and the audit findings
reported to the Audit Committee.
Based on this information, the Audit
Committee concluded that the
external audit process had been
efficiently run and that KPMG LLP proved
effective in its role as external auditor.

Independence safeguards
In accordance with best practice
and professional standards, the
external auditor is required to adhere
to a rotation policy whereby the audit
engagement partner is rotated after
five years. Following the change in
auditor last year, the current audit
engagement partner has now served
for two years. The external auditor is
also required periodically to assess
whether, in its professional opinion,
it is independent and those views are
shared with the Audit Committee.

The Audit Committee has authority to
take independent advice as it deems
appropriate in order to resolve issues
on auditor independence. No such
advice has, to date, been required.

Independence assessment
by the Audit Committee
As required, the external auditor
provided the Audit Committee with
information for review about policies
and procedures for maintaining its
independence and compliance
regarding the rotation of audit partners
and staff. Separate external firms are
engaged for taxation advisory services.
The Audit Committee is satisfied that
the independence of KPMG LLP is
not impaired.

Furthermore, KPMG LLP has provided
an independence report to the Audit
Committee, in which they have
confirmed that they are independent,
that their objectivity is not compromised,
and that they have complied with
the Auditing Practices Board’s ethical
standards (including in relation to
the supply of non-audit services).

KPMG LLP has performed no non-audit
work for the Group in the two years
ended 30 April 2017.

The Audit Committee has assessed the
performance and independence of the
external auditor and recommended to
the Board the re-appointment of KPMG
LLP as auditor until the conclusion of the
AGM in 2018.

Internal audit
The Board has considered the benefits
that an internal audit function might
bring to the Group. It has concluded
that, due to the tight financial controls
in place across the Group, and the
close management of financial matters
by the Executive Directors, an internal
audit function would not currently
provide additional assurance.

Clipper Logistics plc GovernanceWhistleblowing
The Group has a Whistleblowing
Policy which encourages employees
to report any malpractice or illegal
acts or omissions or matters of similar
concern by other employees or former
employees, contractors, suppliers or
advisors using a prescribed reporting
procedure. The Whistleblowing Policy
is complemented by an Anti-bribery
and Corruption Policy, and a Gifts
and Entertainment Policy.

These policies facilitate the reporting
of any ethical wrongdoing or
malpractice or suspicion which may
constitute ethical wrongdoing or
malpractice. Examples include
bribery, corruption, fraud, dishonesty
and illegal practices which may
endanger employees or third parties.

There have been no instances
of whistleblowing during the year
under review.

Accountability
The Board is required to present a
fair, balanced and understandable
assessment of the Company
and Group’s financial position,
performance, business model and
strategy. The responsibilities of the
Directors and external auditor are set
out on pages 64 and 67 respectively.

In reviewing the effectiveness of the
system of internal controls, the Audit
Committee receives self-assurance
statements from the members of the
Senior Management Team, who are
responsible for the principal business
units, confirming that controls and
risk management processes in their
business units have been operated
satisfactorily. These returns are
reviewed by the Audit Committee
and challenged where appropriate.
The Deputy Chief Financial Officer is
responsible for compiling and
maintaining a risk register to monitor all
of the risks facing the business. The key
risks are summarised for review and
approval by the Audit Committee for
inclusion in the Annual Report. In
addition, the Audit Committee reviews
the financial and accounting controls.

In respect of the Group’s financial
reporting, the finance department
is responsible for preparing the
Group Financial Statements using a
well-established consolidation process
and ensuring that accounting policies
are in accordance with International
Financial Reporting Standards.
All financial information published
by the Group is subject to the
approval of the Audit Committee.

There have been no changes in the
Group’s internal controls during the
financial year under review that have
materially affected, or are reasonably
likely to materially affect, the Group’s
control over financial reporting.

The Board, with advice from the Audit
Committee, is satisfied that effective
systems for internal control and risk
management are in place which
enable the Group to identify, evaluate
and manage key risks, and which
accord with the guidance of the Turnbull
Committee on internal control updated
by the Financial Reporting Council in
2005. These processes have been in
place throughout the financial year
and up to the date of approval of the
Financial Statements. Further details of
risk management frameworks and
specific material risks and uncertainties
facing the business can be found on
pages 20 to 23.

In terms of operational matters, the
specialised nature of the Group’s
activities means that a non-specialist
internal audit function would not
provide additional comfort over the
Group’s operational management.
The Board will continue to evaluate this
matter, and the Audit Committee will
formally consider the issue annually, in
accordance with Code provision C.3.2.

Internal control and risk management
The Board is responsible for the overall
system of internal controls for the Group
and for reviewing its effectiveness.
It carries out such a review at least
annually, covering all material controls
including financial, operational and
compliance controls and risk
management systems.

The system of internal controls is
designed to manage, rather than
eliminate, the risk of failure to achieve
business objectives and can only
provide reasonable and not absolute
assurance against material
misstatement or loss.

Operating policies and controls are
in place and have been in place
throughout the financial year under
review, and cover a wide range of
issues including financial reporting,
capital expenditure, information
technology, business continuity and
management of employees.

Detailed policies ensure the accuracy
and reliability of financial reporting
and the preparation of the Financial
Statements, including the consolidation
process. The key elements of the
Group’s ongoing processes for the
provision of effective internal control
and risk management systems, in place
throughout the year and at the date
of this report, include:

— regular Board meetings to consider
matters reserved for the Directors’
consideration;

— regular management reporting,

providing a balanced assessment
of key risks and controls;

— an annual Board review of corporate

strategy, including a review of
material business risks and
uncertainties facing the business;
— established organisational structure

with clearly defined lines of
responsibility and levels of authority;

— documented policies and

procedures; and

— regular review by the Board of

financial budgets, forecasts and
covenants.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Directors’ Remuneration Report

The first Performance Share Plan
(“PSP”) awards made by the Company
in January 2015 are expected to vest in
January 2018 at 100% of the maximum
award. This reflects full attainment of
the performance conditions for these
awards, which required Earnings Per
Share (“EPS”) to have been at least
12.0p in the year ended 30 April 2017.
Actual EPS for the year is 12.5p.

The other significant action which
we had to undertake for the first time
was to consider the treatment of a
departing Executive Director.

Accordingly, the principles which we
have applied in relation to Sean
Fahey’s departure are, we believe,
appropriate and in line with our
shareholder approved remuneration
policy where an individual retires from
the Board.

Our new Directors’
Remuneration Policy
At our 2017 AGM we are required to
re-submit our Directors’ Remuneration
Policy for approval by our shareholders
as it has been three years since the
policy was first approved at our
2014 AGM.

The Directors’ Remuneration Policy
which we are proposing at the 2017
AGM is largely unchanged from
our current policy:

— There will be no increase in the

potential quantum for the Annual
Incentive Plan (“AIP”) (50% of
salary maximum).

— Our Executive Directors will continue
to participate in the PSP, with the
policy being to make awards at
100% of base salary per annum.

Overall, we believe that the Directors’
Remuneration Policy has been
successful in supporting our strategy
and delivering strong performance for
our shareholders. A key element of this
success has been, and remains, the
strong message of a team culture
which comes from having all of our
Executive Directors, including our
Executive Chairman, participating
in the same annual incentive plan
and long-term incentive plan as
our senior managers, with all of that
wider team being incentivised on
the same performance measures.

Whilst not a change to our policy,
we are making changes to the base
salary levels for our Chief Executive
Officer, Tony Mannix, and for our
Chief Financial Officer, David Hodkin.
From 1 August 2017, Tony’s salary has
been increased to £276,000 (from
£228,375) and David’s salary has been
increased to £218,000 (from £182,700).
No increase has been made to our
Executive Chairman’s salary.

These changes do not entail any change
to our remuneration policy, which
permits us to pay salaries up to the
median level for the equivalent role in
the top half of the FTSE SmallCap, plus
10%. In fact, the new salaries remain
below these benchmarks. The changes
were made only following a thorough

Mike Russell
Chairman, Remuneration Committee

Committee Chairman’s introduction
On behalf of the Board, I am pleased
to present the Directors’ Remuneration
Report for the year to 30 April 2017.

Pay for performance in the year
ended 30 April 2017
As described more fully in the Strategic
Report, the financial year ended
30 April 2017 was another significant
one for Clipper. The Group performed
strongly, with EBIT growing by 21.8% to
£17.9 million.

Although the level of EBIT performance
for the year ended 30 April 2017 would
have produced mid-range bonuses for
the Executive Directors, these bonuses
have been waived. The Executive
Directors have asked for this amount of
value to be used for wider staff bonuses.

Clipper Logistics plc Governancereview during which we took into
account the growing scale and
complexity of Clipper since its Initial
Public Offering (“IPO”) in 2014, plus the
fact that, other than a 1.5% increase in
2016 in line with all central office staff,
our Executive Directors’ salaries have
remained unchanged from the time of
our IPO. The overall increases represent
the equivalent of an annualised increase
of less than 5.5% p.a. since our IPO.

We also considered the effect which
increases in base salaries would have on
other aspects of our Executive Directors’
remuneration. As our overall quantum on
incentive pay, particularly AIP at 50% of
base salary maximum, remains modest,
we are comfortable that these changes
to base salaries will not produce an
inappropriate overall increase in total
packages. Both David and Tony have
been central in driving Clipper’s success
and we are confident that these
increases in base salary will prove to
be good value for our shareholders.

For completeness, whilst not a
Remuneration Committee matter,
the first increases to Non-Executive
Directors’ fees since the IPO have
also been made for the year ending
30 April 2018, with the basic fee
increasing from £40,000 to £47,500
and the Senior Independent Director’s
fee increasing from £60,000 to £65,000.
No additional fees are paid for chairing
board committees.

At our 2017 AGM there will be three
remuneration-related resolutions:

— The normal annual advisory vote on
our Directors’ Remuneration Report;

— The vote to approve our new

Directors’ Remuneration Policy,
which will apply to all payments to
be made to Directors from the 2017
AGM and which (unless altered with
shareholders’ approval) will apply for
a period of three years. The Directors’
Remuneration Policy is set out in
Part B of this Report (please see
pages 53 to 59);

— Consistent with past years, a vote
to authorise the participation of
Steve Parkin (Executive Chairman),
David Hodkin (Chief Financial Officer)
and Guy Jackson (Company
Secretary) in the PSP and our
Sharesave Plan in accordance with
the requirements of the Takeover
Panel for “concert parties”.

As I explained in my annual statement
introducing the Directors’ Remuneration
Report last year, due to our shareholding
structure, each year at our AGM we are
required to seek specific approval from
our independent shareholders to permit
the Executive Chairman, the Chief
Financial Officer and the Company
Secretary and General Counsel to
participate in awards under our
Sharesave Plan and PSP.

Last year we engaged specifically
with our largest shareholders and
with leading proxy voting agencies
regarding this requirement to better
understand the reasons why circa 20%
of independent shareholders have not
supported this resolution each year
since 2014. Overall, we welcomed
the feedback which we received.
Most independent shareholders
are supportive of the Directors’
Remuneration Policy which we have
applied since 2014, with the policy being
seen as effective in driving performance
whilst not being excessive. Whilst
noting that having “concert party”
participation in share plans infringes
the guidelines of certain proxy voting
agencies regarding “creeping control”,
we are proposing to continue to operate
our current policy with no material
revisions in order to maintain the team
ethos which underlies our policies.

The Remuneration Committee hopes
that you will continue to support our
approach on remuneration matters. The
Remuneration Committee is confident
that the approach we are following is
the correct one for the Group and
hopes that it can rely on the support of
shareholders for all of the remuneration
related resolutions at the 2017 AGM.

Mike Russell
Chairman, Remuneration Committee

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Directors’ Remuneration Report continued

This report contains the material required to be set out as the Directors’ Remuneration Report for the purposes of Part 4
of The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, which
amended The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (the “DRR
regulations”). The auditor has reported on certain parts of the Directors’ Remuneration Report and stated whether, in
its opinion, those parts have been properly prepared in accordance with the Companies Act 2006. Those parts of the
Directors’ Remuneration Report which have been subject to audit are clearly indicated.

Part A: Implementation Report on Remuneration

Audited information
Single Figure Table

Salary
year ended
30 April:

Benefits1
year ended
30 April:

Annual bonus2
year ended
30 April:

£’000

Steve Parkin5

Tony Mannix5

David Hodkin

Sean Fahey6

2017

411

228

183

152

2016

384

213

180

150

2017

2016

2017

2016

nil

Long-term
incentives3
year ended
30 April:

Pension
contributions4
year ended
30 April:

Total
year ended
30 April:

2017

874

486

389

324

2016

2017

2016

2017

nil

1,364

766

597

519

2016

486

276

205

192

1 Benefits comprise a car allowance or company car, fuel allowance, private family medical cover, and insurance benefits.
2 Details of the Annual Incentive Plan (“AIP”) for the financial year ended 30 April 2017 are set out below.
3

In accordance with the requirements of the DRR regulations, the 2017 value for long-term incentives is an estimate of the vesting outcomes for PSP
awards granted in 2014/15 and which are due to vest on 14 January 2018. These estimated vesting levels are at 100% reflecting outcomes against the
EPS performance measures to 30 April 2017. This vesting outcome is applied to the average share price between 1 February 2017 and 30 April 2017
(380.65p) to produce the estimated long-term incentives figures shown for 2017 in the above table. These assumptions will be revised for actual share
prices on vesting in the report for 2018. Details of the performance measures and targets applicable to the relevant PSP award are set out on page 49.

4 David Hodkin’s pension entitlement is paid by way of an additional allowance, taxed as salary. No director participated in a defined benefit pension.
5 Base salaries for Steve Parkin and Tony Mannix in the year ended 30 April 2016 were £405,000 and £225,000 respectively. In the year ended 30 April

2016, both Steve and Tony surrendered part of their salaries in return for additional employer’s pension contributions.
Sean Fahey resigned as a director on 28 April 2017. Details regarding Sean’s departure terms are set out below.

AIP outcomes for the year ended 30 April 2017
Performance for the AIP was measured against EBIT (adjusted)1 for the year to 30 April 2017.

Performance measure

Threshold
performance
level for
2017 AIP

Maximum
performance
level for
2017 AIP

Performance level attained
for 2017 AIP

AIP attained
as % of
base salary2

EBIT for financial year to 30 April 2017 (adjusted)1

£16.77m

£18.54m

Between threshold and max

nil

1 During the year, the Remuneration Committee deemed that EBIT to be used for AIP purposes should be based on EBIT, but adjusted to include the
Clicklink joint venture for the year ended 30 April 2017. Had it not done so, management would not have been credited with the performance of
the Clicklink joint venture in the year ended 30 April 2017.
The Executive Directors have waived their entitlement to an annual bonus for the year ended 30 April 2017.

PSP outcomes for the 2014/15 awards
The performance conditions for the PSP awards included in the Single Figure Table are as shown below.

Performance measure and weighting

Target range

Performance
achieved

Vesting
outcome

Adjusted EPS in financial year to 30 April 2017
(100% of award)

Target range between 10.0p (25% vests)
and 12.0p (100% vests)

12.5p

100%

Non-Executive Directors’ fees

£’000

Paul Hampden Smith

Stephen Robertson

Mike Russell

Ron Series

Fees year ended 30 April:

Benefits year ended 30 April1:

Total year ended 30 April:

2017

2016

2017

2016

2017

2016

–

1 Benefits amounts reported relate to expenses such as travel and accommodation expenditure incurred on Group business. Whilst these payments are

the reimbursement of expenses and not benefits per se, they are included as being a payment which is subject to tax.

Clipper Logistics plc GovernanceDirectors’ interests
The interests (all being beneficial) of the Directors in the Company’s ordinary shares as at 30 April 2017 are set out below:

Steve Parkin

Tony Mannix

David Hodkin

Stephen Robertson

Mike Russell

Ron Series

Sean Fahey2

Paul Hampden Smith3

Ordinary
shares
Number1

30,000,000

1,358,613

9,410

–

10,000

7,834,397

100,000

1 All shares are wholly owned by Directors or connected persons (i.e. none are subject to performance conditions and none are previously vested but

as of yet unexercised share options).
2 Resigned as a Director on 28 April 2017.
3 Resigned as a Director on 12 July 2017.

As at the last practicable date prior to publication of this report, there had been no changes to the above shareholdings for
current directors.

Share plan interests
Performance Share Plan:

Steve Parkin

Tony Mannix

David Hodkin

Sean Fahey

Sharesave Plan:

Options
held at
1 May 2016

365,056

202,809

162,247

135,205

Options
lapsed

Options
granted

Options
exercised

Option
grant price
(p)

Options
held at 30
April 2017

Earliest
exercise
date

Latest
exercise
date

–

108,012

60,007

48,005

40,004

–

nil

473,068 14/01/2018 27/01/2027

262,816 14/01/2018 27/01/2027

210,252 14/01/2018 27/01/2027

175,209 14/01/2018 27/01/2027

Options
held at
1 May 2016

Options
lapsed

Options
granted

Options
exercised

Option grant
price (p)

Options
held at 30
April 2017

Earliest
exercise
date

Latest
exercise
date

Steve Parkin

12,820

Tony Mannix

David Hodkin

Sean Fahey

10,170

12,820

–

140.40

12,820

01/04/2018

30/09/2018

140.40 and
239.34

140.40

10,170

01/04/2018

30/09/2019

12,820

01/04/2018

30/09/2018

12,820

01/04/2018

30/09/2018

The range of market price of shares in Clipper Logistics plc during the year ended 30 April 2017 was 224p to 430p. The closing price on 30 April 2017
was 385p.

2 None of the Directors paid for the award of options.
3 Options granted in the year under the PSP represent awards with a face value of 100% of base salary for all Executive Directors. This has been calculated

using the average mid-market price of the three days preceding the date of grant, being 380.58p for the options granted on 27 January 2017.
The threshold level of vesting for the PSP options granted in the year is 25% of the total number of options granted.
The performance conditions attached to the PSP awards granted during the year are set out below.
The exercise price for options under the Sharesave Plan was set at 80% of the three day average market price of shares before invitations to
participate were made, in accordance with HMRC rules.
The options under the Sharesave Plan were granted under an HMRC tax-advantaged plan and are therefore not subject to performance conditions.

4
5
6

Performance conditions for PSP awards
The performance measures and targets for the PSP awards made in the year to 30 April 2017 are based on EPS performance
(adjusted in the Remuneration Committee’s discretion for one-off items, where necessary) for the financial year ending 30 April
2019, summarised as follows:

EPS – Financial year ending 30 April 2019

18.0p

Between 14.7p and 18.0p

14.7p

Less than 14.7p

PSP Award

100%

Pro-rata on straight-line basis between 25% and 100%

25%

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Directors’ Remuneration Report continued

Unaudited information
Remuneration Committee
The members of the Remuneration Committee during the year were:

— Mike Russell (Chairman);
— Paul Hampden Smith; and
— Ron Series.

The Remuneration Committee’s principal responsibilities are:

— recommending to the Board the remuneration strategy and framework for the Executive Directors and senior managers;
— determining, within that framework, the individual remuneration arrangements for the Executive Directors and senior

managers; and

— overseeing any major changes in employee benefit structures throughout the Group.

The Executive Chairman is invited to attend meetings of the Remuneration Committee, except when his own remuneration
is being discussed, and the Chief Financial Officer and other executives attend meetings as required.

Sean Fahey
Sean Fahey has been with Clipper since 1992 and has served on the Board of Clipper Logistics plc since incorporation in 1995.
Sean Fahey’s retirement as a Director was announced on 29 March 2017 and took effect on 28 April 2017.

Sean Fahey’s departure terms are in accordance with the terms of his service agreement and the Company’s remuneration
policy. Sean Fahey will remain with the business until the end of September 2017, and he will continue to receive salary,
benefits and pension contributions until the end of this period.

Sean Fahey was entitled to receive an annual bonus for the year ended 30 April 2017 (having remained with the business for
the whole of that financial year), but not for the year ending 30 April 2018. However, along with the other Executive Directors,
Sean waived his entitlement to a bonus for the year.

The Board and Remuneration Committee have determined that from the date of his retirement, Sean Fahey will be treated as
a good leaver under the Company’s share plans. As a result Sean Fahey will retain the awards previously granted in 2015, 2016
and 2017 under the Company’s PSP. These PSP awards will vest at the originally specified vesting dates, three years after they
were awarded, will remain subject to the original pre-vesting performance conditions and will additionally be time pro-rated
at vesting. Sean Fahey’s options under the Sharesave Plan will be treated in accordance with the rules of that plan, which are
prescribed by HMRC legislation.

Advisors
FIT Remuneration Consultants LLP, signatories to the Remuneration Consultants Group’s Code of Conduct, were appointed by the
Remuneration Committee following a competitive tender process. FIT provides advice to the Remuneration Committee on all matters
relating to remuneration, including best practice. FIT provided no other services to the Group and accordingly the Remuneration
Committee was satisfied that the advice provided by FIT was objective and independent. FIT’s fees in respect of the year ended
30 April 2017 were £30,000. FIT’s fees were charged on the basis of the firm’s standard terms of business for advice provided.

Implementation of Policy in the year ending 30 April 2018
Executive Directors
Base salary
— Steve Parkin’s base salary for the year ending 30 April 2018 is £411,075 (unchanged from year ending 30 April 2017).

Tony Mannix’s salary will be increased to £276,000 (currently £228,375) from 1 August 2017, and David Hodkin’s salary will be
increased to £218,000 (currently £182,700) also from 1 August 2017.

Pension
— Contribution rates for Executive Directors are as follows (expressed as percentages of base salary): Tony Mannix – 10% and David
Hodkin – 15%. Steve Parkin will receive a contribution of £10,000. These are unchanged from the financial year ended 30 April 2017.

