CLG.L Regulatory News (CLG)

9 December 2021

CLIPPER LOGISTICS PLC

INTERIM RESULTS FOR THE SIX MONTHS TO 31 OCTOBER 2021

Strong results across the Group with continued momentum in e-commerce and market share growth

Clipper Logistics plc ("Clipper", "the Group", or "the Company"), a leading provider of value-added logistics solutions and e-fulfilment and returns management services to the retail sector, is pleased to announce its unaudited results for the six months ended 31 October 2021 ("H1 FY22").

Financial Highlights

Operational Highlights

Current Trading and Outlook

Commenting on the results, Steve Parkin, Executive Chairman of Clipper, said:

"I am pleased to announce further significant progress across the Group delivering an impressive growth in revenue of 33.1% and EBIT growth of 12.1% (18.8% IAS 17). This growth is due to continuing momentum within online and the reopening of bricks and mortar retail."

"In addition, I would like to welcome new major customers to whom we have commenced the provision of services in the period. We are also delighted to enhance our existing partnerships with long-standing customers.

"We continue to expand our presence and offering in mainland Europe. Our facility in the Netherlands is now fully operational, and our recent acquisition of CE Repair complements our Technical Services division and extends our offering and geographical reach within Mainland Europe."

"Our recent announcement on the formation of a joint venture with Farfetch focusing on the luxury online market will significantly extend our geographical reach further both in Europe and further afield."

"Looking to the macro-economic factors currently in play in the UK and beyond, considering the robustness of our business model and continuing momentum within e-commerce, the Board are positive about the long-term outlook. I am proud of that way that our team has successfully navigated these factors during the period and would like to thank them for all of their hard work. I am pleased to report that in trading post-period-end we have successfully delivered record volumes compared to the prior year on many of our sites."

"Our unique proposition utilising technology-led omnichannel solutions which enables retail coupled with strategically aligned acquisitions that are value accretive will deliver continuing growth for the Group in the future."

A conference call for sell-side analysts only will be held at 09.30am today, 9 December 2021. Please contact Buchanan at clipper@buchanan.uk.com if you wish to attend.

This announcement is released by Clipper Logistics plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 ("MAR"). It is disclosed in accordance with the Group's obligations under Article 17 of MAR. Upon the publication of this announcement, this information is considered to be in the public domain.

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of Clipper Logistics plc by David Hodkin, Chief Financial Officer.

About Clipper

Clipper Logistics plc (www.clippergroup.co.uk), which is premium listed on the Main Market of the London Stock Exchange, is a retail logistics specialist, which provides value-added, consultancy-led services to its blue-chip client base. Clipper is a UK leader in its markets, with a long-standing customer base in:

It has an increasing presence in mainland Europe, with operations in Poland, Germany, the Republic of Ireland, the Netherlands and Belgium.

A profitable and cash generative commercial vehicles business complements the Group's logistics activities.

Cautionary statement

Any forward-looking statements made in this document represent the Board's best judgment as to what may occur in the future. However, the Group's actual results for the current and future financial periods and corporate developments will depend on a number of economic, competitive and other factors, some of which may be outside the control of the Group. Such factors could cause the Group's actual results in future periods to differ materially from those expressed in any forward-looking statements included in this announcement.

PERFORMANCE AT A GLANCE

ALTERNATIVE PERFORMANCE MEASURES ("APMs")

APMs are used by the Board to assess the Group's financial performance, for analysis and for incentive-setting purposes. These measures are not defined by International Financial Reporting Standards ("IFRS") and therefore may not be directly comparable with other companies' APMs, including those in the Group's industry. The Operating and Financial Review has used APMs to aid comparability to the prior year.

APMs should be considered in addition to and are not intended to be a substitute for IFRS measurements. The table below reconciles APMs to statutory measures as defined by IFRS.

OPERATING AND FINANCIAL REVIEW

Group summary

Revenue

Group revenue increased by 33.1% to £406.1 million (H1 FY21: £305.2 million).

Group revenue growth of £100.9 million is attributable to strong growth in both value-added logistics and commercial vehicles segments.

In the Logistics division, in the UK: approximately 19% was attributable to revenue growth on new contracts won in the second six months of the prior year ("H2 FY21"); 12% was due to revenue arising from contracts won in H1 FY22; approximately 2% of this growth was due to the full six months impact of new contracts won in H1 FY21; and the remainder was due to organic growth in existing customers in the UK. Revenue in Europe grew by 57.1% year on year, with approximately 72% of this being from new contract wins, the most significant being in relation to our expansion into the Netherlands with Farfetch. Commercial vehicles accounted for approximately 7% of this growth, in H1 FY21 Commercial vehicles was impacted by the closure of non-essential retail in response to the pandemic.