Benefits
— Details of the benefits received by Executive Directors are set out in note 1 to the single figure table on page 48.
— There is no intention to introduce additional benefits in the financial year ending 30 April 2018.

Annual Incentive Plan for the year ending 30 April 2018
— The AIP maximum is 50% of base salary. This is unchanged from the financial year ended 30 April 2017.
— Performance measures for the AIP in the year to 30 April 2018 will be based on EBIT (adjusted in the Remuneration

Committee’s discretion for one-off items, where necessary). The Remuneration Committee selected EBIT (adjusted, where
necessary) as the performance measure for the AIP for the year ending 30 April 2018 as it is regarded as a key performance
indicator for the Group. Given the competitive nature of the Group’s sectors, the specific performance targets for the AIP

Clipper Logistics plc Governanceare considered to be commercially sensitive and accordingly are not disclosed. Following the conclusion of the current
financial year, the Remuneration Committee’s intention is to disclose the performance targets for the current financial year
on a retrospective basis.

Performance Share Plan for the year ending 30 April 2018
— Award levels are proposed at 100% of base salary for each Executive Director. This is unchanged from the financial year

ended 30 April 2017.

— The performance measures and targets for this award will be based on EPS performance (adjusted in the Remuneration

Committee’s discretion for one-off items, where necessary) for the financial year ending 30 April 2020.

— The Remuneration Committee selected this performance measure because growth in earnings is a key measure of success

for the Group.

— The performance targets for the EPS measure will be set by the Committee shortly before the awards are made, it being
the Company’s practice to make the awards following the announcement of its half-yearly results. Accordingly, this
allows the Committee to ensure that the targets applied are both appropriately stretching, and relevant to participants.
The Company will disclose the performance targets for the EPS measure in next year’s Directors’ Remuneration Report.

Non-Executive Directors
Fees
— The base fee payable to each Non-Executive Director is as follows:

— Stephen Robertson – £47,500;
— Mike Russell – £47,500; and
— Ron Series – £65,000 (Senior Independent Director).

Relative importance of spend on pay
The table below shows the Group’s expenditure on remuneration paid to all employees against distributions to shareholders.

£’000

Remuneration paid to all employees of the Group1

Distributions to shareholders

2017

94,559

6,400

2016

% change

81,253

5,200

+16.4%

+23.1%

Total remuneration reflects overall employee costs. See note 5 to the Group Financial Statements for further information.

Comparative Total Shareholder Return (“TSR”)
The DRR regulations require a line graph showing the TSR on a holding of shares in the Company since admission (to the
London Stock Exchange) (“Admission”) to the financial year end, as well as the TSR for a hypothetical holding of shares in a
broad equity market index for the same period. The graph below compares the Company’s TSR to the TSR of the FTSE Small
Cap (excluding investment trusts) over this period.

The FTSE Small Cap (excluding investment trusts) was chosen as a comparator as it is most closely aligned with Clipper’s activity.

Total Shareholder Return Index (30 May 2014 = 100)

450

300

150

30 May
2014

30 April
2015

30 April
2016

30 April
2017

Clipper Logistics plc

FTSE SmallCap Index excluding investment trusts

Source: Thomson Reuters

The DRR regulations also require a table setting out selected details of the remuneration of the Executive Chairman over the
same period as shown on the TSR graph:

Year ended 30 April 2017: Steve Parkin

Year ended 30 April 2016: Steve Parkin

Year ended 30 April 2015: Steve Parkin

Steve waived his entitlement to his bonus for the year ended 30 April 2017.

Annual
variable
element
award rates
against
maximum
opportunity

Long-term
incentive
vesting rates
against
maximum
opportunity

Single figure
of total
remuneration
(£’000)

1,364

0.0%*

100.0%

486

518

0.0%

20.8%

n/a

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Directors’ Remuneration Report continued

Executive Chairman’s relative pay
In accordance with the DRR regulations, we present in the table below the percentage change in the prescribed pay
elements (salary, taxable benefits, and annual bonus outcome) of the Executive Chairman and the average percentage
change for all Group staff between the year ended 30 April 2016 and the year ended 30 April 2017.

Year-on-year % change

Executive Chairman

All-employees

Salary

1.5%

3.9%

Taxable
benefits Annual bonus

2.3%

7.7%

n/a

7.3%

The salary figures reflect the % difference between the Executive Chairman’s salary for year ended 30 April 2017 (£411,075)
and for the year ended 30 April 2016 (£405,000) before any adjustment for additional pension contributions made by way
of a salary sacrifice.

AGM voting results
Details of the votes on remuneration matters held at the 2016 AGM are as follows:

Resolution

Votes for

% for Votes against

% against

Total votes

Withheld

Approve Directors’
Remuneration Report

Approve participation by “Concert
Party” in PSP and Sharesave Plan

84,875,681

99.87%

107,045

0.13%

84,982,726

34,646,888

78.33%

9,583,075

21.67%

44,229,963

1,559,753

As explained in the Committee Chairman’s introduction at the beginning of this report, the Committee understands that the
reason for the voting outcome in relation to the “Concert Party” resolution was a concern raised by certain governance
bodies in relation to the Executive Chairman’s participation in the PSP given the level of his existing shareholding in the
Company. However, this participation in the PSP was consistent with the importance of a continued team ethic within the
Clipper Senior Management Team which forms a key part of the Directors’ Remuneration Policy which received strong
shareholder support at the 2014 AGM.

Service contracts summary
Each Executive Director has a service contract of indefinite duration with a notice period of twelve months, which may be
given by the Company or the individual.

The date of each Executive Director’s contract is:
Steve Parkin
Tony Mannix
David Hodkin

30 May 2014
30 May 2014
30 May 2014

Non-Executive Directors
Each Non-Executive Director is engaged for an initial period of three years. The appointments can be renewed
following the initial three year term. The engagements can be terminated by either party on three months’ notice.

The Non-Executive Directors cannot participate in the Company’s share schemes, are not entitled to pension benefits and are
not entitled to payment in compensation for early termination of their appointment.

For each Non-Executive Director the effective date of their latest letter of appointment is:
Stephen Robertson
Mike Russell
Ron Series

1 May 2017
1 May 2017
1 May 2017

Clipper Logistics plc Governance

Part B: Directors’ Remuneration Policy

The Directors’ Remuneration Policy as set out in this section of the Remuneration Report will, if approved by shareholders,
take effect for all payments made to Directors from the date of the AGM on 25 September 2017.

Remuneration Policy table
The Directors’ Remuneration Policy is summarised in the table below. The table indicates where any material changes
have been made from the previous Directors’ Remuneration Policy approved at the 2014 AGM.

Element and purpose

Policy and operation

Maximum

Performance measures

Changes from
previous policy

No changes

N/A

In the normal course of
events, the Executive
Directors’ salaries would
not normally be
increased by more than
the average awarded to
staff generally. However,
given the need for a
formal cap under the
DRR regulations, the
Remuneration
Committee has further
limited the maximum
salary which it may
award to Executive
Directors to the median
salary level plus 10% for
that role in the top half
of the FTSE SmallCap.

Base salary
This is the core element
of pay and reflects the
individual’s role and
position within the
Group with some
adjustment to reflect
their capability and
contribution.

Benefits
To provide benefits
valued by recipients.

Base salaries will be
reviewed each year
by the Remuneration
Committee.

The Remuneration
Committee does not
strictly follow data but
uses it as a reference
point in considering,
in its judgement, the
appropriate level of
salary having regard to
other relevant factors
including corporate and
individual performance
and any changes in an
individual’s role and
responsibilities.

Base salary is paid
monthly in cash.

The Executive Directors
may receive a car
allowance or company
car, fuel allowance,
private family medical
cover and insurance
benefits.

The Remuneration
Committee reserves
discretion to introduce
new benefits where
it concludes that
it is appropriate to
do so, having regard
to the particular
circumstances and
to market practice.

Where appropriate, the
Group will meet certain
costs relating to
Executive Director
relocations.

N/A

No changes

It is not possible to
prescribe the likely
change in the cost of
insured benefits or the
cost of some of the other
reported benefits
year-to-year, but the
provision of benefits will
operate within an annual
limit of £100,000 (plus a
further 100% of base
salary in the case of
relocations).

The Remuneration
Committee will monitor
the costs in practice and
ensure that the overall
costs do not increase
by more than the
Remuneration
Committee considers
appropriate in all the
circumstances.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Changes from
previous policy

No changes

Directors’ Remuneration Report continued

Element and purpose

Policy and operation

Maximum

Performance measures

Pension
To provide
retirement benefits.

Annual Incentive Plan
(“AIP”)
To motivate executives
and incentivise delivery
of performance over
a one-year operating
cycle, focusing on the
short to medium term
elements of our
strategic aims.

Executive Directors
can receive pension
contributions to personal
pension arrangements, or
if a Director is impacted
by annual or lifetime limits
on contribution levels to
qualifying pension plans,
the balance can be paid
as a cash supplement.

AIP levels and the
appropriateness of
measures are reviewed
annually at the
commencement of
each financial year to
ensure they continue to
support our strategy.

Once set, performance
measures and targets
will generally remain
unchanged for the year,
except to reflect events
such as corporate
acquisitions or other
major transactions
where the Remuneration
Committee considers
it to be necessary in
its opinion to make
appropriate adjustments.

AIP outcomes are paid
in cash following the
determination of
achievement against
performance measures
and targets.

Malus and clawback
provisions apply to the
AIP as explained in more
detail in the notes to
this table.

The maximum employer’s
contribution is limited to
15% of base salary.

N/A

The maximum level of AIP
outcomes is 50% of base
salary p.a. for the
duration of this Policy.

The performance
measures applied may
be financial or non-
financial and corporate,
divisional or individual
and in such proportions
as the Remuneration
Committee considers
appropriate.

Attaining the threshold
level of performance for
any measure will not
produce a pay-out of
more than 20% of the
maximum portion of
overall AIP attributable
to that measure, with
a sliding scale to full
pay-out for maximum
performance.

However, the AIP
remains a discretionary
arrangement and the
Remuneration Committee
retains a standard power
to apply its judgement
to adjust the outcome
of the AIP for any
performance measure
(from zero to any cap)
should it consider that
to be appropriate.

Clipper Logistics plc GovernanceElement and purpose

Policy and operation

Maximum

Performance measures

Changes from
previous policy

No changes

The PSP allows for awards
over shares with a
maximum value of 150%
of base salary per
financial year.

The Remuneration
Committee expressly
reserves discretion to
make such awards as it
considers appropriate
within these limits.

The Remuneration
Committee may set such
performance conditions
on PSP awards as it
considers appropriate
(whether financial or
non-financial and
whether corporate,
divisional or individual).

Once set, performance
measures and targets will
generally remain
unaltered unless events
occur which, in the
Remuneration
Committee’s opinion,
make it appropriate to
substitute, vary or waive
the performance
conditions in such
manner as the
Remuneration
Committee thinks fit.

Performance periods
may be over such
periods as the
Remuneration
Committee selects at
grant, which will not be
less than
(but may be longer than)
three years.

No more than
25% of awards vest
for attaining the
threshold level of
performance conditions.

Long-Term Incentives
(“LTI”)
To motivate and
incentivise delivery of
sustained performance
over the long-term, and
to promote alignment
with shareholders’
interests, the Group
operates a
Performance Share
Plan (“PSP”).

Share ownership
guidelines
To further align the
interests of Executive
Directors with those
of shareholders.

Awards under the PSP
may be granted as
nil-cost options or
conditional awards of
shares which vest to the
extent performance
conditions are satisfied
over a period of at least
three years.

Under the PSP
rules, vested awards may
also be settled in cash.

The PSP rules allow that
the number of shares
subject to vested PSP
awards may be
increased to reflect the
value of dividends that
would have been paid in
respect of any dividend
dates falling between
the grant of awards and
the vesting of awards.
Whilst this feature does
not currently operate for
awards, the Remuneration
Committee retains
discretion to introduce
this feature during the
period of this policy.

Malus and clawback
provisions apply to PSP
awards and are
explained in more detail
in the notes to this table.

Executive Directors are
expected to retain all
of the ordinary shares
vesting under the
PSP, after any disposals
for the payment of
applicable taxes, until
they have achieved
the required level of
shareholding.

100% of salary for all
Executive Directors.

N/A

No changes

The Remuneration
Committee reserves
the power to amend
(but not reduce) these
levels in future years.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Directors’ Remuneration Report continued

Changes from
previous policy

No changes

Element and purpose

Policy and operation

Maximum

Performance measures

Consistent with normal
practice, such awards
are not subject to
performance conditions.

All-employee
share plans
To encourage
share ownership by
employees, thereby
allowing them to share
in the long-term success
of the Group and align
their interests with those
of the shareholders.

The Sharesave Plan is an
all-employee share plan
established under the
HMRC tax-advantaged
regime and follows the
usual form for such plans.

Executive Directors are
able to participate in
all-employee share plans
on the same terms as
other Group employees.

The exercise price of the
options is usually equal to
the market price of the
shares at the date of
invitation to participate
less a maximum discount
of 20%.

The maximum amount
that can be invested in
the plan will not exceed
the statutory limit from
time to time (currently
£500 pcm).

The options vest
on the third anniversary
of the commencement
of the savings period.

Non-Executive
Director fees
To enable the
Group to recruit
and retain Non-
Executive Directors
of the highest
calibre, at the
appropriate cost.

The fees paid to Non-
Executive Directors
aim to be competitive
with other fully listed
companies of equivalent
size and complexity.

The fees payable
to the Non-Executive
Directors are determined
by the Board.

Fees are paid monthly
in cash.

N/A

No changes

Any increases made
will be appropriately
disclosed.

Notes to the Policy Table
1. Malus and clawback
Malus (being the forfeiture of unvested awards) and clawback (being the ability of the Company to claim repayment of paid
amounts as a debt) provisions apply to the AIP and PSP if, in the opinion of the Remuneration Committee, any of the following
has occurred:

— there has been a material misstatement of the Group’s financial results which has led to an overpayment;
— the assessment of performance targets is based on an error or inaccurate or misleading information or assumptions;
— circumstances warranting summary dismissal; or
— any other act or omission that has had a sufficiently significant impact on the reputation of the Group to justify the

operation of malus/clawback.

Amounts in respect of awards under both plans may be subject to clawback for up to three years post payment or vesting
as appropriate.

2. Stating maximum amounts for the Remuneration Policy
The DRR regulations and related investor guidance encourages companies to disclose a cap within which each element
of the Directors’ Remuneration Policy will operate. Where maximum amounts for elements of remuneration have been
set within the Directors’ Remuneration Policy, these will operate simply as caps and are not indicative of any aspiration.

3. Travel and hospitality
While the Remuneration Committee does not consider it to form part of benefits in the normal usage of that term, it has been
advised that corporate hospitality (whether paid for by the Group or another company) and business travel for Directors
(and exceptionally their families) may technically come within the applicable rules and so the Remuneration Committee
expressly reserves the right for the Remuneration Committee to authorise such activities within its agreed policies.

Clipper Logistics plc Governance4. Differences between the policy on remuneration for Directors from the policy on remuneration of other employees
Where the Group’s pay policy for Directors differs to its pay policies for groups of employees, this reflects the appropriate
market rate position for the relevant roles. The Company takes into account pay levels, bonus opportunity and share awards
applied across the Group as a whole when setting the Directors’ Remuneration Policy.

5. Discretions reserved in operating incentive plans
The Committee will operate the AIP and PSP according to their respective rules and the above Directors’ Remuneration
Policy table. The Committee retains certain discretions, consistent with market practice, in relation to the operation and
administration of these plans including:

— the timing of awards and payments;
— the size of awards, within the overall limits disclosed in the policy table;
— the determination of performance measures and targets and resultant vesting and pay-out levels;
— (as described in the termination payment policy section below) determination of the treatment of individuals who leave
employment, based on the rules of the incentive plans, and the treatment of the incentive plans on exceptional events,
such as a change of control of the Company; and

— the ability to make adjustments to existing awards made under the incentive plans in certain circumstances (e.g. rights

issues, corporate restructurings or special dividends).

While performance conditions will generally remain unchanged once set, the Committee has the usual discretions to
amend the measures, weightings and targets in exceptional circumstances (such as a major transaction) where the original
conditions would cease to operate as intended. Any such changes would be explained in the subsequent Directors’
Remuneration Report and, if appropriate, be the subject of consultation with the Company’s major shareholders.

6. Previous Policies
The Company will honour all pre-existing commitments made under previous policies in accordance with the terms of
such commitments.

Recruitment remuneration policy
In terms of the principles for setting a package for a new Executive Director, the starting point for the Committee will be to
apply the general policy for Executive Directors as set out above and structure a package in accordance with that policy.
Consistent with the DRR regulations, the caps contained within the policy for fixed pay do not apply to new recruits, although
the Committee would not envisage exceeding these caps in practice.

The AIP and PSP will operate (including the maximum award levels) as detailed in the general policy in relation to any newly
appointed Executive Director. For an internal appointment, any variable pay element awarded in respect of the prior role may
either continue on its original terms or be adjusted to reflect the new appointment as appropriate.

For external and internal appointments, the Committee may agree that the Company will meet certain relocation expenses
as it considers appropriate.

For external candidates, it may be necessary to make additional awards to buy-out awards forfeited by the individual on
leaving a previous employer.

For the avoidance of doubt, buy-out awards are not subject to a formal cap. Details of any buy-out awards will be
appropriately disclosed.

For any buy-outs the Company will not pay more than is, in the view of the Committee, necessary and will in all cases seek,
in the first instance, to deliver any such awards under the terms of the existing AIP and PSP. It may, however, be necessary in
some cases to make buy-out awards on terms that are more bespoke than the existing AIP and PSP (including in reliance on
UKLA Listing Rule 9.4.2).

All buy-outs, whether under the AIP, PSP or otherwise, will take account of the service obligations and performance
requirements for any remuneration relinquished by the individual when leaving a previous employer. The Committee will
seek to make buy-outs subject to what are, in its opinion, comparable requirements in respect of, service and performance.
However, the Committee may choose to relax this requirement in certain cases (such as where the service and/or
performance requirements are materially completed, or where such factors are, in the view of the Committee, reflected in
some other way, such as a significant discount to the face value of the awards forfeited) and where the Committee considers
it to be in the interests of shareholders.

A new Non-Executive Director would be recruited on the terms explained above in respect of the main policy for such Directors.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Directors’ Remuneration Report continued

Termination policy summary
It is appropriate for the Committee to consider treatments on a termination having regard to all of the relevant facts
and circumstances available at that time. This policy applies both to any negotiations linked to notice periods on a
termination and any treatments that the Committee may choose to apply under the discretions available to it under
the terms of the AIP and PSP plans. The potential treatments on termination under these plans are summarised below.

Incentives

Annual Incentive Plan

Performance Share Plan

If a leaver is deemed to be
a ‘good leaver’; for example,
leaving through death or
otherwise at the discretion
of the Committee

If a leaver is deemed to be
a ‘bad leaver’; for example,
leaving for disciplinary reasons
or to join a competitor

Other exceptional cases;
e.g. change in control

Committee has discretion
to determine AIP.

No awards made.

Committee has discretion
to determine AIP.

All awards will
normally lapse.

Will receive a pro-rated
award subject to the
application of the
performance conditions
at the date of the event,
subject to standard
Committee discretions
to vary time pro-rating.

Will receive a pro-rated
award subject to the
application of the
performance conditions
at the end of the normal
performance period.

Committee retains standard
discretions to either vary
time pro-rating or to allow
vesting after the date of
cessation (determining the
performance conditions
at that time).

The Company has power to enter into settlement agreements with executives and to pay compensation to settle
potential legal claims. In addition, and consistent with market practice, in the event of termination of an Executive Director,
the Company may pay a contribution towards the individual’s legal fees and fees for outplacement services as part of
a negotiated settlement. Any such fees would be disclosed as part of the detail of termination arrangements. For the
avoidance of doubt, the policy does not include an explicit cap on the cost of termination payments.

In the event of cessation of a Non-Executive Director’s appointment, they would be entitled to a three month notice period.

External appointments
Where Executive Directors serve on the boards of other companies in a non-executive role, the individuals are permitted
to retain any fees earned for acting as a non-executive director.

Statement of consideration of employment conditions elsewhere in the Group
Pay and employment conditions generally in the Group are taken into account when setting Executive Directors’ remuneration.
The Committee receives regular updates on overall pay and conditions in the Group, including (but not limited to) changes
in base pay and any staff bonus pools in operation. There is also oversight of the all-employee Sharesave Plan which Executive
Directors and all other Group employees can participate in on the same terms and conditions.

The Company did not consult with employees in drawing up this Remuneration Report.

Statement of consideration of shareholder views
The Committee welcomes feedback from all shareholders and from shareholder representative bodies. As explained in the
Committee Chairman’s introductory statement, in 2016 the Committee engaged with shareholder and representative bodies
to discuss the continued operation of our current policy, including the inclusion of our Executive Chairman and other “Concert
Party” individuals in our PSP.

Clipper Logistics plc GovernanceIllustrations of application of remuneration policy (£’000)

Executive Chairman – Steve Parkin

CEO – Tony Mannix

CFO – David Hodkin

1,200

1,000

800

600

400

200

£1,108

37%

19%

£717

15%

17%

£490

100%

68%

44%

£748

37%

19%

£486

15%

17%

68%

44%

£333

100%

£374
15%
17%

68%

£253

100%

£581

38%

19%

43%

Minimum

In line with
expectation

Maximum

Minimum

In line with
expectation

Maximum

Minimum

In line with
expectation

Maximum

Total fixed pay

Annual Incentive Plan

Long-term Incentives

The charts above aim to show how the remuneration policy set out above for Executive Directors is applied using the
following assumptions:

— Consists of base salary, benefits and pension.

— Base salary is the salary to be paid in the year ending 30 April 2018.

— Benefits measured as benefits paid in the year ended 30 April 2017 as set out in the single figure table.

Minimum

— Pension measured as the defined contribution or cash allowance in lieu of Company contributions, as a
percentage of salary (£10,000 for Steve Parkin, 10% for Tony Mannix and 15% in the case of David Hodkin).

£’000

Steve Parkin

Tony Mannix

David Hodkin

Base Salary

Benefits

Pension

Total Fixed

411

276

218

490

333

253

In line with
expectations

Based on what the Director would receive if performance was on-target (excl. share price appreciation
and dividends):

— STI: consists of the on-target bonus of 60% of maximum opportunity.
— LTI: consists of the threshold level of vesting (25% vesting), plus the fair value of full investment in the

Sharesave Plan (£1,200).

Based on the maximum remuneration receivable (excl. share price appreciation and dividends):

Maximum

— STI: consists of maximum bonus of 50% of base salary.
— LTI: consists of the face value of awards (100% of salary), plus the fair value of full investment in the

Sharesave Plan (£1,200).

This report was reviewed and approved by the Board on 27 July 2017 and signed on its behalf by:

Mike Russell
Chairman, Remuneration Committee

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report

Directors
The names and biographies of the current Directors of the Company are set out
on pages 36 and 37 of this Annual Report.

The following Directors served the Company during the year ended 30 April 2017:

Name

Position

Steven (Steve) Nicholas Parkin

Executive Chairman

Antony (Tony) Gerard Mannix

Chief Executive Officer

David Arthur Hodkin

Chief Financial Officer

Sean Eugene Fahey1

Chief Information Officer

Paul Nigel Hampden Smith2

Senior Independent Non-Executive Director

Stephen Peter Robertson

Independent Non-Executive Director

Ronald (Ron) Charles Series

Independent Non-Executive Director

Michael (Mike) John Russell

Independent Non-Executive Director

Sean Fahey retired with effect from 28 April 2017.

1
2 Paul Hampden Smith retired with effect from 12 July 2017.

Directors’ share interests
Details of the Directors’ interests in
the Company’s shares are included
in the Directors’ Remuneration Report
on page 49. Between 30 April 2017
and 24 July 2017 (being the latest
practicable date before publication)
there had been no change in the
continuing Directors’ interests as set
out on page 49.

Directors’ indemnities
The Company provided indemnities
to each of its Directors during the year
ended 30 April 2017 in accordance
with the provisions of the Company’s
Articles of Association, allowing the
indemnification of Directors out of the
assets of the Company to the extent
permitted by law. These indemnities
constitute qualifying indemnities for
the purposes of the Companies Act
2006 and remain in force at the date
of approval of this report without
any payment having been made
under them.

Significant contracts
The only significant contract involving
any Director or controlling shareholder
of the Company during the year was
the Relationship Agreement (referred to
later in this report) entered into between
the Company and Steve Parkin and
Carlton Court Investments Limited.

Compensation for loss of office
There are no agreements between
the Company and its Directors or
employees providing for compensation
for loss of office or employment that
occurs as a result of a takeover bid.
Further details of the Directors’ service
contracts can be found in the Directors’
Remuneration Report on pages 46
to 59.

Directors’ and officers’
liability insurance
Directors’ and officers’ liability
insurance cover is in place at the
date of this report. The Board remains
satisfied that an appropriate level of
cover is in place and a review of cover
will take place on an annual basis.

Directors’ Report

The Directors are pleased to present
their report and the audited Financial
Statements of Clipper Logistics plc for
the year ended 30 April 2017.

The Corporate Governance Report
on pages 38 to 41 and the “Our People”
and “Sustainability” sections of the
Strategic Report (with regard to
information about the employment of
disabled persons, employee
involvement and greenhouse gas
emissions) are also incorporated into
this report by reference.

The Company has chosen, in
accordance with section 414C (11) of
the Companies Act 2006 to include the
disclosure of particulars of likely future
developments in the Strategic Report
(see pages 8 to 35).

Financial risk management
The Group’s business activities, together
with the factors likely to affect its future
development, performance and
position are set out in the Operating
and Financial Review on pages 30 to
35, along with the financial position of
the Group, its cash flows and liquidity.

In addition, note 26 to the Group
Financial Statements includes the
Group’s objectives, policies and
processes for capital and financial risk
management, including information
on the Group’s exposures to market risk,
including foreign currency, interest rate,
inflation and equity price risks; details
of its financial instruments and hedging
activities; and its exposures to credit risk
and liquidity risk.

Results and dividends
The consolidated profit for the Group
for the year after taxation was £12.5
million (2016: £10.3 million). The results
are discussed in greater detail in the
Operating and Financial Review on
pages 30 to 35 and set out in the
Group Income Statement on page 68.

The Directors are recommending
the payment on 29 September 2017 of a
final dividend of 4.8 pence per ordinary
share to shareholders on the register at
the close of business on 8 September
2017 which, together with the interim
dividend of 2.4 pence per ordinary
share paid on 30 December 2016,
results in a total dividend for the year
of 7.2 pence per share (2016: net
dividend 6.0 pence).

Clipper Logistics plc GovernanceArticles of Association
The Articles of Association (adopted
by special resolution on 15 May 2014)
(the “Articles”) may only be
amended by special resolution
of the shareholders. A copy of the
Articles is available on request from
the Company Secretary.

Share capital structure
Details of the Company’s share capital
are set out in note 22 to the Group
Financial Statements on page 92.
During the year the Company issued
17,627 new ordinary shares of 0.05p
each pursuant to the exercise of
options granted to certain employees
of the Company under the Company’s
Sharesave Plan approved by
shareholders at the 2014 AGM. The
Company has a single class of share
capital divided into ordinary shares
of 0.05p each. The ordinary shares are
listed on the London Stock Exchange.
The rights and obligations attaching
to these shares are governed by
UK law and the Company’s Articles
of Association.

Voting rights attaching to shares
Ordinary shareholders are entitled
to receive notice and to attend and
speak at any general meeting of the
Company. On a show of hands, every
shareholder present in person or
by proxy (or being a corporation
represented by a duly authorised
representative) shall have one vote,
and on a poll every shareholder who
is present in person or by proxy shall
have one vote for every share of which
he is the holder. The Notice of Annual
General Meeting specifies deadlines
for exercising voting rights and
appointing a proxy or proxies.

Deadlines for exercising voting
rights attaching to shares
The Articles provide a deadline
for the submission of proxy forms
(whether by an instrument in writing
or electronically) of not less than
48 hours before the time appointed
for the holding of the meeting or the
adjourned meeting.

Shares in uncertificated form
Directors may determine that shares
may be held in uncertificated form and
title to such shares may be transferred
by means of a relevant system or that
shares should cease to be so held
and transferred.

Variation of rights attaching to shares
The Articles provide that rights
attached to any class of shares may be
varied with the written consent of the
holders of not less than three-quarters
in nominal value of the issued shares, or
with the sanction of a special resolution
passed at a separate general meeting
of the holders of those shares. At every
such separate general meeting, the
quorum shall be two persons holding or
representing by proxy at least one-third
in nominal value of the issued shares
(calculated excluding any shares held
in treasury). The rights conferred upon
the holders of any shares shall not,
unless otherwise expressly provided in
the rights attaching to those shares, be
deemed to be varied by the creation
or issue of further shares ranking pari
passu with them.

Restrictions on the transfer of shares
There are no restrictions on the transfer
of the ordinary shares other than:

— the standard restrictions for a

UK-quoted company where any
amount is unpaid on a share;
— where, from time to time, certain

restrictions may become imposed
by laws and regulations (for example,
insider trading laws and marketing
requirements relating to close
periods); and

— pursuant to the Listing Rules of

the Financial Conduct Authority
whereby certain Directors, officers or
employees of the Company require
the approval of the Company to
deal in the ordinary shares.

On 30 May 2014 each of the Executive
Directors (save for Steve Parkin) and
certain persons who held ordinary
shares after the Company’s Admission
or whose associates held such shares
entered into an agreement with Steve
Parkin agreeing to certain restrictions
on their ability (and that of their family)
to dispose of ordinary shares in which
they are interested for a period of five
years from the date of Admission.
Under the terms of the agreement, the
obligors may not dispose of any interest
in the ordinary shares held by them at
Admission until the fourth year of the
five year period. During the fourth
year of the period, each obligor may
dispose of up to one third of the
ordinary shares in which he is interested
at Admission. During the fifth year of
the five year period, each obligor
may dispose of up to two thirds of the
ordinary shares in which he is interested
at Admission (less a number equal to
those ordinary shares sold during the
prior year (if any)).

Authority to purchase own shares
A resolution to authorise the Company
to purchase up to 10,000,000 ordinary
shares of 0.05p each (representing less
than 10% of the Company’s issued
ordinary share capital) will be proposed
at the 2017 AGM.

As at 25 July 2017, being the latest
practicable date prior to the publication
of this report, the Company did not hold
any shares in treasury.

Appointment and replacement
of Directors
Unless determined by ordinary
resolution of the Company, the number
of Directors shall not be less than two or
more than 12 in number. A Director is
not required to hold any shares in the
Company by way of qualification.

The Board may appoint any person to
be a Director and such Director shall
hold office only until the next AGM,
when he or she shall be eligible for
appointment by the shareholders.
The articles provide that at each AGM,
one-third of the Directors for the time
being (or, if their number is not a
multiple of three, then the number
nearest to but not less than one-third)
shall retire from office. A Director who
retires at any AGM shall be eligible
for re-appointment. In addition, any
Director appointed by the Board shall
hold office only until the next AGM and
shall then be eligible for appointment.

On 30 May 2014, the Company entered
into an agreement (the “Relationship
Agreement”) with Steve Parkin and his
nominee company Carlton Court
Investments Limited (the “Controlling
Shareholders”). Pursuant to that
agreement the Company has agreed
with the Controlling Shareholders that
the Controlling Shareholders shall be
entitled to appoint and remove one
Director to the Board so long as the
Controlling Shareholders (and/or any of
their associates) when taken together,
hold 25% or more of the voting rights
over the Company’s issued shares.
Where any Controlling Shareholder has
already been nominated to the board
as a Director himself such appointment
will reduce the number of persons
which the Controlling Shareholders are
entitled to nominate for appointment
by one.

Any person appointed by the
Controlling Shareholders to the board
may be removed by the Controlling
Shareholders by notice in writing.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
applicants for employment are given
full and fair consideration having
regard to their particular aptitudes
and abilities, and that existing disabled
employees are given equal access to
training, career development and
promotion opportunities. In the event
of existing employees becoming
disabled, all reasonable means will
be explored to achieve retention
in employment in the same or an
alternative capacity, including
arranging appropriate training.
Further details in relation to the Group’s
employment policy are set out in the
People section of the Strategic Report
on pages 24 to 27.

Significant agreements
There are a number of agreements
which, subject to any discussions with
relevant parties, would terminate upon
a change of control of the Company
such as commercial contracts, bank
loan agreements, property lease
arrangements and employees’ share
plans. None of these individually is
considered to be significant in terms
of their likely impact on the business
of the Group as a whole.

Political donations
The Company has made no
political donations since Admission
on 4 June 2014 and intends to
continue its policy of not doing so.

Charitable donations
During the year to 30 April 2017,
the Group made charitable donations
totalling £59,000 (2016: £72,000).

Directors’ Report continued

Relationship agreement with
controlling shareholders
Carlton Court Investments Limited
(“Carlton”) holds 29.9% of the issued
share capital of the Company. As such
Carlton is a Controlling Shareholder as
defined in the Listing Rules. Carlton is
controlled by Steve Parkin. Steve Parkin
and Carlton have entered into, and
the Company’s relationship with them
is governed by the terms of, the
Relationship Agreement referred to
above, the principal purpose of which
is to ensure that the Company and
the Group is capable of carrying on
its business independently of the
Controlling Shareholders and that
any transactions and relationships
with the Controlling Shareholders are
conducted at arm’s length and on
normal commercial terms.

The Controlling Shareholders have
agreed to procure that their associates
also comply with the Relationship
Agreement. The Relationship
Agreement will continue for so long
as the Company is listed on the main
market for listed securities of London
Stock Exchange plc and the Controlling
Shareholders and their associates
own or control at least 25% of the
Company’s issued share capital or
voting rights.

The Listing Rules require premium
listed companies with controlling
shareholders to provide a confirmation
in their annual reports that all of the
independence provisions contained
in their agreements have been
complied with.

In line with this requirement, the
Board has assessed the Controlling
Shareholders’ and Company’s
compliance with the Relationship
Agreement’s independence
requirements and has assessed
compliance with these requirements
during the period under review.
As such, the Board can confirm that
since the entry into the Relationship
Agreement on 30 May 2014 until 25 July
2017, being the latest practicable date
prior to the publication of this Annual
Report and Accounts:

(i) the Company has complied with the
independence provisions included
in the Relationship Agreement;
(ii) so far as the Company is aware,
the independence provisions
included in the Relationship
Agreement have been complied
with by each of the Controlling
Shareholders and their associates
and also by the Company; and

(iii) so far as the Company is aware,

the procurement obligation included
in the Relationship Agreement has
been complied with by each of the
Controlling Shareholders.

Power of Directors
Subject to the Articles, the Companies
Act and any directions given by special
resolution, the business of the Company
shall be managed by the Board which
may exercise all the powers of the
Company to, for example, borrow
money; mortgage or charge any of its
undertaking, property and uncalled
capital; and issue debentures and
other securities, whether outright or
as collateral security for any debt,
liability or obligation of the Company.

Greenhouse gas emissions
The Group’s disclosures on greenhouse
gas emissions can be found in the
Sustainability section of the strategic
report on pages 28 and 29 and
form part of the Directors’ Report.

Employment policies
Arrangements for consulting and
involving Group employees on matters
affecting their interests at work, and
informing them of the performance
of their employing business and the
Group, are developed in ways
appropriate to each business. A variety
of approaches is adopted aimed at
encouraging the involvement of
employees in effective communication
and consultation, and the contribution
of productive ideas at all levels.

Employment policies are designed to
provide equal opportunities irrespective
of race, caste, national origin, religion,
age, disability, gender, marital status,
sexual orientation or political affiliation.
Group policy is to ensure that disabled

Clipper Logistics plc GovernanceMajor interests in shares
As at 7 July 2017, being the last practicable date prior to publication of this
report, the Company had been advised, in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority, of the following notifiable
interests (whether directly or indirectly held) in 3% or more of its voting rights:

Notification received from

Number of
voting rights

Carlton Court Investments Limited1

30,000,000

29.92%

Liontrust Asset Management

11,943,090

11.91%

SOMLIE Limited2

The Chima Settlement

Unicorn Asset Management

Hargreave Hale

7,483,542

6,999,999

5,585,000

4,503,500

Legal and General Investment Management

4,249,828

Franklin Templeton Fund Management

3,400,000

1 Ultimately controlled by Steve Parkin, Executive Chairman.
2 Ultimately controlled by Sean Fahey.

7.46%

6.98%

5.57%

4.49%

4.24%

3.39%

Annual General Meeting
The Company’s Annual General
Meeting will be held at Clipper
Logistics, 11th Floor, Central Square,
29 Wellington Street, Leeds, LS1 4DL
on 25 September 2017 at 11.00am.
Details of the meeting venue and
the resolutions to be proposed are
set out in a Notice of Meeting which
will be issued under separate cover.

The Directors consider that all of the
proposed resolutions are in the best
interests of the Company and its
shareholders as a whole. It is the
Directors’ recommendation that
shareholders support the proposed
resolutions and vote in favour of them,
as each of the Directors intends to do.

The Directors’ Report has been
approved by the Board of Directors
of Clipper Logistics plc.

Signed on behalf of the Board by:

Guy Jackson
Company Secretary
27 July 2017

Clipper Logistics plc
Registered Office:
Gelderd Road
Leeds LS12 6LT

Company No. 03042024

Going concern
After making enquiries, the Directors
have a reasonable expectation that
the Company and Group have
adequate resources to continue
in operational existence for the
foreseeable future. In making this
assessment they have considered the
Company and Group budgets and
cash flow forecasts for the period to
30 April 2020. The Company has
considerable financial resources,
negligible liquidity risk and is operating
within a sector that is experiencing
growing demand for its services. The
Directors therefore have a reasonable
expectation that the Company and
the Group have adequate resources
to continue in operational existence
for the foreseeable future. Thus they
continue to adopt the going concern
basis of accounting in preparing the
annual Financial Statements. Further
information is disclosed in the Viability
Statement on page 23 and note 2.2
to the Group Financial Statements.

Audit information
Each of the Directors at the date of the
approval of this report confirms that:

— so far as he is aware, there is

no relevant audit information of
which the Group’s auditor is
unaware; and

— he has taken all the reasonable steps
that he ought to have taken as a
Director to make himself aware of
any relevant audit information and
to establish that the Group’s auditor
is aware of the information.

The confirmation is given and should
be interpreted in accordance with
the provisions of section 418 of the
Companies Act 2006.

Auditor
The auditor, KPMG LLP has indicated its
willingness to continue in office and a
resolution seeking to reappoint KPMG
LLP will be proposed at the Annual
General Meeting.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Statement of Directors’ Responsibilities
in respect of the Annual Report and Accounts

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 complies 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 Accounts
We confirm that to the best of
our knowledge:

— the Financial Statements, prepared
in accordance with the applicable
set of accounting standards, give
a true and fair view of the assets,
liabilities, financial position and profit
or loss of the Company and the
undertakings included in the
consolidation taken as a whole; and

— the Strategic Report and Directors’
Report includes a fair review of the
development and performance of
the business and the position of the
issuer and the undertakings included
in the consolidation taken as a whole,
together with a description of the
principal risks and uncertainties that
they face.

We consider the Annual Report and
Accounts, 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.

Approved by the Board and signed
on its behalf by:

Steve Parkin
Executive Chairman
27 July 2017

David Hodkin
Chief Financial Officer
27 July 2017

The Directors are responsible for
preparing the Annual Report and the
Group and Parent 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 IFRS
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 the period.
In preparing each of the Group and
Parent Company Financial Statements,
the Directors are required to:

— select suitable accounting policies
and then apply them consistently;
— make judgements and estimates
that are reasonable and prudent;
— for the Group Financial Statements,

state whether they have been
prepared in accordance with IFRS
as adopted by the EU;

— for the Parent Company Financial

Statements, state whether
applicable UK accounting standards
have been followed, subject to any
material departures disclosed and
explained in the Parent Company
Financial Statements; and

— prepare the Financial Statements
on the going concern basis unless
it is inappropriate to presume that
the Group and the Parent Company
will continue in business.

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 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.

Clipper Logistics plc GovernanceIndependent Auditor’s Report
to the members of Clipper Logistics plc only

Opinions and conclusions arising from our audit
1. Our opinion on the Financial Statements is unmodified
We have audited the Financial Statements of Clipper Logistics plc for the year ended 30 April 2017 set out on pages 68 to 111.
In our opinion:

— the Financial Statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at

30 April 2017 and of the Group’s profit for the year then ended;

— the Group Financial Statements have been properly prepared in accordance with International Financial Reporting

Standards as adopted by the European Union;

— the Parent Company Financial Statements have been properly prepared in accordance with UK Accounting Standards,

including FRS 101 Reduced Disclosure Framework; and

— the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006; and,

as regards the Group Financial Statements, Article 4 of the IAS Regulation.

Overview

Materiality: Group Financial Statements as a whole

£775,000 (2016: £650,000)

5% (2016: 5%) of Group profit before income tax

Coverage

100% (2016: 100%) of Group profit before income tax

Risks of material misstatement

vs 2016

Recurring risk

Revenue recognition

2. Our assessment of risks of material misstatement
In arriving at our audit opinion above on the Financial Statements, the risk of material misstatement that had the greatest
effect on our audit was as follows (unchanged from 2016):

Accuracy
of revenue
recognition in
value-added
logistics
(£251,784,000;
2016:
£205,988,000)

Refer to page
44 (Audit
Committee
Report), page
77 (accounting
policy) and
page 78
(financial
disclosures).

The risk

Our response

Calculation
and cut-off error
Contract and billing terms
with customers across the
value-added logistics
segment vary significantly
and include different and
complex mechanisms for
calculating the amount
payable in respect of
services delivered. These
mechanisms take into
account delivery against
service level agreements
and require agreement of
the level of costs incurred
in delivering the services
with customers.

The varied terms, costs
and performance
requirements used to
determine revenue in
the final month of the
financial year can lead to
complexity around the
calculation of deferred
and accrued revenue,
and ensuring revenue
is recognised in the
correct period.

Our procedures included:
— Determining an expectation: inspecting the contract terms and billing
schedule of a sample of key customer contracts to form an expectation
of whether the year-end balance sheet position would include accrued
or deferred revenue, which we then compared to the actual year
end balances;

— Re-performance: recalculating a sample of deferred revenue balances

using confirmation of services provided to customers or contracts
detailing the specific calculation mechanisms where available. We also
agreed the sample to invoices raised before the year end and cash
receipt where possible;

— Tests of details: agreeing a sample of year end accrued revenue balances

to subsequent cash receipts where available or alternative evidence,
including confirmations of services provided to customers in the year;
— Tests of details (Clipper Logistics plc): for a sample of invoices raised
around the year end date, reading original contract documentation to
understand if billing is in advance or arrears and confirming revenue has
been accrued or deferred as expected. For the same sample of invoices
we observed the trend of invoicing during the financial year and after the
year end and where outliers were identified we challenged the Group and
obtained support for their explanations. We also agreed amounts to
subsequent cash receipt where available, or alternative external audit
evidence including customer confirmation of services received in the year;

— Tests of details (Servicecare Support Services Limited): for a sample
of invoices raised around the year end date, assessing whether the
associated revenue was recognised in the correct period and for the
appropriate amount, by referring back to confirmation of services
provided to customers and where possible cash payment; and
— Assessing transparency: assessing the adequacy of the Group’s

disclosures in respect of the accounting policies on revenue recognition
set out in note 2.2 to the Group Financial Statements.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Independent Auditor’s Report continued
to the members of Clipper Logistics plc only

3. Our application of materiality and an overview of the scope of our audit
Materiality for the Group Financial Statements as a whole was set at £775,000, determined with reference to a benchmark
of Group profit before income tax, of which it represents 5% (2016: 5%).