New contracts which commenced operations in FY21, and hence contribute in full to H1 FY22 include: Linenbundle, Revolution Beauty, River Island, T.M. Lewin and the activities arising from the supply of PPE and other ancillary products to healthcare providers through the online portal in partnership with eBay and Royal Mail. New contracts which commenced in H1 FY22 and therefore contribute in part to H1 FY22 include: Farfetch, JD Sports, additional e-commerce and store replenishment services for John Lewis, Mountain Warehouse and a second operation for Wilko in Magor. Against this, the following customers have been lost: Arcadia due to administration in H2 FY21 and therefore no contribution in H1 FY22 and the contract with Zara was terminated in H1 FY22.

Please refer to the Segmental Review section for a more detailed discussion on each operating segment.

EBIT

Group EBIT increased by £2.4 million, or 12.1%, to £22.6 million (H1 FY21: £20.2 million), in part due to the strong revenue growth of 33.1% discussed above. In H1 FY22 compared to H1 FY21:

By segment:

Group EBIT on an IAS 17 basis increased by £2.9 million, or 18.8%, to £18.3 million (H1 FY21: £15.4 million). In H1 FY22 compared to H1 FY21:

By segment:

Please refer to the Segmental Review section for a more detailed discussion on each operating segment.

Net finance costs

Net finance costs have increased by 12.7% to £5.7 million (H1 FY21: £5.1 million), largely as a result of increased interest costs arising on lease liabilities, with new property leases being entered into in H2 FY21 and H1 FY22 (Daventry and Sherburn in the UK and Venray in the Netherlands) and as a result of rent reviews and lease renewals on existing sites in the UK. Interest paid on bank loans and overdrafts is higher in H1 FY22 compared to H1 FY21 due to higher requirement of revolving credit facilities. Offsetting this, but to a lesser extent, are decreased interest costs on the commercial vehicles stocking lines.

Profit before tax and amortisation and Profit before tax

As a result of the above, Group profit before tax and amortisation and exceptional items increased by 12.3% to £16.8 million (H1 FY21: £15.0 million) and Group profit before tax increased by 12.6% to £16.1 million (H1 FY21: £14.3 million).

Taxation

The tax charge on profit before tax was £3.3 million (H1 FY21: £2.9 million). The effective tax rate in H1 FY22 is 20.6% (H1 FY21: 20.2%), the increase largely being due to the impact on the Group's deferred tax amounts of the prospective increase in the UK corporation tax rate. The headline rate of corporation tax in the UK is 19%, unchanged from the prior year. Legislation has been enacted to increase the headline rate to 25% with effect from 1 April 2023. Certain expenditure being disallowed for tax purposes, in both the UK and Europe, leads to an effective rate higher than the headline rate. The effective tax rate applied at the half year is an estimate of the expected full year rate.

Basic Earnings Per Share (EPS)

EPS was 12.6 pence in H1 FY22, 12.5% up on the same period of the prior year (H1 FY21: 11.2 pence).

Dividend

In line with Clipper's dividend policy and reflecting the Group's earnings growth, the Board is pleased to announce an interim dividend of 4.5 pence per share, which will be paid on 7 January 2022 to shareholders on the register at 17 December 2021. This represents an increase of 12.5% (0.5 pence per share) compared to the interim dividend of 4.0 pence paid in January 2021.

Cashflow

Net cash generated from operations in H1 FY22 was £32.5 million (H1 FY21: £45.7 million). In H1 FY22, the working capital outflow was £7.4 million compared to £10.1 million inflow in H1 FY21. In H1 FY21 certain payments were deferred relating to property leases, deferrals of VAT payments and other payroll taxes. All deferred payments have been brought up to date. The benefit to working capital in H1 FY21 was £18.3 million. Adjusting for this, working capital is in line with H1 FY21.

Capital spend across non-current assets has increased by £6.0 million to £9.4 million in H1 FY21 compared to £3.4 million in H1 FY21. This is as a result of higher customer related requirements in H1 FY22 compared to H1 FY21 reflecting contract wins in H2 FY21 and H1 FY22. Notable spends were on the fitout of the Venray site in the Netherlands and Mountain Warehouse requirements in Peterborough in the UK.

Income tax payments and interest payments excluding IFRS 16 lease interest have increased by £0.9 million in H1 FY22 compared to first six months of the prior year. This is as a result of the increased profit before tax and the mix between jurisdictions on how that profit is generated. There was a £2.8 million cash inflow in H1 FY22 relating to a business combination from the prior year representing deferred consideration. Dividend payments were £7.3 million, a £1.0 million increase on H1 FY21.

Lease repayments have increased by £3.6 million to £27.3 million in H1 FY22 as a result of additions in the prior year, new leases in H1 FY22 and rent reviews and renewals on property leases in H1 FY22.

The net drawdown on the revolving credit facility and other bank loans was £1.9 million in H1 FY22 compared to a net repayment of £8.2 million in H1 FY21.

Net debt

Net debt at the end of H1 FY22 is £11.2 million (excluding leases liabilities arising as a result of the application of IFRS 16), compared to £27.7 million at the end of H1 FY21. Net debt was £16.9 million at 30 April 2021, the decrease since the year end being largely due to the cash generated from operating activities. Much of our net debt relates to capital to be recovered from blue-chip customers over the term of their open book contracts. Recoverable capex on open book contracts at 31 October 2021 amounts to £21.5 million.

OUTLOOK

The key Black Friday trading weekend occurred shortly after the end of H1 FY22. In this period, the Group processed record daily volumes for many of our customers (some contracts reported a 50% increase in volumes on the prior year) and is pleased to report that early customer feedback has been very positive. The Board remains confident that the Group is strategically well positioned to capitalise on the mega-trend towards online retail, not just in the UK but in mainland Europe and further afield.

SEGMENTAL REVIEW

Overview

Group revenue increased by 33.1% to £406.1 million (H1 FY21: £305.2 million), with revenue by segment as set out in the table below:

Group EBIT increased by £2.4 million, or 12.1%, to £22.6 million (H1 FY21: £20.2 million), with EBIT by segment as set out in the table below:

Group EBIT on an IAS 17 basis increased by £2.9 million, or 18.8%, to £18.3 million (H1 FY21: £15.4 million), with EBIT by segment as set out in the table below:

E-fulfilment and returns management services

E-fulfilment operations 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. At no time does Clipper take ownership of customers' products.

We continue to manage the return of products on behalf of retailers, particularly those sold online, through our Boomerang brand.

Revenue

Revenue from E-fulfilment and returns management services grew by £59.6 million (31.7%) from £188.0 million in H1 FY21 to £247.6 million in H1 FY22.

This revenue growth was achieved in certain operations which were still in the start-up phase in H1 FY21 such as the services we deliver for H&M, Linenbundle, Revolution Beauty and T M Lewin. These contributed a full six months' revenue to the results for H1 FY22, having only contributed in part to the results of H1 FY21.

Within the UK, growth has also been derived from the commencement of e-fulfilment services to JD Sports at our flagship northern distribution centre in Sherburn in Elmet, additional e-commerce and store replenishment services for John Lewis at Coalville, Mountain Warehouse in our existing Peterborough site and commencement of activities on our second operation for Wilko within their existing Magor facility. Within Europe, in the Netherlands, we opened our new distribution centre in Venray in which operations commenced for Farfetch providing a pan-European solution, all of which commenced in H1 FY22. These activities did not contribute to revenue for H1 FY21 and only contribute for part of H1 FY22. As such, these will not generate a full contribution to the Group's annual revenue and profits until the year ending 30 April 2023.

Operations which did not commence until H2 FY21, including the commencement of e-fulfilment activities including a returns solution for River Island within their existing facility in Milton Keynes, generated no contribution to the results for H1 FY21 but contribute a full six months to the revenue and EBIT of H1 FY22.

Our Technical Services sub-division also delivered strong revenue growth in H1 FY22 of 26.3% compared to H1 of FY21.

On our existing contracts we continue to process increased volumes, with considerable organic growth on our ASOS contracts within the UK and Poland, PrettyLittleThing.com in the UK and Westwing in Poland. These pureplay e-tailers are continuing to benefit from the structural shift to online.

EBIT

EBIT from E-fulfilment and returns management services grew by £1.8 million (12.6%) from £14.8 million in H1 FY21 to £16.6 million in H1 FY22. EBIT grew as a result of the revenue drivers noted above. In addition, our joint venture with John Lewis now provides services to close to 40 retail brands. The revenue of the joint venture is not directly consolidated into Group revenue, so adding new customers will have no impact on Group revenue, but they do have an impact on the joint venture's profitability, 50% of which is consolidated into Group EBIT. Overall EBIT growth in H1 FY22 was less than the revenue growth for the same period as a result of the impact of a loss-making contract which has now been exited.