We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding £38,750, in addition
to other identified misstatements that warranted reporting on qualitative grounds.

Of the Group’s eight (2016: seven) reporting components, we subjected five (2016: six) to full-scope audits for Group reporting
purposes. These procedures covered 99.9% of total Group revenue (2016: 95%), 100% of Group profit before income tax (2016: 100%),
and 99.5% of total Group assets (2016: 95%).

The work on one of the five components (2016: nil of the six components) was performed by the component auditor and
the rest by the Group team. The Group team instructed the component auditor as to the significant areas to be covered,
including the relevant risks detailed above and the information to be reported back. The Group team approved the
component materialities, which ranged from £110,000 to £665,000, having regard to the mix of size and risk profile of the
Group across the components.

The Group team visited one (2016: not applicable) component location in Germany (2016: not applicable), to assess the
audit risk and strategy. Telephone conference meetings were also held with the component auditor. At these meetings, the
findings reported to the Group team were discussed in more detail, and any further work required by the Group team was
then performed by the component auditor.

Group profit before income tax
£16,052,000
(2016: £13,122,000)

Materiality
£775,000
(2016: £650,000)

1 Group profit before income tax
2 Group materiality

£16,052,000
£775,000

£775,000
Whole financial statements materiality
(2016: £650,000)

£655,000
Range of materiality at five components
(£110,000 to £665,000) (cid:31)
(2016: £104,000 to £594,000)

£38,750
Misstatements reported to the audit committee
(2016: £33,000)

Clipper Logistics plc Financial Statements4. Our opinion on other matters
prescribed by the Companies Act
2006 is unmodified
In our opinion:

— the part of the Directors’

Remuneration Report to be audited
has been properly prepared in
accordance with the Companies
Act 2006; and

— the information given in the Strategic
Report and the Directors’ Report for
the financial year is consistent with
the Financial Statements.

Based solely on the work required to be
undertaken in the course of the audit
of the Financial Statements and from
reading the Strategic Report and the
Directors’ Report:

— we have not identified material

misstatements in those reports; and

— in our opinion, those reports have

been prepared in accordance with
the Companies Act 2006.

5. We have nothing to report on
the disclosures of principal risks
Based on the knowledge we acquired
during our audit, we have nothing
material to add or draw attention to
in relation to:

— the Directors’ Viability Statement on
page 23, concerning the principal
risks, their management, and, based
on that, the Directors’ assessment
and expectations of the Group’s
continuing in operation over the 3
years to 30 April 2020; or

— the disclosures in note 2 of the Group
Financial Statements concerning
the use of the going concern basis
of accounting.

6. We have nothing to report in
respect of the matters on which we
are required to report by exception
Under ISAs (UK and Ireland) we are
required to report to you if, based on
the knowledge we acquired during our
audit, we have identified other
information in the Annual Report that
contains a material inconsistency with
either that knowledge or the Financial
Statements, a material misstatement of
fact, or that is otherwise misleading.

In particular, we are required to report
to you if:

— we have identified material

inconsistencies between the
knowledge we acquired during our
audit and the Directors’ statement
that they consider that the Annual
Report and 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; or

— the Audit Committee Report does
not appropriately address matters
communicated by us to the audit
committee.

Under the Companies Act 2006 we are
required to report to you if, in our opinion:

— adequate accounting records have

not been kept by the parent
company, or returns adequate for
our audit have not been received
from branches not visited by us; or

— the Parent Company Financial
Statements and the part of the
Directors’ Remuneration Report to be
audited are not in agreement with the
accounting records and returns; or

— certain disclosures of Directors’

remuneration specified by law are
not made; or

— we have not received all the

information and explanations we
require for our audit.

Under the Listing Rules we are required
to review:

— the Directors’ Statements, set out on
pages 63 and 23, in relation to going
concern and longer-term viability; and
— the part of the Corporate Governance

Statement on page 38 in the
Corporate Governance Report
relating to the Company’s compliance
with the eleven provisions of the 2014
UK Corporate Governance Code
specified for our review.

We have nothing to report in respect
of the above responsibilities.

Scope and responsibilities
As explained more fully in the Directors’
Responsibilities Statement set out on
page 64, the Directors are responsible
for the preparation of the Financial
Statements and for being satisfied
that they give a true and fair view. A
description of the scope of an audit of
financial statements is provided on the
Financial Reporting Council’s website
at www.frc.org.uk/auditscopeukprivate.
This report is made solely to the
Company’s members as a body and
is subject to important explanations
and disclaimers regarding our
responsibilities, published on our
website at www.kpmg.com/uk/
auditscopeukco2014a, which are
incorporated into this report as if set out
in full and should be read to provide
an understanding of the purpose of this
report, the work we have undertaken
and the basis of our opinions.

Johnathan Pass
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory
Auditor Chartered Accountants

1 Sovereign Square
Sovereign Street
Leeds LS1 4DA

27 July 2017

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Group Income Statement
For the year ended 30 April

Revenue
Cost of sales

Gross profit
Other net gains
Administration and other expenses

Operating profit before share of equity-accounted investees, net of tax
Share of equity-accounted investees, net of tax

Operating profit

EBIT
Less: amortisation of other intangible assets
share of tax and finance costs of equity-accounted investees
Operating profit

Finance costs
Finance income

Profit before income tax
Income tax expense

Profit for the financial year

Basic earnings per share
Diluted earnings per share

2017
Group
£’000

340,127
(241,097)

99,030
405
(81,964)

17,471
217

17,688

17,928
(177)
(63)
17,688

(1,657)
21

16,052
(3,586)

12,466

12.5p
12.3p

2016
Group
£’000

290,325
(205,742)

84,583
263
(70,315)

14,531
–

14,531

14,718
(187)
–
14,531

(1,413)
4

13,122
(2,786)

10,336

10.3p
10.3p

Note

4
4
6

8
9

11
11

The accompanying notes on pages 72 to 97 form part of these Financial Statements.

Group Statement of Comprehensive Income
For the year ended 30 April

Profit for the financial year
Other comprehensive expense for the year, net of tax:
To be reclassified to the income statement in subsequent periods:
Exchange differences on retranslation of foreign operations

Total comprehensive income for the financial year

The accompanying notes on pages 72 to 97 form part of these Financial Statements.

2017
Group
£’000

12,466

2016
Group
£’000

10,336

(57)

(6)

12,409

10,330

Clipper Logistics plc Financial StatementsGroup Statement of Financial Position
At 30 April

Note

2017
Group
£’000

2016
Group
£’000

Assets:
Non-current assets

Goodwill
Other intangible assets

Intangible assets
Property, plant and equipment
Interest in equity-accounted investees
Non-current financial assets
Deferred tax assets

Total non-current assets

Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents

Total current assets

Total assets

Equity and liabilities:
Current liabilities
Trade and other payables
Financial liabilities: borrowings
Derivative financial instruments
Short-term provisions
Current income tax liabilities

Total current liabilities

Non-current liabilities
Financial liabilities: borrowings
Long-term provisions
Deferred tax liabilities

Total non-current liabilities

Total liabilities

Equity shareholders’ funds
Share capital
Share premium
Currency translation reserve
Other reserve
Merger reserve
Share based payment reserve
Retained earnings

Total equity attributable to the owners of the Company

Total equity and liabilities

The accompanying notes on pages 72 to 97 form part of these Financial Statements.

Approved by the Board on 27 July 2017 and signed on its behalf by:

D A Hodkin
Chief Financial Officer
Company No. 03042024

12
14
15
27
10

16
17

19
20

20
21
10

23,252
1,498

24,750
38,899
2,167
1,450
353

67,619

29,972
47,728
–
862

78,562

146,181

85,068
7,389
–
127
2,187

94,771

19,973
1,367
–

21,340

116,111

50
80
(33)
84
6,006
2,038
21,845

30,070

146,181

23,252
1,646

24,898
25,564
–
–
–

50,462

26,252
39,816
36
715

66,819

117,281

72,183
6,553
10
109
1,747

80,602

12,931
769
202

13,902

94,504

50
56
24
84
6,006
783
15,774

22,777

117,281

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Group Statement of Changes in Equity
For the year ended 30 April

Balance at 1 May 2015
Profit for the year
Other comprehensive income/(expense)
Equity settled transactions
Share issue
Dividends

Balance at 30 April 2016

Profit for the year
Other comprehensive income/(expense)
Equity settled transactions
Share issue
Dividends

Balance at 30 April 2017

Balance at 1 May 2015
Profit for the year
Other comprehensive income/(expense)
Equity settled transactions
Share Issue
Dividends

Balance at 30 April 2016

Profit for the year
Other comprehensive income/(expense)
Equity settled transactions
Share issue
Dividends

Balance at 30 April 2017

Share
capital
Group
£’000

Share
premium
Group
£’000

Currency
translation
reserve
Group
£’000

Other
reserve
Group
£’000

Carried
forward
Group
£’000

50
–
–
–
–
–

–
–
–
–
–

Brought
forward
Group
£’000

213
–
(7)
–
8
–

214

–
(57)
–
24
–

181

48
–
–
–
8
–

–
–
–
24
–

Merger
reserve
Group
£’000

6,006
–
–
–
–
–

6,006

–
–
–
–
–

6,006

31
–
(7)
–
–
–

–
(57)
–
–
–

(33)

Share based
payment
reserve
Group
£’000

139
–
–
644
–
–

783

–
–
1,255
–
–

2,038

84
–
–
–
–
–

–
–
–
–
–

Retained
earnings
Group
£’000

10,637
10,336
1
–
–
(5,200)

15,774

12,466
–
5
–
(6,400)

213
–
(7)
–
8
–

214

–
(57)
–
24
–

181

Total
Group
£’000

16,995
10,336
(6)
644
8
(5,200)

22,777

12,466
(57)
1,260
24
(6,400)

21,845

30,070

The accompanying notes on pages 72 to 97 form part of these Financial Statements.

Clipper Logistics plc Financial StatementsGroup Statement of Cash Flows
For the year ended 30 April

Profit before tax from operating activities
Adjustments to reconcile profit before tax to net cash flows:
— Depreciation and impairment of property, plant and equipment
— Amortisation and impairment of intangible assets
— Gain on disposal of property, plant and equipment
— Share of equity-accounted investees, net of tax
— Consideration received
— Exchange differences
— Finance costs
— Movement in derivative financial instruments
— Amortisation of grants
— Share based payments charge
Working capital adjustments:
— (Increase)/decrease in trade and other receivables and prepayments
— (Increase)/decrease in inventories
— Increase/(decrease) in trade and other payables

Operating activities:
— Cash generated from operations
— Interest received
— Interest paid
— Income tax paid

Net cash flows from operating activities

Investing activities:
— Purchase of property, plant and equipment
— Proceeds from sale of property, plant and equipment
— Purchase of intangible assets
— Proceeds from sale of intangible assets
— Investment in joint venture
— Acquisition of subsidiary undertaking net of cash acquired

Net cash flows from investing activities

Financing activities:
— Drawdown of bank loans
— Debt issue costs paid
— Finance leases advanced in respect of prior year purchases of property, plant

and equipment

— Shares issued
— Dividends paid
— Non-current financial assets advanced
— Repayment of bank loans
— Repayment of capital on finance leases

Net cash flows from financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at start of year

Cash and cash equivalents at end of year

The accompanying notes on pages 72 to 97 form part of these Financial Statements.

2017
Group
£’000

16,052

4,725
548
(260)
(217)
557
(238)
1,636
(10)
–
832

(7,895)
(3,049)
12,989

25,670
3
(1,606)
(3,234)

20,833

(4,028)
2,112
(551)
167
(1,950)
–

(4,250)

–
–

4,879
24
(6,400)
(1,450)
(5,995)
(5,677)

(14,619)

1,964

(1,102)

862

Note

6
6
6
15
21

8 & 9
6
6
23

15
28

22
7

2016
Group
£’000

13,122

4,580
466
(37)
–
–
(82)
1,409
(60)
(1)
454

(6,372)
(3,677)
10,694

20,496
4
(1,362)
(2,063)

17,075

(5,383)
238
(546)
–
–
(2,212)

(7,903)

6,442
(232)

207
8
(5,200)
–
(10,141)
(3,212)

(12,128)

(2,956)

1,854

(1,102)

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Notes to the Group Financial Statements

1. General information
The Group Financial Statements for
the year ended 30 April 2017 were
authorised for issue by the Board of
Directors on 27 July 2017 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.

The Group’s Financial Statements have
been prepared in accordance with
note 2.1 Basis of preparation, and note
2.3 Basis of consolidation. The principal
accounting policies adopted by the
Group are set out in note 2.

2. Summary of significant
accounting policies
The principal accounting policies
applied in the preparation of these
consolidated Financial Statements
are set out below. These policies have
been consistently applied to all years
presented, unless otherwise stated.

2.1. Basis of preparation
Clipper Logistics plc (the “Company”),
a public limited company incorporated
and domiciled in the United Kingdom,
acts as Parent undertaking for the
Clipper Group of companies. The
Company has independent operations
in its own right and owns 100% of the
share capital and voting rights of the
following principal trading entities:

— Northern Commercials (Mirfield)

Limited

— Clipper Logistics KG (GmbH & Co.)

(Germany)

— Servicecare Support Services Limited

(see note 28)

During the year ended 30 April 2017
the Company subscribed for 50% of
the share capital and voting rights of
Clicklink Logistics Limited (see note 15).

In addition, the Group has a number of
other subsidiaries as set out in note F to
the Company Financial Statements.

The Group’s Financial Statements have
been prepared in accordance with
International Financial Reporting
Standards as adopted by the European
Union (IFRS) and also in accordance
with the provisions of the Companies
Act 2006.

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

The accounting policies which follow
set out those policies which apply in
preparing the Financial Statements
for the year ended 30 April 2017.

The Group’s Financial Statements
have been prepared on a historical
cost basis, except for derivative
financial instruments which have been
measured at fair value. The Financial
Statements are presented in Pounds
Sterling and all values are rounded to
the nearest thousand (£’000) unless
otherwise indicated.

2.2. Going concern
The Financial Statements have been
prepared on a going concern basis.
In determining the appropriate basis
of preparation of the Financial
Statements, the Directors are required
to consider whether the Group can
continue in operational existence for
the foreseeable future.

Further information in relation to the
Group’s business activities, together
with the factors likely to affect its future
development, performance and
position is set out in the Strategic Report
section of this report on pages 8 to 35.

Note 26 to the Group Financial
Statements includes the Group’s
objectives, policies and processes
for managing its capital, its financial
risk management objectives and its
exposure to foreign exchange, credit
and interest rate risk. Further details of
the Group’s net debt at 30 April 2017
are included in note 20 to the Group
Financial Statements.

The Group Statement of Financial
Position shows total current assets of
£78,562,000 and total current liabilities
of £94,771,000. Net current liabilities at
30 April 2017 were therefore £16,209,000
(2016: £13,783,000). At the year end,
the Group had a committed Revolving
Credit Facility of £20,000,000 and an
overdraft facility of £8,000,000, both
of which were undrawn. The Directors
have assessed the future funding
requirements of the Group and the
Company and compared them to the
bank facilities which are available.
The assessment included a detailed
review of financial and cash flow
forecasts for at least the 12 month
period from the date of signing
the Annual Report. The Directors
considered a range of potential
scenarios within the key markets the
Group serves and how these might
impact on the Group’s cash flow.
The Directors also considered what
mitigating actions the Group could
take to limit any adverse consequences.

The Group’s forecasts and projections
show that the Group should be able
to operate without the need for any
increase in borrowing facilities.

Having undertaken this work, the
Directors are of the opinion that
the Company and the Group have
adequate resources to continue
in operational existence for the
foreseeable future. Accordingly,
they continue to adopt the going
concern basis in preparing the
Financial Statements.

Clipper Logistics plc Financial Statements2.3. Basis of consolidation
(a) Group reorganisation and
merger reserve
At 30 April 2014 the Company was a
wholly owned subsidiary of Clipper
Group Holdings Limited. In April 2014
the Group undertook a restructuring,
whereby the Company acquired
certain fellow subsidiaries from Clipper
Group Holdings Limited and the
remaining 25% ownership interest of the
Group’s German operations from the
minority shareholders. On 4 June 2014
Clipper Logistics plc was admitted to
the premium segment of the London
Stock Exchange and Clipper Group
Holdings Limited was no longer the
parent company.

IFRS 3 states that it does not apply to
a combination of entities or businesses
under common control. Accordingly,
the consolidated information of the
Clipper Group has been prepared
to reflect the combination of the
restructured Clipper Group as if it had
occurred from 1 May 2010, being the
earliest comparative period reported
by the restructured Group.

The Group reorganisation is a
combination of entities under common
control; and consolidated using a
pooling of interests basis. This treats the
restructured group as if it was formed
in May 2010 and a merger reserve
has been included to reflect this, with
a balance of £6,006,000 after the
acquisition of the fellow subsidiaries
from Clipper Group Holdings Limited
as part of the Group reorganisation.

(b) Consolidations
The consolidated Financial Statements
comprise the Financial Statements of
the Group and its subsidiaries as at
30 April 2017. Control is achieved when
the Group is exposed, or has rights, to
variable returns from its involvement
with the investee and has the ability to
affect those returns through its power
over the investee. Specifically, the
Group controls an investee if, and
only if, the Group has:

— power over the investee (i.e., existing
rights that give it the current ability
to direct the relevant activities of
the investee);

— exposure, or rights, to variable

returns from its involvement with
the investee; and

— the ability to use its power over
the investee to affect its returns.

Generally, there is a presumption that a
majority of voting rights result in control.
To support this presumption and when
the Group has less than a majority
of the voting or similar rights of an
investee, the Group considers all
relevant facts and circumstances in
assessing whether it has power over
an investee, including:

— the contractual arrangement
with the other vote holders of
the investee;

— rights arising from other

contractual arrangements; and

— the Group’s voting rights and

potential voting rights.

The Group re-assesses whether or not
it controls an investee if facts and
circumstances indicate that there are
changes to one or more of the three
elements of control. Consolidation of
a subsidiary begins when the Group
obtains control over the subsidiary and
ceases when the Group loses control of
the subsidiary. Assets, liabilities, income
and expenses of a subsidiary acquired
or disposed of during the year are
included in the consolidated Financial
Statements from the date the Group
gains control until the date the Group
ceases to control the subsidiary.

Profit or loss and each component
of other comprehensive income are
attributed to the equity holders of
the parent of the Group and to any
non-controlling interests, even if this
results in the non-controlling interests
having a deficit balance. When
necessary, adjustments are made to
the Financial Statements of subsidiaries
to bring their accounting policies
into line with the Group’s accounting
policies. All intra-group assets and
liabilities, equity, income, expenses
and cash flows relating to transactions
between members of the Group are
eliminated in full on consolidation. The
Financial Statements of subsidiaries
used in the preparation of the
consolidated Financial Statements
are prepared on the same reporting
year as the Parent Company.

resultant gain or loss is recognised in
profit or loss. Any investment retained
is recognised at fair value.

The purchase method of accounting
is used to account for the acquisition
of subsidiaries by the Group other than
those included in the restructuring
referred to above. The cost of an
acquisition is measured as the fair value
of the assets given, equity instruments
issued and liabilities incurred or
assumed at the date of exchange,
plus costs directly attributable to the
acquisition. Identifiable assets acquired
and liabilities and contingent liabilities
assumed in a business combination are
measured initially at their fair values at
the acquisition date, irrespective of
the extent of any minority interest. The
excess of the cost of acquisition over
the fair value of the Group’s share of
the identifiable net assets acquired is
recorded as goodwill. If the cost of
acquisition is less than the fair value
of the net assets of the subsidiary
acquired, the difference is recognised
directly in the income statement.

(c) Equity-accounted investees
An investment in an entity over which
the Group has significant influence,
but is not a subsidiary, is accounted
for under the equity method of
accounting. Equity-accounted
investees could comprise associates or
joint ventures. An associate is an entity
in which the Group has significant
influence over the financial and
operating policy decisions of
the investee but not control or joint
control over those policies. A joint
venture is an arrangement in which the
Group has joint control, whereby the
Group has rights to the net assets of the
arrangement, rather than rights to its
assets and obligations for its liabilities.

Under the equity method, an investment
is initially recognised at cost and adjusted
thereafter to recognise the Group’s
share of the profit or loss and other
comprehensive income of the investee,
until the date on which significant
influence or joint control ceases.

A change in the ownership interest of
a subsidiary without loss of control is
accounted for as an equity transaction.
If the Group loses control over a
subsidiary, it derecognises the related
assets (including goodwill), liabilities,
non-controlling interest and other
components of equity while any

2.4. Segment reporting
Operating segments are reported in
a manner consistent with the internal
reporting provided to the Company’s
Board of Directors, collectively the
Group’s chief operating decision
maker, to assess performance and
allocate capital or resources.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
2.5. Foreign currency translation
(a) Functional and
presentation currency
Items included in the Financial
Statements of each of the Group’s
entities are measured using the
currency of the primary economic
environment in which the entity
operates (‘the functional currency’).
The combined Financial Statements
are presented in Pounds Sterling,
which is the Company’s functional
and presentation currency.