EBIT on an IAS 17 basis grew by £1.9 million (15.5%) from £11.8 million in H1 FY21 to £13.7 million in H1 FY22.

Non e-fulfilment logistics

Non e-fulfilment operations include receipt, warehousing, stock management, picking and distribution of products on behalf of customers. Clipper does not take ownership of customers' products at any time.

Within this sector, Clipper handles high value products, including tobacco, electrical products and high value clothing, whilst also undertaking traditional retail support services including processing, storage and distribution of products, particularly fashion, to high street retailers.

Revenue

Revenue from Non e-fulfilment logistics increased in H1 FY22 compared to H1 FY21. Revenue was £82.2 million in H1 FY21 and was £116.4 million in H1 FY22. Growth of Non e-fulfilment logistics activity was therefore 41.6%.

A number of new activities which commenced in H1 FY21 contributed revenue for the full six months in H1 FY22, having only contributed in part to the revenue for H1 FY21. Of note are the Non e-fulfilment elements of the Joules operation in Corby and also the full six month impact of the revenue generated in the distribution of personal protective equipment (PPE) and other healthcare products for the Department of Health and Social Care. In H2 of FY21, Arcadia entered into administration and therefore as a result there are no revenues relating to this customer in H1 FY22.

Revenues generated in the provision of services to our traditional bricks and mortar customers or where we provide Non e-fulfilment services to customers such as Asda, Harvey Nichols and New Look in the UK and s.Oliver and TIGI in Europe have strongly rebounded in H1 FY22 since the closure of non-essential retail in response to the pandemic came to an end.

In addition, the contribution of new contract wins in H1 FY22 have contributed in part to the revenue growth in H1 FY22, but the full year impact will not be realised until the financial year ending 30 April 2023.

EBIT

EBIT from Non e-fulfilment logistics grew by £1.6 million (15.4%) from £10.1 million in H1 FY21 to £11.7 million in H1 FY22.

EBIT on an IAS 17 basis grew by £2.2 million (25.8%) from £8.3 million in H1 FY21 to £10.5 million in H1 FY22.

Central logistics overheads

Central logistics overheads represent the costs of support services specific to the logistics operations, but which cannot be allocated in a meaningful way to the sub-segment activities.

Such costs include directorate, advertising and promotions, accounting and IT, and the costs of the solutions development team.

Central logistics overheads of £4.6 million are £0.2 million are higher compared to the prior year (H1 FY21: £4.4 million). To support the growth in E-fulfilment and returns management services and Non e-fulfilment logistics, the Group invested into the Logistics overhead base, in particular in technology led solution design and implementation.

Commercial vehicles

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

Main dealerships are located in Brighouse, Manchester, Northampton, Dunstable and Tonbridge. Thus, the business operates across the north of England and into Wales, through the Midlands, and into the South-east.

Revenue

Commercial vehicles revenue increased by £6.7 million (18.3%) from £36.7 million in H1 FY21 to £43.4 million in H1 FY22, the increase is due to new vehicle sales, service hours sold and parts sales. 741 new vehicles were sold generating £24.7 million of revenue in H1 FY22, compared to 727 sold in H1 FY21 generating £20.4 million of revenue. Service hours sold in H1 FY22 were 76,000 generating revenue of £6.1 million compared to 64,000 hours sold in H1 FY21 generating revenue of £4.9 million.

EBIT

EBIT for H1 FY22 was comparable to H1 FY21 for this division.

Head office costs

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

We incurred Head office costs of £2.7 million in H1 FY22 (H1 FY21: £1.9 million). The £0.8 million increase was driven by the full six month impact of increased head count in the prior year.

STRATEGY

The Group's direction continues to be shaped by the same four key strategic pillars as outlined in our 2021 Annual Report, namely:

There have been significant developments in each of these areas in H1 FY22.

In terms of expanding the customer base, please refer to commentary provided elsewhere in this report.

New products and services have been developed and continue to be developed both for existing customers and with a view to attracting new customers. These include:

Technology

The Group has developed a rapid deployment warehouse management system solution for retailers utilising the best of breed capability of Blue Yonder and the Clipper retail know how. The solution is called Clipper QuickStart. This offers rapid start up to customers who also benefit from the collaborative learning built into the toolset.