(b) Transactions and balances
Foreign currency transactions are
translated into the functional currency
using the exchange rates prevailing at
the dates of the transactions. Foreign
exchange gains and losses resulting
from the settlement of such transactions
and from the translation at year end
exchange rates of monetary assets
and liabilities denominated in foreign
currencies are recognised in the
income statement. Non-monetary items
that are measured in terms of historical
cost in a foreign currency are translated
using the exchange rates at the dates
of the initial transactions. Non-monetary
items measured at fair value in a
foreign currency are translated using
the exchange rates at the date when
the fair value is determined. The gain
or loss arising on translation of non-
monetary items measured at fair value
is treated in line with the recognition
of the gain or loss on the change in
fair value of the item (i.e., translation
differences on items whose fair value
gain or loss is recognised in other
comprehensive income or profit
or loss are also recognised in other
comprehensive income or profit
or loss, respectively).

(c) Translation of foreign operations
On consolidation, the assets and
liabilities of foreign operations are
translated into Pounds Sterling at the rate
of exchange prevailing at the reporting
date and their statements of profit or loss
are translated at the average exchange
rates for the year. The exchange
differences arising on translation
for consolidation are recognised
in other comprehensive income.

Any goodwill arising on the acquisition
of a foreign operation and any fair
value adjustments to the carrying
amounts of assets and liabilities arising
on the acquisition are treated as assets
and liabilities of the foreign operation
and translated at the spot rate of
exchange at the reporting date.

2.6. Property, plant and equipment
Property, plant and equipment is stated
at historical cost less depreciation and
impairment. Historical cost includes
expenditure that is directly attributable
to the acquisition of the items.

Subsequent costs are included in the
asset’s carrying amount or recognised
as a separate asset, as appropriate,
only when it is probable that future
economic benefits associated with the
item will flow to the Group and the cost
of the item can be measured reliably.
The carrying amount of any replaced
part is derecognised. All other repairs
and maintenance are charged to the
income statement during the financial
period in which they are incurred.

Depreciation is calculated using the
straight-line method to allocate assets’
cost to their residual values over their
estimated useful lives, as follows:

— Leasehold property: over the length

of the lease;

— Plant and machinery: 2–20 years; and
— Motor vehicles: 4–8 years.

Residual values and useful lives are
reviewed, and adjusted if appropriate,
at each balance sheet date.

An asset’s carrying amount is written
down immediately to its recoverable
amount if the asset’s carrying amount
is greater than its estimated
recoverable amount.

An item of property, plant and
equipment and any significant part
initially recognised is derecognised
upon disposal or when no future
economic benefits are expected from
its use or disposal. Any gain or loss
arising on derecognition of the asset
(calculated as the difference between
the net disposal proceeds and the
carrying amount of the asset) is
included within ‘other net gains’
in the income statement when
the asset is derecognised.

2.7. Intangible assets
(a) Goodwill
Goodwill represents the excess of the
cost of an acquisition over the fair
value of the Group’s share of the net
identifiable assets of the acquired
subsidiary at the date of acquisition.
If the cost of acquisition is less than
the fair value of the net assets of the
subsidiary acquired, the difference is
‘negative goodwill’ and is recognised
in the income statement immediately.

Goodwill on acquisitions of subsidiaries
is included in ‘intangible assets’.
Separately recognised goodwill is tested
annually for impairment and carried
at cost less accumulated impairment
losses. Impairment losses on goodwill
are not reversed. Gains and losses on
the disposal of an entity include the
carrying amount of goodwill relating to
the entity sold. Goodwill is allocated to
cash-generating units for the purpose
of impairment testing. The allocation is
made to those cash-generating units
or groups of cash-generating units that
are expected to benefit from the
business combination in which the
goodwill arose.

(b) Contracts and licences
Intangible assets acquired separately
are measured on initial recognition
at cost. The cost of intangible assets
acquired in a business combination
is their fair value at the date of
acquisition. Following initial recognition,
intangible assets are carried at cost
less any accumulated amortisation
and accumulated impairment losses.
Internally generated intangibles,
excluding capitalised development
costs, are not capitalised and the
related expenditure is reflected in
profit or loss in the period in which
the expenditure is incurred.

Intangible assets are amortised over
the useful economic life (five to ten
years) and assessed for impairment
whenever there is an indication that
the intangible asset may be impaired.

Notes to the Group Financial Statements continued Clipper Logistics plc Financial Statements(c) Computer software
Acquired computer software licences
are capitalised on the basis of the costs
incurred to acquire and bring to use
the specific software. These costs are
amortised over their estimated useful
lives (three to five years).

Costs associated with developing
or maintaining computer software
programmes are recognised as
an expense as incurred. Costs that
are directly associated with the
development of identifiable and
unique software products controlled
by the Group, and that will probably
generate economic benefits
exceeding costs beyond one year,
are recognised as intangible
assets. Costs include the software
development employee costs and
overheads directly attributable to
bringing the asset into use.

Computer software development costs
recognised as assets are amortised
over their estimated useful lives (not
exceeding five years).

2.8. Impairment of non-financial assets
The Group assesses, at each reporting
date, whether there is an indication
that an asset may be impaired. If any
indication exists, or when annual
impairment testing for an asset is
required, the Group estimates the
asset’s recoverable amount. An asset’s
recoverable amount is the higher of
an asset’s or cash-generating unit’s
(“CGU”) fair value less costs to sell
and its value in use.

Where the asset does not generate
cash flows that are independent from
other assets, the Group estimates the
recoverable amount of the CGU to
which the asset belongs.

When the carrying amount of an
asset or CGU exceeds its recoverable
amount, the asset is considered
impaired and is written down to its
recoverable amount.

In assessing value in use, the estimated
future cash flows are discounted to their
present value using a pre-tax discount
rate that reflects current market
assessments of the time value of money
and the risks specific to the asset.

In determining fair value less costs
to sell, recent market transactions
are taken into account. If no such
transactions can be identified, an
appropriate valuation model is used.
These calculations are corroborated
by valuation multiples, quoted share
prices for publicly traded companies
or other available fair value indicators.

An impairment loss is recognised as
an expense immediately. Where an
impairment loss subsequently reverses,
the carrying amount of the asset
(or CGU) is increased to the revised
estimate of its recoverable amount, but
so that the increased carrying amount
does not exceed the carrying amount
that would have been determined had
no impairment loss been recognised
for the asset (or CGU) in prior years.
A reversal of an impairment loss is
recognised as income immediately.

The Group bases its impairment
calculation on detailed budgets and
forecast calculations, which are
prepared separately for each of the
Group’s CGUs to which the individual
assets are allocated. These budgets
and forecast calculations generally
cover a minimum period of two years.
For longer periods, a long-term growth
rate is calculated and applied to
project future cash flows after the
second year.

2.9. Financial assets
The Group classifies its financial assets
in the following categories: at fair value
through profit or loss and available for
sale. The classification depends on
the purpose for which the financial
assets were acquired. Management
determines the classification of its
financial assets at initial recognition.
At 30 April 2017 the Group held no
financial assets available for sale.

Financial assets at fair value
through profit or loss
Financial assets at fair value through
profit or loss are financial assets held for
trading. A financial asset is classified in
this category if acquired principally for
the purpose of selling in the short term.
Derivatives are also categorised as held
for trading unless they are designated
as hedges. Assets in this category are
classified as current assets.

Investments are initially recognised at
fair value plus transaction costs for all
financial assets not carried at fair value
through profit or loss. Financial assets
carried at fair value through profit or
loss are initially recognised at fair value
and transaction costs are expensed in
the income statement. Financial assets
are derecognised when the rights to
receive cash flows from the investments
have expired or have been transferred
and the Group has transferred
substantially all risks and rewards
of ownership.

Available-for-sale financial assets and
financial assets at fair value through
profit or loss are subsequently carried
at fair value.

Gains or losses arising from changes
in the fair value of the ‘financial assets
at fair value through profit or loss’
category are presented in the income
statement within ‘other net gains’ in
the period in which they arise.

Dividend income from financial assets
at fair value through profit or loss is
recognised in the income statement as
part of other income when the Group’s
right to receive payments is established.

The Group assesses at each balance
sheet date whether there is objective
evidence that a financial asset or a
Group of financial assets is impaired.

Impairment testing of trade receivables
is described in note 2.12.

2.10. Inventories
Inventories are stated at the lower of
cost and net realisable value. Cost
includes all costs incurred in bringing
each product to its present location
and condition. Cost is determined
using the first-in, first-out (FIFO) method.
Net realisable value is the estimated
selling price in the ordinary course of
business, less applicable variable
selling expenses.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
2.14. Trade payables
Trade payables are recognised initially
at fair value and subsequently
measured at amortised cost using
the effective interest method.

2.15. Consignment inventory payables
Inventories of commercial vehicles
are usually funded under stocking
finance plans offered by either the
manufacturer’s own finance arm,
or third party funders. Amounts
outstanding are included in trade
and other payables.

2.16. Borrowings
Borrowings are recognised initially
at fair value, net of transaction costs
incurred. Borrowings are subsequently
stated at amortised cost; any
difference between the proceeds
(net of transaction costs) and the
redemption value is recognised in the
income statement over the period of
the borrowings using the effective
interest method.

Borrowings are classified as current
liabilities unless the Group has an
unconditional right to defer settlement
of the liability for at least 12 months
after the balance sheet date.

2.17. Income tax
Current tax assets and liabilities are
measured at the amount expected
to be recovered from or paid to the
taxation authorities, based on tax
rates and laws that are enacted or
substantively enacted by the balance
sheet date.

Deferred income tax is provided in
full, using the liability method, on
temporary differences arising between
the tax bases of assets and liabilities
and their carrying amounts in the
Financial Statements.

However, the deferred income tax is
not accounted for, if it arises from initial
recognition of goodwill or an asset or
liability in a transaction other than a
business combination that at the time
of the transaction affects neither
accounting nor taxable profits or losses.

Deferred income tax is determined
using tax rates (and laws) that have
been enacted or substantially enacted
by the balance sheet date and are
expected to apply when the related
deferred income tax asset is realised
or the deferred income tax liability is
settled. Deferred income tax assets
are recognised to the extent that it is
probable that future taxable profit
will be available against which the
temporary differences can be utilised.

Deferred income tax is provided on
temporary differences arising on
investments in subsidiaries and
associates, except where the timing of
the reversal of the temporary difference
is controlled by the Group and it is
probable that the temporary difference
will not reverse in the foreseeable future.

Deferred income tax assets and
liabilities are offset only if a legally
enforceable right exists to set off current
tax assets against current tax liabilities,
the deferred income taxes relate to
the same taxation authority and
that authority permits the Group to
make a single net payment.

2.18. Employee benefits
(a) Pension obligations
Group companies operate various
pension schemes. The schemes are
generally funded through payments to
insurance companies. The Group has
only defined contribution plans. A
defined contribution plan is a pension
plan under which the Group pays fixed
contributions into a separate entity.

For defined contribution plans, the
Group pays contributions to privately
administered pension insurance plans
on a contractual or voluntary basis.
The Group has no further payment
obligations once the contributions
have been paid. The contributions
are recognised as employee benefit
expense when they are due.

2.11. Vehicles on consignment
Vehicles held on consignment from
manufacturers are included in the
statement of financial position where
it is considered that the Group enjoys
the benefits and carries the risks
of ownership.

2.12. Trade receivables
Trade receivables are recognised initially
at fair value and subsequently measured
at amortised cost using the effective
interest method, less provision for
impairment. A provision for impairment
of trade receivables is established when
there is objective evidence that the
Group will not be able to collect all
amounts due according to the original
terms of the receivables.

Significant financial difficulties of the
debtor, probability that the debtor
will enter bankruptcy or financial
reorganisation, and default or
delinquency in payments (more than
30 days overdue) are considered
indicators that the trade receivable
may be impaired. The amount of the
provision is the difference between
the asset’s carrying amount and the
present value of estimated future cash
flows, discounted at the original
effective interest rate.

The carrying amount of the asset
is reduced through the use of an
allowance account, and the
amount of the loss is recognised
in the income statement within
‘administration expenses’.

When a trade receivable is
uncollectable, it is written off against
the allowance account for trade
receivables. Subsequent recoveries
of amounts previously written off are
credited against ‘administration
expenses’ in the income statement.

2.13. Cash and cash equivalents
Cash and cash equivalents includes cash
in hand, deposits held at call with banks,
other short-term highly liquid investments
with original maturities of three months or
less, and bank overdrafts. Bank overdrafts
are shown within borrowings in current
liabilities on the statement of financial
position. Cash and cash equivalents are
stated net of bank overdrafts in the cash
flow statement.

Notes to the Group Financial Statements continued Clipper Logistics plc Financial Statements(b) Profit-sharing and bonus plans
The Group recognises a liability and an
expense for bonuses and profit-sharing,
based on a formula that takes into
consideration the profit attributable
to the Company’s shareholders after
certain adjustments. The Group
recognises a provision where
contractually obliged or where
there is a past practice that has
created a constructive obligation.

(c) Share based payments
IFRS 2 requires the recognition of equity
settled share based payments at fair
value at the date of the grant. All
equity settled share based payments
are ultimately recognised as an
expense in the income statement
with a corresponding credit to share
based payment reserve.

If vesting periods or other non-market
vesting conditions apply, the expense
is allocated over the vesting period
based on the best available estimate
of the number of shares expected to
vest. Estimates are revised subsequently
if there is any indication that the
number of shares expected to vest
differs from previous estimates. Any
cumulative adjustment prior to vesting
is recognised in the current period.
Upon exercise of share options, the
proceeds received net of attributable
transaction costs are credited to share
capital and where appropriate,
share premium.

2.19. Provisions
Provisions for items such as dilapidations
and legal claims are recognised when:
the Group has a present legal or
constructive obligation as a result of
past events; it is probable that an
outflow of resources will be required to
settle the obligation; and the amount
has been reliably estimated.

Where there are a number of similar
obligations, the likelihood that an
outflow will be required in settlement
is determined by considering the class
of obligations as a whole. A provision
is recognised even if the likelihood of
an outflow with respect to any one
item included in the same class of
obligations may be small.

Provisions are measured at the present
value of the expenditures expected
to be required to settle the obligation
using a pre-tax rate that reflects current
market assessments of the time value
of money and the risks specific to the
obligation. The increase in the provision
due to passage of time is recognised
as interest expense.

2.20. Revenue recognition
Revenue is measured at the fair value
of the consideration received or
receivable for the sale of goods and
services in the ordinary course of the
Group’s activities. Revenue is shown net
of value-added tax, returns, rebates
and discounts and after eliminating
sales within the Group.

The Group recognises revenue when
the amount of revenue can be reliably
measured, it is probable that future
economic benefits will flow to the entity
and when specific criteria have been
met for each of the Group’s activities.
The amount of revenue is not
considered to be reliably measurable
until all contingencies relating to the
sale have been resolved. In practice
this means that revenue is generally
recognised as follows:

(a) Sale of goods
Revenue from the sale of goods is
recognised when the Group has
transferred to the buyer the significant
risks and rewards of ownership of the
goods. For vehicles, this is generally on
registration; for other goods, it is when
despatched, or packaged and made
available for collection.

(b) Services other than repair
and maintenance contracts
Revenue is recognised when the
service is rendered. Invoicing varies by
contract, but is typically either in line
with work performed or initially on a
budgeted volume basis with later
adjustment to reflect actual activity.
Where a contract contains elements
of variable consideration, the Group
will estimate the amount or revenue
to which it will be entitled under the
contract. Variable consideration
can arise as a result of incentives,
performance bonuses, penalties
or other similar items. Variable
consideration is recognised only to the
extent that it is highly probable that the
economic benefit will transfer to the
Group. Calculation of accrued and
deferred income is therefore necessary
at period ends, with client billing

arrangements not always coinciding
with the Group’s reporting periods.
Revenue from open book contracts
includes contributions to the capital
cost of items used in the delivery of
services, together with a finance
charge. Judgement is required when
determining the appropriate timing
and amount of revenue that can be
recognised, due to the different
contractual arrangements in place.

(c) Repair and maintenance contracts
Revenue is recognised over the life of
the contract in proportion to the costs
of providing the services.

2.21. Supplier bonuses
Cost of sales are recognised net of
vehicle manufacturers’ bonuses. These
are recognised when the Group has
met the relevant conditions. There is
little judgement or estimation involved
in computing the amounts.

2.22. Leases
Leases in which a significant portion of
the risks and rewards of ownership are
retained by the lessor are classified as
operating leases. Payments made
under operating leases (net of any
incentives received from the lessor) are
charged to the income statement on
a straight-line basis over the period
of the lease.

Assets held under finance leases, which
transfer to the Group substantially all
the risks and benefits incidental to
ownership of the leased item, are
capitalised at the inception of the
lease, with a corresponding liability
being recognised for the lower of the
fair value of the leased asset and the
present value of the minimum lease
payments. Lease payments are
apportioned between the reduction of
the lease liability and finance charges
in the income statement so as to
achieve a constant rate of interest on
the remaining balance of the liability.
The property, plant and equipment
acquired under finance leases is
depreciated over the shorter of the
estimated useful life of the asset and
the lease term; where the lease
contains an option to purchase which
is expected to be exercised, the asset
is depreciated over the useful life of
the asset. The accounting policy
adopted for finance leases is also
applied to hire purchase agreements.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
2.23. Dividend distribution
Dividend distribution to the Company’s
shareholders is recognised as a liability
in the Group’s Financial Statements
in the period in which the dividends
are approved by the Company’s
shareholders.

2.24. Exceptional items
Items that are both material and
non-recurring are presented as
exceptional items within their relevant
consolidated income statement
category. The separate reporting of
exceptional items helps provide a
clearer indication of the Group’s
underlying business performance.

Items which may give rise to
classification as exceptional include,
but are not limited to, restructuring of
the business or depot network, asset
impairments and litigation settlements.

2.25. Financial risk management
The Group carries out treasury hedging
activities to manage exposures to
interest rate movements on its core
borrowings using interest rate swaps.

The Group only uses derivatives for
hedging purposes and they are
recognised at fair value and are
re-measured to fair value at each
balance sheet date. Where an interest
rate swap qualifies as an effective
hedge under IAS 39, movements in fair
value are shown as an adjustment to
the net interest charge being hedged.

Movements in fair value of derivatives
that do not qualify as an effective
hedge under IAS 39 are shown in ‘other
net gains’ within the income statement.
The Group identifies, evaluates and
hedges financial risks centrally under
policies approved by the Board
covering specific areas, such as
interest rate risk, foreign exchange risk
and credit risk.

2.26. Critical accounting
estimates and assumptions
The Group makes estimates and
assumptions concerning the future.
The resulting accounting estimates will,
by definition, seldom equal the related
actual results. The estimates and
assumptions that have a significant
risk of causing a material adjustment
to the carrying amounts of assets
and liabilities within the next financial
year are discussed below.

(a) Revenue recognition
Judgement is required when
determining the appropriate timing
and amount of revenue to be
recognised in the value-added logistics
segment. This is due to the various
contractual arrangements in place,
each with bespoke terms which
can lead to different revenue
recognition requirements.

(b) Estimated impairment of goodwill
The Group annually tests whether
goodwill has suffered any impairment,
in accordance with the accounting
policy stated above. The recoverable
amounts of cash-generating units have
been determined based on value-in-
use calculations. These calculations
require the use of estimates, both in
arriving at the expected future cash
flows and the application of a suitable
discount rate in order to calculate the
present value of these flows.

(c) Fair value of intangible assets
acquired in business combinations
As there is no ready market for
intangible assets such as customer
relationships and brands, judgement is
required in assessing fair value when
accounting for a business combination.

Estimates and judgements are
continually evaluated by management,
on a case-by-case basis, based on
historical experience and other factors,
including expectations of future events
that are believed to be reasonable
under the circumstances.

2.27. Adoption of new and revised
reporting standards
The Group has applied all accounting
standards and interpretations issued
by the IASB and IFRIC except for the
following standards and interpretations
which were in issue but not yet effective:

Effective date
(annual periods
beginning
on or after)

1 January 2018

Title

IFRS 15 Revenue
from Contracts
with Customers

IFRS 9 Financial
Instruments
(issued in 2014)

IFRS 16 Leases

1 January 2019

Annual Improvements
to IFRS 2014-2016 Cycle

1 January 2017

The effective dates stated above are
those given in the original IASB/IFRIC
standards and interpretations.

As the Group prepares its financial
information in accordance with IFRS as
adopted by the European Union, the
application of new standards and
interpretations will be subject to them
having been endorsed for use in the
EU via the EU Endorsement mechanism.
In the majority of cases this will result
in an effective date consistent with
that given in the original standard or
interpretation but the need for
endorsement restricts the Group’s
discretion to early adopt standards.

Adoption of IFRS 16 is likely to have
a material impact on the Group’s
non-current assets and borrowings.
It is not yet practical to provide a
reasonable estimate of the effect until
a detailed review has been completed.
The Directors do not anticipate that the
adoption of the remaining standards
and interpretations will have a material
impact on the Group’s historical
financial information in the period
of initial application.

In the current year, amendments
to IAS 1, 16, 27, 28 & 38; IFRS 10 & 11
and those arising from the annual
improvements to IFRSs 2012-2014 cycles
have been adopted. There has been
no material impact, although there
have been some minor changes
to disclosure.

Notes to the Group Financial Statements continued Clipper Logistics plc Financial Statements3. Revenue
Revenue recognised in the income statement is analysed as follows:

E-fulfilment and returns management services

Non e-fulfilment logistics

Value-added logistics services

Commercial vehicles

Inter-segment sales

Revenue from external customers

Geographical information – revenue from external customers:

United Kingdom

Germany

Rest of Europe

Revenue from external customers

Geography is determined by the location of the end customer.

2017
Group
£’000

129,854

121,930

251,784

91,515

(3,172)

2016
Group
£’000

97,598

108,390

205,988

85,642

(1,305)

340,127

290,325

2017
Group
£’000

2016
Group
£’000

302,730

264,219

16,103

21,294

14,234

11,872

340,127

290,325

The Group has one customer that in the year ended 30 April 2017 accounted for greater than 10% of the total Group revenue.
For completeness, the comparative 2016 figure is shown, although it constituted less than 10% of Group revenue in that year.

The revenue all arose in the value-added logistics services segment as follows:

Revenue from largest single customer in 2017

4. Segment information

2017
Group
£’000

35,179

2016
Group
£’000

17,390

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:

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

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

— E-fulfilment & returns management services;
— Non e-fulfilment logistics; and
— Central logistics overheads, being the costs of support services specific to the value-added logistics services segment,

but which are impractical to allocate between the sub-segment 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.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
4. Segment information (continued)
The following tables present profit information for continuing operations regarding the Group’s business segments for the two
years ended 30 April 2017:

Earnings before interest & tax (“EBIT”):

E-fulfilment & returns management services
Non e-fulfilment logistics
Central logistics overheads

Value-added logistics services
Commercial vehicles
Head office costs

Group EBIT

Amortisation of other intangible assets:

E-fulfilment & returns management services
Non e-fulfilment logistics
Central logistics overheads

Value-added logistics services
Commercial vehicles
Head office costs

Group total

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

Net finance costs
Income tax expense

Group total

Operating profit and profit before income tax:

Operating profit:
E-fulfilment & returns management services
Non e-fulfilment logistics
Central logistics overheads

Value-added logistics services
Commercial vehicles
Head office costs

Group operating profit before share of equity-accounted investees
Share of equity-accounted investees, net of tax

Operating profit

Finance costs
Finance income

Profit before income tax

2017
Group
£’000

10,232
12,431
(4,832)

17,831
2,342
(2,245)

17,928

2017
Group
£’000

(156)
(21)
–

(177)
–
–

(177)

2017
Group
£’000

(9)
(54)

(63)

2017
Group
£’000

9,796
12,410
(4,832)

17,374
2,342
(2,245)

17,471
217

17,688

(1,657)
21

16,052

2016
Group
£’000

8,291
10,742
(4,718)

14,315
2,263
(1,860)

14,718

2016
Group
£’000

(156)
(31)
–

(187)
–
–

(187)

2016
Group
£’000

–
–

–

2016
Group
£’000

8,135
10,711
(4,718)

14,128
2,263
(1,860)

14,531
–

14,531

(1,413)
4

13,122

Notes to the Group Financial Statements continued Clipper Logistics plc Financial StatementsThe segment assets and liabilities at the balance sheet date are as follows:

At 30 April 2017:

Value-added logistics services
Commercial vehicles

Segment assets/(liabilities)

Unallocated assets/(liabilities):
— Cash and cash equivalents
— Financial liabilities
— Deferred tax
— Income tax assets/(liabilities)

Total assets/(liabilities)

At 30 April 2016:

Value-added logistics services
Commercial vehicles

Segment assets/(liabilities)

Unallocated assets/(liabilities):
— Cash and cash equivalents
— Financial liabilities
— Deferred tax
— Income tax assets/(liabilities)

Total assets/(liabilities)

Segment
assets
£’000

99,077
45,889

Segment
liabilities
£’000

(46,442)
(40,120)

144,966

(86,562)

862
–
353
–

–
(27,362)
–
(2,187)

146,181

(116,111)

Segment
assets
£’000

73,858
42,672

116,530

715
–
–
36

Segment
liabilities
£’000

(39,288)
(33,773)

(73,061)

(1,817)
(17,677)
(202)
(1,747)

117,281

(94,504)

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

Capital expenditure:

Value-added logistics services
Commercial vehicles

Total

2017
Group
£’000

19,386
851

20,237

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

Depreciation:

Value-added logistics services
Commercial vehicles

Total

Amortisation:

Value-added logistics services
Commercial vehicles

Total

2017
Group
£’000

4,012
713

4,725

2017
Group
£’000

539
9

548

2016
Group
£’000

15,500
661

16,161

2016
Group
£’000

3,883
697

4,580

2016
Group
£’000

447
19

466

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
4. Segment information (continued)
Non-current assets held by each geographical area are made up as follows:

United Kingdom
Germany
Rest of Europe
Deferred taxation assets

Total

5. Staff costs

Wages and salaries
Social security costs
Pension costs for the defined contribution scheme
Share based payments

Total

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

Warehousing
Distribution
Service and maintenance
Administration

Total

Key management compensation (including Executive Directors):

Wages and salaries
Social security costs
Pension costs for the defined contribution scheme
Share based payments

Total

Directors’ emoluments:

Aggregate emoluments excluding share based payments on unvested awards
Pension costs for the defined contribution scheme

Total

2017
Group
£’000

62,409
4,617
240
353

67,619

2017
Group
£’000

84,462
7,791
1,474
832

94,559

2017
Group
Number

2,402
416
396
526

3,740

2017
Group
£’000

2,680
370
336
793

4,179

2017
Group
£’000

1,309
48

1,357

2016
Group
£’000

46,194
4,268
–
–

50,462

2016
Group
£’000

72,662
6,766
1,371
454

81,253

2016
Group
Number

2,097
406
387
490

3,380

2016
Group
£’000

2,589
378
398
381

3,746

2016
Group
£’000

1,259
86

1,345

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

Defined contribution plans

More detail is set out in the Directors’ Remuneration Report on pages 46 to 59.

2017
Group
Number

2016
Group
Number

Notes to the Group Financial Statements continued Clipper Logistics plc Financial Statements6. Group operating profit
This is stated after charging:

Depreciation of property, plant and equipment – owned assets
Depreciation of property, plant and equipment – leased assets
Amortisation of intangible assets (included within administration and other expenses)

Total depreciation and amortisation expense

Operating lease rentals:
— Vehicles, plant and equipment
— Land and buildings

Auditor’s remuneration:
KPMG LLP:
— Group audit fees
— Other services

Ernst & Young LLP:
— Group audit fees
— Other services

Total auditor’s remuneration:
— Audit of the Group Financial Statements
— Audit of the subsidiaries
— Non-audit fees

Total fees paid to the Group’s auditors

Operating profit is stated after crediting:

Other net gains:
— Profit on sale of property, plant and equipment
— Dealership contributions
— Fair value adjustment to derivative financial instruments
— Amortisation of grants

Total net gains

7. Dividends

Final dividend for the prior year of 4.0 pence (2016: 3.2 pence) per share
Interim dividend for the year of 2.4 pence (2016: 2.0 pence) per share

Total dividends paid

2017
Group
£’000

2,023
2,702
548

5,273

2016
Group
£’000

2,484
2,096
466

5,046

8,876
18,069

7,808
15,474

142
–

–
–

60
82
–

142

125
–

30
–

60
95
–

155

2017
Group
£’000

2016
Group
£’000

260
135
10
–

405

2017
Group
£’000

4,000
2,400

6,400

37
165
60
1

263

2016
Group
£’000

3,200
2,000

5,200

Proposed final dividend for the year ended 30 April 2017 of 4.8 pence (2016: 4.0 pence)
per share

4,813

4,000

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 8 September 2017. The payment of this dividend will not have any tax consequences for the Group.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
8. Finance costs

On bank loans and overdrafts
On hire purchase agreements
Amortisation of debt issue costs
Commercial vehicle stocking interest
Other interest payable

2017
Group
£’000

438
766
97
299
57

2016
Group
£’000

533
394
78
370
38

Total interest expense for financial liabilities measured at amortised cost

1,657

1,413

9. Finance income

Bank interest
Other interest
Amounts receivable from related parties

Total interest income for financial assets measured at amortised cost

10. Income tax expense
(a) Tax charged in the income statement:

Current income tax:
UK and foreign corporation tax
Amounts under/(over) provided in previous years

Total income tax on continuing operations

Deferred tax:
Origination and reversal of temporary differences
Amounts under/(over) provided in previous years
Impact of change in tax laws and rates

Total deferred tax

2017
Group
£’000

–
3
18

2017
Group
£’000

3,620
90

3,710

(144)
48
(28)

(124)

2016
Group
£’000

3
1
–

2016
Group
£’000

3,066
(28)

3,038

(231)
21
(42)

(252)

Tax expense in the income statement on continuing operations

3,586

2,786

(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:

Profit before taxation from continuing operations
Standard rate of corporation tax in UK
Tax on profit on ordinary activities at standard rate

Share of equity-accounted investees, already net of tax
Expenses not allowable for tax purposes
Tax under/(over) provided in previous years
Difference in tax rates overseas
Utilisation of previously unrecognised tax losses
Deferred tax rate difference

Total tax expense reported in the income statement

2017
Group
£’000

16,052
19.92%
3,198

(43)
212
138
109
–
(28)

2016
Group
£’000

13,122
20.00%
2,624

–
169
(7)
42
–
(42)

3,586

2,786

Notes to the Group Financial Statements continued Clipper Logistics plc Financial Statements(d) Deferred tax in the income statement:

Deferred tax on accelerated capital allowances
Deferred tax on other temporary differences

Total

2017
Group
£’000

152
(276)

(124)

2016
Group
£’000

(123)
(129)

(252)

The UK corporation tax rate reduced from 20% to 19% with effect from 1 April 2017. Legislation to reduce the rate to 17%
with effect from 1 April 2020 was substantively enacted at 30 April 2017. A rate of 17% (2016: 18%) has been applied in the
measurement of the Group’s UK deferred tax assets and liabilities in the year.

(e) Deferred tax in the statement of financial position:

Deferred tax liabilities:
Accelerated capital allowances
Other timing differences

Deferred tax asset:
Share based payments
Provisions and other timing differences

Net deferred tax asset (liability)

(f) Deferred tax movement:

At 1 May 2015
Credited to income statement
Credited to share based payment reserve
Foreign currency adjustment

At 30 April 2016

Credited to income statement
Credited to share based payment reserve
Foreign currency adjustment

At 30 April 2017

2017
Group
£’000

(512)
(204)

873
196

353

2016
Group
£’000

(356)
(213)

309
58

(202)

Group
£’000

(642)
252
190
(2)

(202)

124
429
2

353

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:

Profit attributable to ordinary equity holders of the Company

Basic weighted average number of shares (thousands)
Basic earnings per share

Diluted weighted average number of shares (thousands)
Diluted earnings per share

2017
Group
£’000

12,466

2017
Group

100,011
12.5p

101,710
12.3p

2016
Group
£’000

10,336

2016
Group

100,000
10.3p

100,823
10.3p

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
12. Intangible assets

Cost:
At 1 May 2015
Additions
Disposals
Foreign currency adjustment

At 30 April 2016

Additions
Disposals
Foreign currency adjustment

At 30 April 2017

Accumulated amortisation:
At 1 May 2015
Charge for the year
Disposals
Foreign currency adjustment

At 30 April 2016

Charge for the year
Disposals
Foreign currency adjustment

At 30 April 2017

Net book value:

At 1 May 2015

At 30 April 2016

At 30 April 2017

Goodwill
Group
£’000

Contracts
and licences
Group
£’000

Computer
software
Group
£’000

23,252
–
–
–

23,252

–
–
–

1,933
98
–
–

2,031

–
–
7

1,514
448
–
5

1,967

551
(263)
16

Total
Group
£’000

26,699
546
–
5

27,250

551
(263)
23

23,252

2,038

2,271

27,561

–
–
–
–

–

–
–
–

–

786
187
–
1

974

177
–
2

1,094
279
–
5

1,378

371
(96)
5

1,880
466
–
6

2,352

548
(96)
7

1,153

1,658

2,811

23,252

1,147

1,057

885

420

589

613

24,819

24,898

24,750

The average remaining useful life of contracts and licences at 30 April 2017 is 5.4 years (2016: 6.5 years)

13. Impairment test for goodwill
The carrying amount of goodwill has been allocated to each cash generating unit (“CGU”) as follows:

Value-added logistics services
Commercial vehicles

Total

2017
Group
£’000

17,326
5,926

23,252

2016
Group
£’000

17,326
5,926

23,252

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 2020.

The business plans for the value-added logistics services segment take into account the annualised impact of contract wins
in the year ended 30 April 2017 as well as confirmed new and ceasing contracts. The key judgement 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 2.5% (2016: 2.5%) to 2027 (2016: 2026).
The cash flows have then been discounted using a pre-tax risk adjusted discount rate of between 9 and 11% (2016: 9 and 11%).
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.

Notes to the Group Financial Statements continued Clipper Logistics plc Financial Statements14. Property, plant and equipment

Cost:
At 1 May 2015
Additions
Disposals
Foreign currency adjustment

At 30 April 2016

Additions
Disposals
Foreign currency adjustment

At 30 April 2017

Accumulated depreciation:
At 1 May 2015
Charge for the year
Disposals
Foreign currency adjustment

At 30 April 2016

Charge for the year
Disposals
Foreign currency adjustment

At 30 April 2017

Net book value:

At 1 May 2015

At 30 April 2016

At 30 April 2017

Leasehold
property
Group
£’000

Motor
vehicles
Group
£’000

3,851
391
(16)
5

4,231

198
(142)
6

3,836
1,875
(680)
68

5,099

777
(1,123)
129

Plant,
machinery,
fixtures &
fittings
Group
£’000

26,224
13,349
(259)
209

39,523

18,711
(3,429)
232

Total
Group
£’000

33,911
15,615
(955)
282

48,853

19,686
(4,694)
367

4,293

4,882

55,037

64,212

1,759
313
(16)
5

2,061

353
(142)
5

1,965
784
(488)
34

2,295

861
(794)
26

15,572
3,483
(250)
128

18,933

3,511
(1,907)
111

19,296
4,580
(754)
167

23,289

4,725
(2,843)
142

2,277

2,388

20,648

25,313

2,092

2,170

2,016

1,871

2,804

2,494

10,652

20,590

14,615

25,564

34,389

38,899

Included within property, plant and equipment are amounts held under finance lease contracts. At 30 April 2017, the net book
value of these assets was £27,314,000 (30 April 2016: £10,638,000). Total additions include £13,697,000 (2016: £8,172,000) under
finance lease contracts.

Additions to plant, machinery, fixtures & fittings include £1,824,000 (2016: £2,823,000) in respect of assets in the course
of construction.

15. Investment in equity-accounted investees

Brought forward
Subscription for share capital
Share of profit after tax for the period

Carried forward

2017
Group
£’000

–
1,950
217

2,167

2016
Group
£’000

–
–
–

–

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 United Kingdom.
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.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
15. Investment in equity-accounted investees (continued)
Summarised financial information from Clicklink’s audited accounts for the 13 week trading period ended
31 January 2017 is set out below:

Current assets
Non-current assets
Current liabilities
Non-current liabilities

Equity attributable to owners of the company

Revenue
Operating profit
Interest payable and similar charges
Income tax expense

Profit for the period

16. Inventories

Component parts and consumable stores
Commercial vehicles
Commercial vehicles on consignment

Total inventories net of provision for obsolescence

See below for the movements in the provision for obsolescence:

At 1 May 2015
Charged for the year
Utilised

At 30 April 2016

Charged for the year
Utilised

At 30 April 2017

31 January
2017
£’000

7,874
4,677
(5,312)
(2,905)

4,334

13 weeks
ended
31 January
2017
£’000

6,624
560
(18)
(108)

434

2016
Group
£’000

4,319
3,768
18,165

26,252

Group
£’000

17
39
(47)

114
(36)

2017
Group
£’000

4,459
3,225
22,288

29,972

The cost of inventories recognised as an expense amounted to £91,072,000 (2016: £ 82,398,000).

Included within commercial vehicles is £768,000 (2016: £930,000) relating to assets held under hire purchase agreements.

17. Trade and other receivables

Trade receivables
Less: provision for impairment of receivables

Trade receivables – net

Other receivables
Amounts receivable from related parties (see note 27)
Prepayments and accrued income

Total trade and other receivables

2017
Group
£’000

24,297
(340)

23,957

2,708
522
20,541

47,728

2016
Group
£’000

19,316
(328)

18,988

2,971
–
17,857

39,816

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.

Notes to the Group Financial Statements continued Clipper Logistics plc Financial StatementsSee below for the movements in the provision for impairment:

At 1 May 2015
Charged for the year
Foreign currency adjustment
Utilised

At 30 April 2016

Charged for the year
Foreign currency adjustment
Utilised

At 30 April 2017

Group
£’000

256
124
2
(54)

328

227
1
(216)

340

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 22 days (2016: 20 days).

An impairment review has been undertaken at the balance sheet date to assess whether the carrying amount of financial
assets is deemed recoverable. The primary credit risk relates to customers which have amounts due outside of their credit
period. A provision for impairment is made when there is objective evidence of impairment which is usually indicated by a
delay in the expected cash flows or non-payment from customers.

The ageing analysis of trade receivables was as follows:

30 April 2017

30 April 2016

18. Cash and cash equivalents

Cash and cash equivalents
Bank overdraft

Total cash and cash equivalents

19. Trade and other payables

Trade creditors
Consignment inventory payables
Amounts payable to related parties (see note 27)
Other taxes and social security
Other creditors
Accruals and deferred income

Total trade and other payables

Neither past
due nor
impaired

£’000

22,245

17,216

Total

£’000

23,957

18,988

Past due but not impaired

30-60 days
£’000

60-90 days
£’000

> 90 days
£’000

816

1,006

231

2017
Group
£’000

862
–

862

2017
Group
£’000

28,760
29,230
171
5,372
5,103
16,432

85,068

832

535

2016
Group
£’000

715
(1,817)

(1,102)

2016
Group
£’000

25,984
22,859
–
3,364
4,338
15,638

72,183

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
20. Financial liabilities: borrowings

Non-current:
Bank loans
Obligations under finance leases or hire purchase agreements

Total non-current

Current:
Bank overdrafts
Bank loans
Obligations under finance leases or hire purchase agreements

Total current

Total borrowings

Less: Cash and cash equivalents

Loans to related party (see note 27)

Net debt

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

In one year or less
Between one and five years
After five years

Total bank loans

2017
Group
£’000

1,330
18,643

19,973

–
797
6,592

7,389

27,362

862
1,450

25,050

2017
Group
£’000

797
1,330
–

2,127

2016
Group
£’000

5,113
7,818

12,931

1,817
944
3,792

6,553

19,484

715
–

18,769

2016
Group
£’000

944
5,113
–

6,057

The principal lender has security over all assets of the Group’s UK operations. The Group’s principal bank facilities total
£30,000,000 and consist of:

— a Revolving Credit Facility of £20,000,000 repayable in January 2021; interest rate 1.75% above LIBOR. The amount drawn

at 30 April 2017 was £nil;

— a committed overdraft of £8,000,000. The amount drawn at 30 April 2017 was £nil; and
— bonds and guarantees of £2,000,000.

Items included within bank loans at 30 April 2017 are as follows:

— other bank loans – £2,491,000 repayable in monthly or quarterly instalments over periods between two and 52 months;

interest rates fixed at between 3.65% and 4.80%;

— unamortised debt issue costs of £364,000 in relation to the principal facilities, which have been deducted from the total

outstanding bank loans.

Notes to the Group Financial Statements continued Clipper Logistics plc Financial Statements
The amounts which are repayable under hire purchase or finance lease instalments are shown below:

Fixed rate leases:
Minimum lease payments:
In one year or less
Between one and five years
After five years

Interest:
In one year or less
Between one and five years
After five years

Principal of fixed rate leases:
In one year or less
Between one and five years
After five years

Variable rate leases:
In one year or less
Between one and five years
After five years

Total

2017
Group
£’000

2016
Group
£’000

6,631
19,008
–

25,639

(830)
(1,194)
–

(2,024)

5,801
17,814
–

23,615

791
829
–

1,620

25,235

3,241
7,244
–

10,485

(366)
(483)
–

(849)

2,875
6,761
–

9,636

917
1,057
–

1,974

11,610

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 4.5 (2016: 4.0) years. At 30 April 2017 £23,636,000 (2016 £10,878,000) 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.

21. Provisions

At 1 May 2015
Utilised
Charged in year

At 30 April 2016

Utilised
Consideration received
Charged in year

At 30 April 2017

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

Current
Non-current

Total

Onerous
contracts
Group
£’000

Uninsured
losses
Group
£’000

Dilapidations
Group
£’000

234
(92)
30

172

(92)
–
19

–
(60)
60

–

(145)
–
145

606
(92)
192

706

(166)
557
298

Total
Group
£’000

840
(244)
282

878

(403)
557
462

–

1,395

1,494

2017
Group
£’000

127
1,367

1,494

2016
Group
£’000

109
769

878

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
21. Provisions (continued)
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 will be 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 key sites have leases that expire 20 and 11 years from the balance sheet date and a new office lease expires
15 years from the balance sheet date. All other leases expire in 10 years or less.

During the year the Company took assignment of a property lease with 8 years remaining and received compensation
from the previous tenant, reflecting the agreed value of accrued dilapidation remedial works at the date of handover.

22. Share capital

Allotted, called up and fully paid:
100,022,968 (2016: 100,005,341) ordinary shares of 0.05p each

2017
Company
£’000

2016
Company
£’000

During the year the Company issued 17,627 ordinary shares at a price of 140.4p per share to satisfy share options. See 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 3 years. A summary of the principal terms of the PSP, including vesting conditions, is
contained in the Directors’ Remuneration Report on pages 46 to 59.

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 3-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:

Date

Outstanding 1 May 2015
Granted during the year
Forfeited during the year
Exercised during the year

Outstanding 30 April 2016

Granted during the year
Forfeited during the year
Exercised during the year

Outstanding 30 April 2017

PSP
Number

845,895
519,551
–
–

1,365,446

379,848
(151,155)
–

1,594,139

WAEP

nil
nil
–
–

nil

nil
nil
–

nil

Sharesave
Number

1,352,846
299,609
(127,245)
(5,341)

WAEP

140.40p
239.34p
148.70p
140.40p

1,519,869

159.21p

311,214
(141,985)
(17,627)

303.74p
169.53p
140.40p

1,671,471

185.44p

At 30 April 2017, options over 4,509 (2016: 6,671) of the above shares were exercisable.

Notes to the Group Financial Statements continued Clipper Logistics plc Financial StatementsThe 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:

Share price at: 27 January 2017
6 February 2017

Expected life of option
Volatility
Dividend yield

2017

380.00p
374.88p
3.5 years
35%
1.68% – 1.71%

The expected life of the options has been estimated as 6 months beyond vesting date. As there is little historical data the
volatility has been estimated at 35% based on similar quoted companies. 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 charge for the year ended 30 April 2017
relating to employee share based payment plans was £832,000 (2016: £454,000). The fair value of share options at 30 April 2017
to be amortised in future years was £2,052,000 (2016: £1,958,000).

All share based payments in both years are equity settled.

24. Commitments and contingencies
Operating lease commitments – land and buildings:

Less than one year
Between one and five years
More than five years

Total minimum lease payments

Operating lease commitments – vehicles, plant and equipment:

Less than one year
Between one and five years
More than five years

Total minimum lease payments

25. Capital commitments

Authorised and contracted for
Authorised, but not contracted for

Total capital commitments

2017
Group
£’000

19,191
66,367
77,567

2016
Group
£’000

14,981
60,549
83,541

163,125

159,071

2017
Group
£’000

5,844
9,443
11

2016
Group
£’000

4,697
9,148
99

15,298

13,944

2017
Group
£’000

2,011
2,659

4,670

2016
Group
£’000

9,467
7,279

16,746

26. Financial instruments and financial risk management objectives and policies
In accordance with IAS 39 (Financial Instruments: Recognition and Measurement) the Group has reviewed all contracts for
embedded derivatives that are required to be separately accounted for if they do not meet certain requirements. The Group
did not identify any such derivatives.

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.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report

26. Financial instruments and financial risk management objectives and policies (continued)
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 and available for sale 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 2017 there were no significant concentrations of credit risk (2016: £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.

The interest rate swap taken on by the Company as part of the novation of bank facilities from the former parent on 2 May 2014,
expired on 31 October 2016.

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 (2016: 50 points) on that portion of borrowings affected, would be to reduce the Group’s profit before tax by
£93,000 (2016: £99,000).

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.

Notes to the Group Financial Statements continued Clipper Logistics plc Financial StatementsIn 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.

EBIT
Finance costs (net)

Interest cover

EBIT
Depreciation and impairment of property, plant and equipment
Amortisation and impairment of computer software

Earnings before interest, tax, depreciation and amortisation (EBITDA)
Net debt (note 20)

Net debt/EBITDA

2017
Group
£’000

17,928
1,636

11.0

2017
Group
£’000

17,928
4,725
371

23,024
25,050

1.09

2016
Group
£’000

14,718
1,409

10.4

2016
Group
£’000

14,718
4,580
279

19,577
18,769

0.96

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.

Maturity of financial liabilities:

30 April 2016
Fixed rate borrowings
Floating rate borrowings

Total borrowings
Trade and other payables

Total financial liabilities

30 April 2017
Fixed rate borrowings
Floating rate borrowings

Total borrowings
Trade and other payables

Total financial liabilities

Due within
one year
£’000

Due between
one and two
years
£’000

Due between
two and five
years
£’000

2,980
3,573

6,553
70,388

76,941

6,598
791

7,389
81,681

89,070

2,457
674

3,131
–

3,131

6,013
695

6,708
–

6,708

5,279
4,982

10,261
–

10,261

13,496
134

13,630
–

13,630

Total
£’000

10,716
9,229

19,945
70,388

90,333

26,107
1,620

27,727
81,681

109,408

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

— derivatives: interest rate swaps are marked to market using listed market prices;
— interest-bearing loans and borrowings: fair value is calculated based on discounted expected future principal and interest

cash flows; and

— trade and other receivables/payables: the notional amount for trade receivables/payables with a remaining life of less than

one year are deemed to reflect their fair value.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
26. Financial instruments and financial risk management objectives and policies (continued)

Non-current financial assets

Current financial assets:
Cash and cash equivalents
Trade and other receivables
Liabilities:
Bank overdraft
Short-term borrowings
Trade and other payables
Derivative financial instruments
Long-term borrowings

2017
Book value
£’000

2017
Fair value
£’000

2016
Book value
£’000

2016
Fair value
£’000

1,450

1,394

–

862
47,484

–
(7,389)
(84,824)
–
(19,973)

–
(7,389)
(84,824)
–
(19,100)

715
39,816

(1,817)
(4,736)
(72,183)
(10)
(12,931)

715
39,816

(1,817)
(4,736)
(72,183)
(10)
(12,588)

Long-term borrowings are classified as Level 2 (items with significant observable inputs) financial liabilities under IFRS 13. Derivative
financial instruments consist of interest rate swaps and are 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.

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

Branton Court Stud LLP, in which Steve Parkin is a partner, receives management and administration services from the Group.

Roydhouse Properties Limited is the landlord of two of the Company’s leasehold properties and is classed as a related party
due to the company having common directors with Clipper Logistics plc.

Knaresborough Real Estate Limited, a company owned by Steve Parkin, is the landlord of one of the Group’s leasehold
properties. Rent payable under the current lease is at the same rate as that with the previous landlord.

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.

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

Harrogate Road Restaurants Limited shares a common director with Clipper Logistics plc.

The Group rents an aircraft from South Acre Aviation Limited, a company owned by Steve Parkin. Charges are on an arm’s
length basis.

Key management compensation is disclosed in note 5.

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

Non-current financial assets:
Clicklink Logistics Limited – interest bearing loan
Trade and other receivables:
Clicklink Logistics Limited – trading balance
Knaresborough Investments Limited
Branton Court Stud LLP
Trade and other payables:
Clicklink Logistics Limited
Southerns Office Interiors Limited

2017
Group
£’000

1,450

282
115
125

135
36

2016
Group
£’000

–

–
–
–

–
–

Notes to the Group Financial Statements continued Clipper Logistics plc Financial StatementsThe 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. The facility may be drawn in up to ten loans. 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 2019.

All other balances owing to or from related parties were settled by the end of June 2017.

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

Items credited to the income statement:
Clicklink Logistics Limited – revenue
Clicklink Logistics Limited – finance income
Knaresborough Investments Limited
Branton Court Stud LLP
Southerns Office Interiors Limited
Harrogate Road Restaurants Limited
Items charged to the income statement:
Clicklink Logistics Limited
Knaresborough Investments Limited
Roydhouse Properties Limited
Knaresborough Real Estate Limited
Southerns Office Interiors Limited
Guiseley Association Football Club
South Acre Aviation Limited
Purchase of non-current assets
Southerns Office Interiors Limited
Sale of non-current assets
Clicklink Logistics Limited – items previously capitalised by the Company
Clicklink Logistics Limited – items procured but not capitalised by the Company

2017
Group
£’000

4,701
18
150
125
7
2

410
5
888
345
47
25
7

136

1,173
3,681

2016
Group
£’000

–
–
275
–
–
–

–
–
885
298
–
50
19

–

–
–

28. Business combinations
Servicecare Support Services Limited
On 3 December 2014, the Group acquired 100% of the voting shares of Servicecare Support Services Limited, in exchange for
cash consideration. In the year ended 30 April 2016, deferred consideration of £2,212,000 was paid.

29. Post balance sheet events
Acquisition of Tesam Distribution Limited
On 24 May 2017 the Company acquired the entire issued share capital of Tesam Distribution Limited (“Tesam”). Tesam is a
provider of a variety of warehousing and distribution services to the retail sector. The business, which operates from three sites
in and around Peterborough totalling more than 1.1m square feet, was established in 1984 and employs around 250 people.

In its financial year ended 30 June 2016, Tesam’s audited accounts reported revenue of £19.6m, earnings before interest and
tax of £1.8m and net assets of £3.1m.

The gross consideration paid was £11.75m. However the assets acquired include cash of approximately £3.4m and a freehold
property which will be sold post-acquisition and is expected to realise £2.7m net. The net consideration was funded in cash
from the Company’s existing cash and bank facilities.

Exercise of options
On 5 June 2017 the Company’s broker Numis Securities Limited (“Numis”) exercised the share options (“Options”) granted to it
pursuant to an Option Deed dated 30 May 2014 which was entered into by the Company and Numis at IPO. Under the terms
of the Option Deed, upon the exercise of the Options and the payment of the exercise price of £1 per share, 250,000 new ordinary
shares of 0.05p each (“New Shares”) were issued to Numis. The New Shares rank pari passu with all existing ordinary shares in issue.

Acquisition of RepairTech Limited
On 15 June 2017 the Company acquired the entire issued share capital of RepairTech Limited (“RepairTech”). RepairTech is
a specialist provider of consumer electronic repair services based in Southam, Warwickshire.

RepairTech was established in 1999 by the current Managing Director, Richard Costello. It is consistently profitable, and reported
underlying earnings before interest and tax of £0.6m on revenues of £3.2m in its unaudited financial statements to March 2017.

Consideration is £2.5m in cash, with a further £0.5m deferred for 12 months. Assets acquired with the business include net cash
balances of approximately £0.3m. The consideration was funded in cash from the Company’s existing cash and bank facilities.

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Company Statement of Financial Position
At 30 April

Assets:
Non-current assets

Goodwill
Other intangible assets

Intangible assets
Property, plant and equipment
Investment in subsidiaries
Other investments
Non-current financial assets
Deferred tax assets

Total non-current assets

Current assets
Inventories
Trade and other receivables
Current income tax assets
Cash and cash equivalents

Total current assets

Total assets

Equity and liabilities:
Current liabilities
Trade and other payables
Financial liabilities: borrowings
Derivative financial instruments
Short term provisions
Current income tax liabilities

Total current liabilities

Non-current liabilities
Borrowings
Long term provisions
Deferred tax liabilities

Total non-current liabilities

Total liabilities

Equity shareholders’ funds
Share capital
Share premium
Currency translation reserve
Other reserve
Share based payment reserve
Retained earnings

Total equity attributable to the owners of the Company

Total equity and liabilities

Approved by the Board on 27 July 2017 and signed on its behalf by:

D A Hodkin
Chief Financial Officer
Company No. 03042024

2017
Company
£’000

2016
Company
£’000

Note

D
E
F
F
T
O

G
H

I
J
M
N

J
N
O

5,712
194

5,906
33,522
20,228
1,950
1,450
279

63,335

394
37,947
–
49

38,390

101,725

44,920
15,210
–
43
1,766

61,939

18,057
1,279
–

19,336

81,275

50
80
40
851
2,038
17,391

20,450

101,725

5,712
414

6,126
20,279
19,973
–
–

46,378

500
27,518
–
212

28,230

74,608

37,429
11,854
10
26
1,118

50,437

11,292
616
55

11,963

62,400

50
56
25
851
783
10,443

12,208

74,608

Clipper Logistics plc Financial StatementsCompany Statement of Changes in Equity
For the year ended 30 April

Balance at 1 May 2015
Profit for the year
Other comprehensive income/(expense)
Equity settled transactions
Share issue
Dividends

Balance at 30 April 2016

Profit for the year
Other comprehensive income/(expense)
Equity settled transactions
Share issue
Dividends

Balance at 30 April 2017

Balance at 1 May 2015
Profit for the year
Other comprehensive income/(expense)
Equity settled transactions
Share issue
Dividends

Balance at 30 April 2016

Profit for the year
Other comprehensive income/(expense)
Equity settled transactions
Share issue
Dividends

Balance at 30 April 2017

Share capital
Company
£’000

Share
premium
Company
£’000

Currency
translation
reserve
Company
£’000

Other reserve
Company
£’000

Carried
forward
Company
£’000

50
–
–
–
–
–

–
–
–
–
–

48
–
–
8
–
–

–
–
–
24
–

–
25
–
–
–
–

–
15
–
–
–

Brought
forward
Company
£’000

Share based
payment
reserve
Company
£’000

949
–
25
–
8
–

982

–
15
–
24
–

1,021

110
–
–
673
–
–

783

–
–
1,255
–
–

2,038

851
–
–
–
–
–

851

–
–
–
–
–

949
25
–
8
–
–

982

–
15
–
24
–

851

1,021

Retained
earnings
Company
£’000

6,521
9,122
–
–
–
(5,200)

Total
Company
£’000

7,580
9,122
25
673
8
(5,200)

10,443

12,208

13,343
–
5
–
(6,400)

13,343
15
1,260
24
(6,400)

17,391

20,450

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Notes to the Company Financial Statements

A. Authorisation of Financial
Statements and statement of
compliance with UK GAAP
The Parent Company Financial
Statements of Clipper Logistics plc
(the “Company”) for the year ended
30 April 2017 were authorised for issue
by the Board of Directors on 27 July 2017
and the Company Statement of
Financial Position was signed on the
Board’s behalf by David Hodkin. Clipper
Logistics plc is a public limited
company incorporated and domiciled
in England and Wales. The Company’s
ordinary shares are traded on the
London Stock Exchange.

The Financial Statements are prepared
in accordance with Financial Reporting
Standard 101 Reduced Disclosure
Framework (FRS 101). The Financial
Statements are prepared under the
historical cost convention.

No profit and loss account is presented
by the Company as permitted by
Section 408 of the Companies Act
2006. The profit after tax attributable
to the members of the Company and
other comprehensive income are
shown in the Statement of Changes
in Equity.

The results of Clipper Logistics plc
are included in the consolidated
Financial Statements of Clipper
Logistics plc which are available from
the Company Secretary at Gelderd
Road, Leeds, LS12 6LT.

The accounting policies which follow
set out those policies which apply in
preparing the Financial Statements
for the year ended 30 April 2017. The
Financial Statements are prepared in
Pounds Sterling and are rounded to
the nearest thousand pounds (£’000).

B. Accounting policies
The Financial Statements have been
prepared in accordance with the
Companies Act 2006 and with
applicable accounting standards
in the United Kingdom.

B.1. Basis of preparation
The Company has taken advantage
of the following disclosure exemptions
under FRS 101:

(a) the requirements of paragraphs

45(b) and 46-52 of IFRS 2 Share
based Payment;

(b) the requirements of paragraphs 62,
B64(d), B64(e), B64(g), B64(h), B64(j)
to B64(m), B64(n)(ii), B64 (o)(ii),
B64(p), B64(q)(ii), B66 and B67 of
IFRS 3 Business Combinations;

Instruments: Disclosures;

(d) the requirements of paragraphs

91-99 of IFRS 13 Fair Value
Measurement;

(e) the requirement in paragraph 38 of
IAS 1 ‘Presentation of Financial
Statements’ to present comparative
information in respect of:
i. paragraph 79(a)(iv) of IAS 1;
ii. paragraph 73(e) of IAS 16

Property, Plant and Equipment;

iii. paragraph 118(e) of IAS 38

Intangible Assets;

iv. paragraphs 76 and 79(d) of

IAS 40 Investment Property; and

v. paragraph 50 of IAS 41

Agriculture.

(f) the requirements of paragraphs
10(d), 10(f), 39(c) and 134-136 of
IAS 1 Presentation of Financial
Statements;

(g) the requirements of IAS 7 Statement

of Cash Flows;

(h) the requirements of paragraphs 30
and 31 of IAS 8 Accounting Policies,
Changes in Accounting Estimates
and Errors;

(i) the requirements of paragraph 17 of
IAS 24 Related Party Disclosures; the
requirements in IAS 24 Related Party
Disclosures to disclose related party
transactions entered into between
two or more members of a group,
provided that any subsidiary which
is a party to the transaction is wholly
owned by such a member; and
(j) the requirements of paragraphs

134(d)-134(f) and 135(c)-135(e) of IAS
36 Impairment of Assets.

B.2. Going concern
The Financial Statements have been
prepared on a going concern basis.
In determining the appropriate basis
of preparation of the Financial
Statements, the Directors are required
to consider whether the Company and
the Group can continue in operational
existence for the foreseeable future.

The Company Statement of Financial
Position at 30 April 2017 shows current
assets of £38,390,000 (2016: £28,230,000)
and current liabilities of £61,939,000
(2016: £50,437,000). Net current
liabilities are therefore £23,549,000
(2016: £22,207,000). The Group has
access to a non-amortising Revolving
Credit Facility of £20,000,000 repayable
in 2021 and an overdraft facility of
£8,000,000, neither of which had been
drawn down at 30 April 2017 (see note
20 to the Group Financial Statements).
The Company’s bank overdraft shown
in Note J was covered by cash
balances held by other UK entities
of the Group.

The Directors have assessed the future
funding requirements of the Group and
the Company and compared them
to the bank facilities which are now
available. The assessment included a
detailed review of financial and cash
flow forecasts for at least the 12 month
period from the date of signing the
Annual Report. The Directors considered
a range of potential scenarios within the
key markets the Group serves and how
these might impact on the Group’s cash
flow. The Directors also considered what
mitigating actions the Group could take
to limit any adverse consequences.

100

Clipper Logistics plc Financial Statements

The Group’s forecasts and projections
show that the Group should be able to
operate without the need for any
increase in borrowing facilities.

Having undertaken this work, the
Directors are of the opinion that the
Company and the Group have
adequate resources to continue
in operational existence for the
foreseeable future. Accordingly,
they continue to adopt the going
concern basis in preparing the
Financial Statements.

B.3. Property, plant and equipment
Property, plant and equipment is stated
at historical cost less depreciation and
impairment. Historical cost includes
expenditure that is directly attributable
to the acquisition of the items.

Subsequent costs are included in the
asset’s carrying amount or recognised
as a separate asset, as appropriate,
only when it is probable that future
economic benefits associated with
the item will flow to the Company and
the cost of the item can be measured
reliably. The carrying amount of any
replaced part is derecognised. All
other repairs and maintenance are
charged to the income statement
during the financial period in which
they are incurred.

Depreciation is calculated using the
straight-line method to allocate their
cost to their residual values over their
estimated useful lives, as follows:

— Leasehold property over the length

of the lease;

— Plant and machinery 2 – 20 years; and
— Motor vehicles 4 – 8 years.

Residual values and useful lives are
reviewed, and adjusted if appropriate,
at each balance sheet date.

An asset’s carrying amount is
written down immediately to its
recoverable amount if the asset’s
carrying amount is greater than its
estimated recoverable amount.

B.4. Investments
Non-current investments are shown
at cost less provision for impairment.

B.5. Intangible assets
(a) Contracts and licences
Intangible assets recognised in relation to
contracts or licences are amortised over
the length of the relevant agreement.

(b) Goodwill
Goodwill representing the excess of the
purchase price compared with the fair
value of net assets acquired is capitalised
and included in intangible assets.

Separately recognised goodwill is
tested annually for impairment and
carried at cost less accumulated
impairment losses. This is not in
accordance with The Large and
Medium-sized Companies and Groups
(Accounts and Reports) Regulations
2008 which requires that all goodwill be
amortised. The directors consider that
this would fail to give a true and fair
view of the profit for the year and that
the economic measure of performance
in any period is properly made by
reference only to any impairment that
may have arisen. It is not practicable
to quantify the effect on the Financial
Statements of this departure.

(c) Computer software
Acquired computer software licences
are capitalised on the basis of the costs
incurred to acquire and bring to use
the specific software. These costs are
amortised over their estimated useful
lives (three to five years).

Costs associated with developing
or maintaining computer software
programmes are recognised as an
expense as incurred. Costs that
are directly associated with the
development of identifiable and unique
software products controlled by the
Company, and that will probably
generate economic benefits exceeding
costs beyond one year, are recognised
as intangible assets. Costs include the
software development employee costs
and overheads directly attributable to
bringing the asset into use.

Computer software development
costs recognised as assets are
amortised over their estimated
useful lives (not exceeding five years).

B.6. Leases
Leases in which a significant portion of
the risks and rewards of ownership are
retained by the lessor are classified as
operating leases. Payments made under
operating leases (net of any incentives
received from the lessor) are charged to
the income statement on a straight-line
basis over the period of the lease.

Assets held under finance leases, which
transfer to the Company substantially
all the risks and benefits incidental to
ownership of the leased item, are
capitalised at the inception of the
lease, with a corresponding liability
being recognised for the lower of the
fair value of the leased asset and the
present value of the minimum lease
payments. Lease payments are
apportioned between the reduction of
the lease liability and finance charges
in the income statement so as to
achieve a constant rate of interest on
the remaining balance of the liability.
The property, plant and equipment
acquired under finance leases is
depreciated over the shorter of the
estimated useful life of the asset and
the lease term; where the lease
contains an option to purchase which
is expected to be exercised, the asset
is depreciated over the useful life of
the asset. The accounting policy
adopted for finance leases is also
applied to hire purchase agreements.

101

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
B.7. Inventories – component parts
and consumable stores
Inventories of component parts and
consumable stores are valued at the
lower of cost and net realisable value
on a line by line basis. Provision is made
for obsolete and slow-moving items.

B.8. Trade receivables
Trade receivables are recognised
initially at fair value and subsequently
measured at amortised cost using
the effective interest method, less
provision for impairment. A provision
for impairment of trade receivables is
established when there is objective
evidence that the Company will not
be able to collect all amounts due
according to the original terms of
the receivables.

Significant financial difficulties of the
debtor, probability that the debtor
will enter bankruptcy or financial
reorganisation, and default or
delinquency in payments (more than
30 days overdue) are considered
indicators that the trade receivable
may be impaired. The amount of the
provision is the difference between
the asset’s carrying amount and the
present value of estimated future
cash flows, discounted at the original
effective interest rate.

The carrying amount of the asset
is reduced through the use of an
allowance account, and the
amount of the loss is recognised
in the income statement within
‘administration expenses’.

B.9. Cash and cash equivalents
Cash and cash equivalents includes
cash in hand, deposits held at call with
banks, other short-term highly liquid
investments with original maturities
of three months or less, and bank
overdrafts. Bank overdrafts are shown
within borrowings in current liabilities
on the Company Statement of
Financial Position.

B.10. Trade payables
Trade payables are recognised initially
at fair value and subsequently
measured at amortised cost using
the effective interest method.

B.11. Borrowings
Borrowings are recognised initially at
fair value, net of transaction costs
incurred. Borrowings are subsequently
stated at amortised cost; any
difference between the proceeds
(net of transaction costs) and the
redemption value is recognised in the
income statement over the period of
the borrowings using the effective
interest method.

Borrowings are classified as current
liabilities unless the Company has an
unconditional right to defer settlement
of the liability for at least 12 months
after the balance sheet date.

B.12. Income tax
Current tax assets and liabilities are
measured at the amount expected
to be recovered from or paid to the
taxation authorities, based on tax
rates and laws that are enacted or
substantively enacted by the balance
sheet date.

Deferred income tax is provided
in full, using the liability method, on
temporary differences arising between
the tax bases of assets and liabilities
and their carrying amounts in the
Financial Statements.

Deferred income tax assets and
liabilities are offset, only if a legally
enforceable right exists to set off current
tax assets against current tax liabilities,
the deferred income taxes relate to
the same taxation authority and that
authority permits the Company to
make a single net payment.

B.13. Employee benefits
(a) Pension obligations
The Company operates various pension
schemes. The schemes are generally
funded through payments to insurance
companies. The Company has only
defined contribution plans. A defined
contribution plan is a pension plan
under which the Company pays fixed
contributions into a separate entity.

For defined contribution plans, the
Company pays contributions to
privately administered pension
insurance plans on a contractual or
voluntary basis. The Company has
no further payment obligations once
the contributions have been paid.
The contributions are recognised as
employee benefit expense when
they are due.

(b) Post-retirement benefits
The Company provides no other post-
retirement benefits to its employees.

(c) Profit-sharing and bonus plans
The Company recognises a liability and
an expense for bonuses and profit-
sharing, based on a formula that takes
into consideration the profit attributable
to the Company’s shareholders after
certain adjustments. The Company
recognises a provision where
contractually obliged or where
there is a past practice that has
created a constructive obligation.

(d) Share based payments
IFRS 2 requires the recognition of equity
settled share based payments at fair
value at the date of the grant. All
equity settled share based payments
are ultimately recognised as an
expense in the income statement
with a corresponding credit to share
based payment reserve.

102

Notes to the Company Financial Statements continued Clipper Logistics plc Financial StatementsIf vesting periods or other non-market
vesting conditions apply, the expense
is allocated over the vesting period
based on the best available estimate
of the number of shares expected to
vest. Estimates are revised subsequently
if there is any indication that the
number of shares expected to vest
differs from previous estimates. Any
cumulative adjustment prior to vesting
is recognised in the current period.
The financial effect of awards by the
Company of options over its equity
shares to employees of subsidiary
undertakings are charged to the
employing entity. Amounts recharged
by the Company are recognised as
an intra-Group receivable with a
corresponding credit to equity.

Upon exercise of share options, the
proceeds received net of attributable
transaction costs are credited to share
capital and where appropriate,
share premium.

B.14. Provisions
Provisions for items such as dilapidations
and legal claims are recognised when:
the Company has a present legal or
constructive obligation as a result of
past events; it is probable that an
outflow of resources will be required
to settle the obligation; and the
amount has been reliably estimated.

Provisions are measured at the present
value of the expenditures expected to
be required to settle the obligation
using a pre-tax rate that reflects current
market assessments of the time value
of money and the risks specific to the
obligation. The increase in the provision
due to passage of time is recognised as
interest expense.

B.15. Foreign currency translation
The Company’s functional currency
and presentation currency is Pounds
Sterling. Transactions in foreign
currencies are initially recorded in
the functional currency by applying
the spot exchange rate ruling at the
date of the transaction. Monetary
assets and liabilities denominated

in foreign currencies are retranslated
at the functional currency rate of
exchange ruling at the balance sheet
date. All differences are taken to the
income statement.

Non-monetary items that are measured
in terms of historical cost in a foreign
currency are translated using the
exchange rates as at the dates of the
initial transactions. Non-monetary items
measured at fair value in a foreign
currency are translated using the
exchange rates at the date when the
fair value was determined.

The Company does not apply hedge
accounting of foreign exchange risks
in its Company Financial Statements.

B.16. Revenue recognition
Revenue is measured at the fair value
of the consideration received or
receivable for the sale of goods and
services in the ordinary course of the
Company’s activities. Revenue is shown
net of value-added tax, returns, rebates
and discounts.

The Company recognises revenue
when the amount of revenue can be
reliably measured, it is probable that
future economic benefits will flow to the
entity and when specific criteria have
been met for each of the Company’s
activities. The amount of revenue is not
considered to be reliably measurable
until all contingencies relating to the
sale have been resolved. In practice
this means that revenue is generally
recognised when the service is
rendered. Invoicing varies by contract,
but is typically either in line with work
performed or initially on a budgeted
volume basis with later adjustment to
reflect actual activity. Where a contract
contains elements of variable
consideration, the Company will
estimate the amount or revenue to
which it will be entitled under the
contract. Variable consideration can
arise as a result of incentives,
performance bonuses, penalties or
other similar items. Variable
consideration is recognised only to the
extent that it is highly probable that the
economic benefit will transfer to the
Company. Calculation of accrued and
deferred income is therefore necessary
at period ends, with client billing
arrangements not always coinciding
with the Company’s reporting periods.
Revenue from open book contracts
includes contributions to the capital
cost of items used in the delivery of

services, together with a finance
charge. Judgement is required when
determining the appropriate timing
and amount of revenue that can be
recognised, due to the different
contractual arrangements in place.

B.17. Intra-Group guarantees
Where the Company enters into
contracts to guarantee the
indebtedness of other companies
within the Group, the Company treats
the guarantee contract as a contingent
liability until such time as it becomes
probable that the Company will be
required to make a payment under
the guarantee.

B.18. Judgements and key sources
of estimation uncertainty
The preparation of the financial
information under FRS 101 requires
management to make judgements,
estimates and assumptions concerning
the future. The estimates and associated
assumptions are based on historical
experience and other factors that are
believed to be reasonable under the
circumstances, the results of which form
the basis of making the judgements
about carrying values of assets and
liabilities that are not readily apparent
from other sources. The resulting
accounting estimates will, by definition,
seldom equal the related actual results.
The estimates and assumptions that have
a significant risk of causing a material
adjustment to the carrying amounts of
assets and liabilities within the next
financial year are discussed below.

(a) Revenue recognition
Judgement is required when
determining the appropriate timing
and amount of revenue that can
be recognised, due to the various
contractual arrangements in place,
each with bespoke terms which
can lead to different revenue
recognition requirements.

(b) Estimated impairment of goodwill
The Company annually tests whether
goodwill has suffered any impairment,
in accordance with the accounting
policy stated above. The recoverable
amounts of cash-generating units have
been determined based on value-in-
use calculations. These calculations
require the use of estimates, both in
arriving at the expected future cash
flows and the application of a suitable
discount rate in order to calculate the
present value of these flows.

103

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
C. Auditor’s remuneration
Remuneration payable to the Company’s auditor is shown in note 6 to the Group Financial Statements.

D. Intangible assets

Cost:
At 1 May 2015
Additions
Disposals

At 30 April 2016

Additions
Disposals

At 30 April 2017

Accumulated amortisation or impairment:
At 1 May 2015
Charge for year/impairment
Disposals

At 30 April 2016

Charge for year/impairment
Disposals

At 30 April 2017

Net book value:
At 1 May 2015

At 30 April 2016

At 30 April 2017

Goodwill
Company
£’000

Contracts and
licences
Company
£’000

Computer
software
Company
£’000

Total
Company
£’000

8,312
–
–

8,312

–
–

8,312

2,542
58
–

2,600

–
–

2,600

5,770

5,712

723
–
–

723

–
–

723

723
–
–

723

–
–

723

–

1,320
287
–

1,607

105
(261)

10,355
287
–

10,642

105
(261)

1,451

10,486

998
195
–

1,193

158
(94)

4,263
253
–

4,516

158
(94)

1,257

4,580

322

414

194

6,092

6,126

5,906

104

Notes to the Company Financial Statements continued Clipper Logistics plc Financial StatementsE. Property, plant and equipment

Cost:
At 1 May 2015
Additions
Disposals

At 30 April 2016

Additions
Disposals

At 30 April 2017

Accumulated depreciation:
At 1 May 2015
Charge for the year
Disposals

At 30 April 2016

Charge for the year
Disposals

At 30 April 2017

Net book value:
At 1 May 2015

At 30 April 2016

At 30 April 2017

Leasehold
property
Company
£’000

Motor
vehicles
Company
£’000

2,549
261
(16)

2,794

20
(141)

1,314
268
(213)

1,369

30
(11)

Plant,
machinery,
fixtures &
fittings
Company
£’000

22,523
12,445
(146)

34,822

17,846
(3,434)

Total
Company
£’000

26,386
12,974
(375)

38,985

17,896
(3,586)

2,673

1,388

49,234

53,295

988
194
(16)

1,166

225
(141)

985
152
(170)

967

142
(11)

13,859
2,860
(146)

16,573

2,837
(1,985)

15,832
3,206
(332)

18,706

3,204
(2,137)

1,250

1,098

17,425

19,773

1,561

1,628

1,423

329

402

290

8,664

18,249

10,554

20,279

31,809

33,522

Included within property, plant and equipment are amounts held under finance lease contracts. At 30 April 2017 the net book
value of these assets was £24,557,000 (2016: £8,948,000).The depreciation charged to the accounts in the year in respect of
such assets amounted to £2,031,000 (2016: £1,647,000).

Additions to plant, machinery, fixtures & fittings include £1,757,000 (2016: £2,823,000) in respect of assets in the course of construction.

F. Investments

Cost:
At 1 May 2015
Additions

At 30 April 2016

Additions

At 30 April 2017

Provision for impairment:
At 1 May 2015, 30 April 2016 and 30 April 2017

Net book value:
At 1 May 2015

At 30 April 2016

At 30 April 2017

Subsidiary
undertakings
£’000

20,188
–

20,188

255

20,443

215

19,973

Other
£’000

–
–

–

1,950

–

20,228

1,950

During the year the Company subscribed for share capital in Clicklink Logistics Limited (see note 15 to the Group Financial
Statements) and incorporated a subsidiary in Poland, Carriba Investments Sp. z o.o., now renamed Clipper Logistics Sp. z o.o.,
which commenced trading in April 2017.

105

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
F. Investments (continued)
Subsidiary undertakings
Except where indicated, the subsidiary undertakings are incorporated and operate in Great Britain, registered in England
and Wales and the Company or Group owns 100% of the issued ordinary share capital and voting rights.

The subsidiary undertakings of the Company as at 30 April 2017 were as follows:

Company

Nature of business during the year

Servicecare Support Services Limited1

Returns management services and on-line retail

Clipper Logistics KG (GmbH & Co.) (Germany)2

Contract distribution and warehousing

Clipper Logistics Sp. z o.o.(Poland)3

Contract distribution and warehousing

Northern Commercials (Mirfield) Limited4

Sale, servicing and repair of commercial vehicles

Genesis Specialised Product Packing Limited

On-line retail and distribution

Stormont Truck and Van Limited*

Agency for leasing commitments

Clipper Verwaltungs GmbH (Germany)*2

Agency for leasing commitments

Electrotec International Limited*1

Gagewell Transport Limited

Clipper e-commerce Limited

Clipper Logistics (Processing) Limited

Clipper Logistics (Warehousing) Limited

Clipper Secure Logistics Limited

Clipper Logistics BV (Netherlands)

DTS Logistics Limited

Guardex Security Services Limited

Transference Technology Limited (90% owned)*

Northern Commercial Trailers (Mirfield) Limited*

Dormant

Shareholding held indirectly.

*
See note 29 to the Group Financial Statements for additions subsequent to the financial year end.

The registered office of each subsidiary is Clipper Logistics Group, Gelderd Road, Leeds LS12 6LT except for:

Steinweg 2, 95213, Münchberg, Germany

1 Hollinwood Works, Manchester Road, Hollinwood, Oldham, Lancashire OL9 7AA
2
3 ul. Zernicka, 22, Robakowo, 62-023, Robakowo, Poland
4 Armytage Road, Wakefield Road Industrial Estate, Brighouse, West Yorkshire HD6 1PG

G. Inventories

Component parts and consumable stores

H. Trade and other receivables

Amounts falling due within one year:
Trade receivables
Other receivables
Prepayments and accrued income
Amounts receivable from related parties (see note T)
Amounts owed by fellow Group companies

Amounts falling due after more than one year:
Amounts owed by fellow Group companies

Total

106

2017
Company
£’000

2016
Company
£’000

394

500

2017
Company
£’000

2016
Company
£’000

14,840
114
18,464
522
371

34,311

9,490
117
15,986
–
48

25,641

3,636

1,877

37,947

27,518

Notes to the Company Financial Statements continued Clipper Logistics plc Financial StatementsI. Trade and other payables

Trade payables
Other taxes and social security
Other payables
Accruals and deferred income
Amounts owed to related parties (see note T)
Amounts owed to fellow Group companies

Total

J. Financial liabilities: borrowings

Non-current:
Bank loans
Obligations under finance leases or hire purchase agreements

Total non-current

Current:
Bank overdrafts
Bank loans
Obligations under finance leases or hire purchase agreements

Total current

Total borrowings

Less: cash and cash equivalents
non-current financial assets (note T)

Net debt

2017
Company
£’000

2016
Company
£’000

20,588
4,821
2,028
13,869
171
3,443

44,920

16,379
2,506
1,405
13,490
–
3,649

37,429

2017
Company
£’000

2016
Company
£’000

1,300
16,757

18,057

9,263
770
5,177

15,210

33,267

49
1,450

31,768

5,060
6,232

11,292

8,510
896
2,448

11,854

23,146

212
–

22,934

Bank loans and overdrafts are secured by a charge over the Group’s assets. The Company’s overdraft is offset by cash
balances in subsidiary companies. The net Group overdraft at 30 April 2017 is £nil (2016: £1,817,000).

Obligations under finance leases or hire purchase agreements are secured by related assets.

K. Bank loans
Bank loans repayable, included within borrowings are analysed as follows:

In one year or less
Between one and five years
After five years

Total

See note 20 to the Group Financial Statements for the principal features of the bank loans.

2017
Company
£’000

2016
Company
£’000

770
1,300
–

2,070

896
5,060
–

5,956

107

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
L. Finance leases and hire purchase agreements
The Company uses finance leases and hire purchase agreements to acquire property, plant and equipment.

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

Fixed rate leases:
Minimum lease payments:
In one year or less
Between one and five years

Interest:
In one year or less
Between one and five years

Principal of fixed rate leases:
In one year or less
Between one and five years

Variable rate leases:

Total

2017
Company
£’000

2016
Company
£’000

5,961
17,909

23,870

(784)
(1,152)

(1,936)

5,177
16,757

21,934

–

21,934

2,775
6,686

9,461

(327)
(454)

(781)

2,448
6,232

8,680

–

8,680

M. Derivative financial instruments
As part of the novation of bank facilities from the former parent on 2 May 2014, the Company took on an existing interest rate
swap which expired in October 2016.

N. Provisions

At 1 May
Utilised
Consideration received
Charged/(credited) in year

At 30 April

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

Current
Non-current

Total

2017
Company
£’000

2016
Company
£’000

642
(311)
557
434

1,322

556
(151)
–
237

642

2017
Company
£’000

2016
Company
£’000

43
1,279

1,322

26
616

642

Provisions are established over the life of leases to cover remedial work necessary at termination under the terms of those leases.
Two key sites have leases that expire 20 and 11 years from the balance sheet date. All other leases expire in 10 years or less.

During the year the Company took assignment of a property lease with eight years remaining and received compensation
from the previous tenant, reflecting the agreed value of accrued dilapidation remedial works at the date of handover.

108

Notes to the Company Financial Statements continued Clipper Logistics plc Financial StatementsO. Deferred tax
Deferred tax balances in the Statement of Financial Position are as follows:

Deferred tax liability:
Accelerated capital allowances

Deferred tax asset:
Share based payment
Provisions and other timing differences

Net deferred tax asset (liability)

The movement in deferred tax balances is as follows:

At 1 May
(Charged)/credited in year
Credited to share based payment reserve

At 30 April

2017
Company
£’000

2016
Company
£’000

(612)

(397)

846
45

279

300
42

(55)

2017
Company
£’000

2016
Company
£’000

(55)
(94)
428

279

(420)
160
205

(55)

The UK corporation tax rate reduced from 20% to 19% with effect from 1 April 2017. Legislation to reduce the rate to 17%
with effect from 1 April 2020 was substantively enacted at 30 April 2017. A rate of 17% (2016: 18%) has been applied in the
measurement of the Company’s deferred tax assets and liabilities in the year.

P. Share capital

Allotted, called up and fully paid:
100,022,968 (2016: 100,005,341) ordinary shares of 0.05p each

2017
Company
£’000

2016
Company
£’000

During the year the Company issued 17,627 ordinary shares at a price of 140.4p per share to satisfy share options. See note 23
to the Group Financial Statements.

Q. Share based payments
Further details of the share option schemes are set out in note 23 to the Group Financial Statements. The charge to the
Company’s income statement for equity settled transactions in the year ended 30 April 2017 was £771,000 (2016: £417,000).

109

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
R. Commitments and contingencies
Operating lease commitments – land and buildings:

Within one year
Between one and five years
After more than five years

Total

Operating lease commitments – vehicles, plant and equipment:

Within one year
Between one and five years
After more than five years

Total

S. Capital commitments

Authorised and contracted for
Authorised, but not contracted for

Total

2017
Company
£’000

16,062
58,514
75,058

2016
Company
£’000

12,457
52,343
79,732

149,634

144,532

2017
Company
£’000

2016
Company
£’000

5,284
9,353
11

14,648

3,867
8,769
99

12,735

2017
Company
£’000

2016
Company
£’000

2,011
2,659

4,670

9,467
7,279

16,746

T. Related party disclosures
Clicklink Logistics Limited (see note 15 to the Group Financial Statements) is a supplier of logistics services to the Company.
The Company 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.

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

Branton Court Stud LLP, in which Steve Parkin is a partner, receives management and administration services from the Company.

Roydhouse Properties Limited is the landlord of two of the Company’s leasehold properties and shares a common director
with the Company.

Southerns Office Interiors Limited supplies office furniture to the Company. 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.

Guiseley Association Football Club shares a common director with the Company.

Harrogate Road Restaurants Limited shares a common director with the Company.

The Company rents an aircraft from South Acre Aviation Limited, a company owned by Steve Parkin. Charges are on an
arm’s length basis.

Key management compensation is disclosed in note 5 to the Group Financial Statements.

110

Notes to the Company Financial Statements continued Clipper Logistics plc Financial StatementsBalances owing to or from these related parties at 30 April were as follows:

2017
Company
£’000

2016
Company
£’000

1,450

282
115
125

135
36

–

–
–
–

–
–

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. The facility may be drawn in up to ten loans. 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 2019.

All other balances owing to or from related parties were settled by the end of June 2017.

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

Items credited to the income statement:
Clicklink Logistics Limited – revenue
Clicklink Logistics Limited – finance income
Knaresborough Investments Limited
Branton Court Stud LLP
Harrogate Road Restaurants Limited
Items charged to the income statement:
Clicklink Logistics Limited
Knaresborough Investments Limited
Roydhouse Properties Limited
Southerns Office Interiors Limited
Guiseley Association Football Club
South Acre Aviation Limited
Purchase of non-current assets
Southerns Office Interiors Limited
Sale of non-current assets
Clicklink Logistics Limited – items previously capitalised by the Company
Clicklink Logistics Limited – items procured but not capitalised by the Company

2017
Company
£’000

2016
Company
£’000

4,701
18
150
125
2

410
5
888
46
25
7

135

1,173
3,681

–
–
275
–
–

–
–
885
–
50
19

–

–
–

111

Annual Report and Accounts 2017Clipper Logistics plc Financial StatementsGovernanceStrategic Report
Directors, Secretary, Registered & Head Office
and Advisors

Directors:

Steve Parkin, Executive Chairman
Tony Mannix, Chief Executive Officer
David Hodkin, Chief Financial Officer
Ron Series, Senior Independent Non-Executive Director
Stephen Robertson, Independent Non-Executive Director
Mike Russell, Independent Non-Executive Director

Company Secretary:

Registered Office and Head Office of the Company:

Registered number:

Sponsor, financial advisor, sole bookrunner and broker:

Legal advisors:

Auditor:

Registrars:

Financial public relations advisors to the Company:

Guy Jackson

Gelderd Road
Leeds
LS12 6LT

03042024

Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT

Squire Patton Boggs (UK) LLP
2 Park Lane
Leeds
LS3 1ES

Pinsent Masons LLP
1 Park Row
Leeds
LS1 5AB

KPMG LLP
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA

Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA

Bell Pottinger
Holborn Gate
330 High Holborn
London
WC1V 7QD

112

Clipper Logistics plc Financial Statements
Consultancy, design and production
www.luminous.co.uk

Design and production

www.luminous.co.uk

Clipper Logistics plc
Gelderd Road
Leeds
LS12 6LT

Tel: 0113 204 2050
Email: info@clippergroup.co.uk
Web: www.clippergroup.co.uk