A new partnership arrangement with a Carrier Management System provides improved delivery options available to customers and reduces their carrier costs.

The Group is utilising the latest automation technologies, including use of robotics in several of our sites.

Acquisitions

CE Repair

In H2 of FY22 we acquired CE Repair for cash consideration of €12.5 million and which on completion will be immediately earnings enhancing. CE Repair is a specialist in consumer electronic repair services based in Dordrecht in the Netherlands providing services across the Benelux countries. The acquisition will complement Clipper's existing electronic product repair capability in both the UK and mainland Europe. The acquisition of CE Repair further extends Clipper's geographical footprint in mainland Europe, and in particular its presence in the circular economy and its provision of a full end-to-end suite of services for online and omnichannel retailers. A number of cross-selling opportunities between CE Repair and Clipper's existing customer base have already been identified. The existing CE Repair management team will remain within the business to continue to deliver double digit organic growth.

Farfetch

We have also entered into a joint venture with Farfetch to create a global e-fulfilment solution for luxury products which will launch in early 2022. The joint venture will create a unique logistics offering for inventory from Farfetch's group of companies including Browns and New Guards Group, as well as products from other luxury brands, that will specialise in the complex and highly demanding fulfilment requirements of the global luxury goods sector. By combining Clipper's expertise in full end-to-end online logistics and technical solutions with Farfetch's carrier and duty management systems, and deep expertise and relationships in the luxury industry, the joint venture will offer a world-class, global fulfilment solution specifically focussed on the needs of luxury businesses.

We continue to seek out value-additive acquisition opportunities in the UK, Europe and beyond, capitalising from the global structural shift to e-commerce increasing our international presence.

RISK MANAGEMENT

A risk management process is used by the Group to identify, monitor, manage and mitigate against such risks. The principal risks and uncertainties facing the business are unchanged from those identified in the 2021 Annual Report.

The key such risks are outlined below:

The Group has mitigation strategies in place to deal with these risks. Further details can be found on pages 46 to 49 in the 2021 Annual Report.

CONDENSED FINANCIAL STATEMENTS FOR THE 6 MONTHS TO 31 OCTOBER 2021

Interim Group Income Statement (unaudited)

Interim Group Statement of Comprehensive Income (unaudited)

Interim Group Statement of Financial Position (unaudited)

Interim Group Statement of Changes in Equity (unaudited)

Interim Group Statement of Cash Flows (unaudited)

Notes to the Interim Financial Statements

1. Accounting policies

Basis of preparation

Clipper Logistics plc ("the Company") is a public limited company incorporated and domiciled in the United Kingdom. The condensed interim financial statements have been prepared in accordance with the Disclosure and Transparency rules of the Financial Conduct Authority ("FCA") and where applicable IAS 34 "Interim Financial Reporting (as adopted by the UK)".

As required by the Disclosure and Transparency rules of the FCA, the condensed interim financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 30 April 2021. These statements do not include all the information required for full annual financial statements and should be read in conjunction with the full annual report for the year ended 30 April 2021. The financial information for the half year ended 31 October 2021 and for the equivalent period in 2020 has not been audited or reviewed.

The information for the year ended 30 April 2021 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The financial statements are prepared on the going concern basis.

Going concern

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. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described above. The Group has considerable financial resources together with strong trading relationships with its key customers and suppliers. As a consequence, the Directors believe that the Group is well placed to manage its business risk successfully.

The Group continues to give consideration to the ongoing COVID-19 pandemic as part of its assessment of viability and ability to continue for the foreseeable future.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

2. Financial risks, estimates, assumptions and judgments

The preparation of the condensed interim financial information requires management to make judgments, 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 judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty in preparing these condensed interim financial statements were the same as those that applied to the consolidated financial statements for the year ended 30 April 2021.

3. Revenue

Revenue is disaggregated into two distinct operating segments. This is consistent with the revenue information that is disclosed for

each reportable segment under IFRS 8 'Operating Segments', as reported in note 4 below.

Revenue recognised in the income statement is analysed as follows:

4. Segment information

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

Within the value-added logistics services segment, the Chief Operating Decision Maker also reviews performance of three separate business activities:

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

The following table presents profit information for continuing operations regarding the Group's business segments:

5. Other net gains or losses

Other net gains or losses comprises the following amounts

6. Staff costs

Directors' remuneration is in line with the disclosures set out in the 2021 Annual Report.

7. Finance costs

8. Finance income

9. Taxation

Tax has been provided on the profit before taxation, at the estimated effective rate for the full year of 20.6% (year ended 30 April 2021: 18.9%). 

10. Earnings per share

Basic earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period. 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 shares outstanding during the period 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 basic earnings per share computation:

11. Dividends

An interim dividend for the current year of £4,604,000 at 4.5p per share was approved by the Board on 8 December 2021. The dividend will be payable on 7 January 2022 to shareholders on the register at the close of business on 17 December 2021.

12. Property, plant and equipment

During the six months ended 31 October 2021, the Group acquired property, plant and equipment with a cost of £8,363,000 (2020: £2,593,000). Included in the additions during the period are assets in the course of construction amounting to £1,412,000 (2020: £5,000).

13. Right-of-use assets

During the six months ended 31 October 2021, the Group received sale proceeds of £4,044,000 (2020: £nil) from the sale of leased assets to customers. Following each such transaction, the Group settled the outstanding lease liability.

14. Cash and cash equivalents

15. Financial liabilities - borrowings

The principal lender has security over all assets of the Group's UK operations.

The Group's obligations under leases are secured by the lender's charge over the relevant assets.

The maturity analysis of the bank loans and revolving credit advances is as follows:

The Group has access to a committed overdraft of £8,000,000 and a non-amortising revolving credit facility of £34,000,000 repayable in 2023. At 31 October 2021 £18,000,000 (2020: £11,000,000) of the revolving credit facility was drawn. Unamortised debt issue costs of £313,000 (2020: £501,000) have been deducted from the gross total outstanding.

16. Financial instruments

Fair value of financial instruments

The book value of trade and other receivables, trade and other payables, cash and cash equivalents & current borrowings equates to fair value.

The table below sets out the book value and fair value of the Group's other financial assets and liabilities:

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

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

17. Share based payments

Options over 328,499 ordinary shares have been granted in the six months ended 31 October 2021. Details of grants in prior periods are set out in the 2021 Annual Report. During the six months ended 31 October 2021, the Company issued 500,943 (2020: 53,298) ordinary shares for aggregate consideration of £137,000 (2020: £88,000) to satisfy share options. At 31 October 2021 options over 8,635 ordinary shares (2020: 491,948) were exercisable.

The charge for share based payments in the six months ended 31 October 2021 is £808,000 (2020: £123,000).

The decrease in deferred tax asset during the period in relation to share based payments amounted to £123,000 (2020: increase of £653,000), which has been recognised in the share based payment reserve.

18. Related party disclosures

The company owns 50% of the issued capital and voting rights of Clicklink Logistics Limited ("Clicklink"), a customer of the Group and a provider of services to the Group.

The condensed financial statements include the following in respect of Clicklink:

Other related party transactions are in line with the disclosures set out in the 2021 Annual Report.

19. Business combinations

On 19 May 2021, the Group acquired the entire £1,000 share capital of Wippet Ltd, a company registered in England and Wales with registered number 13115709. Wippet Ltd is a B2B online marketplace providing users the ability to sell and procure healthcare essentials. The acquisition is in line with the Group's strategic plans to expand further into the life sciences vertical.

Purchase consideration:

Performance-related deferred consideration may be payable in the year ending 30 April 2024. Any consideration payable will be charged to the income statement in line with anticipated performance.

As the Group is in the process of establishing the fair value of the assets acquired and the liabilities assumed, the fair values presented below are provisional.

Acquisition:

Goodwill represents the knowledge and expertise of the staff of the entity acquired. Goodwill is allocated entirely to the value-added logistics services segment. None of the goodwill recognised is expected to be deductible for income tax purposes.

Professional fees and costs in relation to the acquisition were £41,000 and have been charged to the income statement.

During the period the acquired entity was still under development and as such did not provide a material contribution to revenue or operating profit.

20. Post balance sheet event

On 29 November 2021 the Group announced it had entered into an agreement to acquire CE Repair Services Group B.V. ("CE Repair"), a company registered in the Netherlands with registered number 58336613, for consideration of €12,500,000 plus up to €5,000,000 deferred consideration dependent upon performance. Completion of the acquisition was announced on 7 December 2021 and CE Repair is expected to be immediately earnings enhancing to the Group.

DIRECTORS' RESPONSIBILITY STATEMENT IN RESPECT OF THE CONDENSED INTERIM FINANCIAL STATEMENTS

The Directors confirm that to the best of our knowledge: