A market leader in retail logistics

2018 Full Year Results

Presentation

2 August 2018

Strengthening our business

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Disclaimer

This presentation includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking

statements can be identified by the use of forward-looking terminology, including the terms “believe”, “estimates”, “plans”, “projects”,

“anticipates”, “expects”, “intends”, “may”, “will”, or “should” or, in each case, their negative or other variations or comparable

terminology. These forward-looking statements include matters that are not historical facts and include statements regarding the

Company’s intentions, beliefs or current expectations.

Any forward-looking statements in this presentation reflect the Company’s current expectations and projections about future events. By

their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or

events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and

assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking

statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or

activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the

date of this presentation. No representations or warranties are made as to the accuracy of such statements, estimates or projections.

Please note that the Directors of the Company are, in making this presentation, not seeking to encourage shareholders to either buy or

sell shares in the Company. Shareholders in any doubt about what action to take are recommended to seek financial advice from an

independent financial advisor authorised by the Financial Services and Markets Act 2000.

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Agenda

Highlights and operational developments 1

2

Operational review

o Operational update

o Team Clipper

3

Outlook 4

Financial review

5 Summary and Q&A

Highlights and

operational developments 1

Highlights – financial*

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* The highlights are for the 12 months ended 30 April 2018, as compared to the 12 months ended 30 April 2017.

1 Group EBIT is defined as operating profit, including the Group’s share of operating profit in equity-accounted investees,

before amortisation of intangible assets arising on consolidation .

Group revenue growth of 17.6% to £400.1m (2017: £340.1m), driven by strong growth in e-fulfilment.

Group EBIT1 growth of 16.3% to £20.9m (2017: £17.9m):

o E-fulfilment & returns management services – EBIT of £11.9m, up 16.0% (2017: £10.2m).

o Non e-fulfilment logistics – EBIT of £14.8m, up 18.9% (2017: £12.4m).

o Commercial vehicles – EBIT of £2.5m, up 4.6% (2017: £2.3m).

Group profit for the year up 14.6% to £14.3m (2017: £12.5m).

EPS of 14.2p, up 13.6% (2017: 12.5p).

Proposed final dividend of 5.6p per share giving total dividend of 8.4p per share, up 16.7% (2017:

7.2p).

Cash generated from operations was £24.5m (2017: £25.7m).

Operational developments

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Key new contract wins: o Pretty Little Thing

o Halfords

o Edinburgh Woollen Mill

Significant contract extensions: o Wilko: 5 years

o Morrisons: 4 years

o Supergroup: 5 years

Innovation remains key: o Data analytics

o Solutions design

European expansion – Poland.

Incremental cost issues on major contract: o World’s largest fashion retailer

o Rapid growth and activity spikes led to higher labour costs c. £1.9m

o Commercials now recalibrated

o Extension of services: 315k sq ft to 900k sq ft

Start-up costs on new transport contract: o Labour and fleet inefficiencies led to under-performance of c.£1.7m

o Now profitable; will achieve full expected run rate by October

Profit on sale of freehold: o Freehold site acquired with Tesam sold, as planned; profit £2.2m

Other property income: £4.2m o Strengthening of covenant

o Will become a recurring revenue stream

Financial review 2

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Summary income statement

Headline financials

Strong top-line performance in the year in all

business segments.

EBIT is the key metric, and saw further growth

driven by: continued contract evolution in the

logistics business, new acquisitions and property-

related transactions, but offset by some non-

recurring incremental operational costs.

Increase in finance costs driven by increased debt

following the two acquisitions.

Dividends

Interim dividend of 2.8 pence per share, paid

January 2018.

Final proposed dividend 5.6 pence per share.

Total dividend 8.4 pence per share (7.2 pence year

to 30 April 2017).

£m Year to 30 April Change

2018 2017 %

Revenue 400.1 340.1 +17.6%

Cost of sales (283.3) (241.1)

Gross profit 116.8 99.0

Other net gains 2.4 0.4

Admin expenses (98.4) (81.9)

Operating profit before share of equity-

accounted investees, net of tax 20.8 17.5

Share of equity-accounted investees, net of tax (0.9) 0.2

Operating profit 19.9 17.7

EBIT 20.9 17.9 +16.3%

Less: amortisation of other intangible assets (1.1) (0.2)

share of tax and finance costs of equity-accounted

investees 0.1 (0.0)

Operating profit 19.9 17.7

Net finance costs (1.9) (1.6)

Profit before income tax 18.0 16.1

Income tax (3.7) (3.6)

Profit for the financial year 14.3 12.5 +14.6%

Basic earnings per share (p) 14.2 12.5 +13.6%

Diluted earnings per share (p) 14.1 12.3

Segmental and business activity performance

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Continued growth in Logistics:

o Organic growth and new business activities on

existing contracts including Antler, ASOS

returns, Asda, Bench, Browns, Haddad,

Morrisons, Philip Morris, Wilko and Zara in the

UK, and s.Oliver in Germany.

o Full year benefit of prior year contract wins

including British American Tobacco (for Vype),

Halfords, Inditex, Links of London, Kidly, Pretty

Green, Secret Sales, SilkFred, Smiffys, Thread

35 and Westwing.

o Part-year impact of wins in the year including

Crosswater, Edinburgh Woollen Mill, M&S

returns operations and River Island in the UK;

ASOS returns in Poland; and Superdry and

Urban Outfitters in the Clicklink joint venture.

o A contribution from property related advisory

services and profit on sale of freehold.

o A reduction in contract packing work in the

tobacco sector.

o Non-recurring incremental operational costs on

two key contracts.

Steady growth in commercial vehicles.

£m Year to 30 April Change

2018 2017 %

E-fulfilment & returns management services 159.4 129.9 +22.7%

Non e-fulfilment logistics 139.1 121.9 +14.1%

Total value-added logistics services 298.5 251.8 +18.6%

Commercial vehicles 103.6 91.5 +13.2%

Inter-segment sales (2.0) (3.2)

Group revenue 400.1 340.1 +17.6%

£m Year to 30 April Change

2018 2017 %

E-fulfilment & returns management services 11.9 10.2 +16.0%

Non e-fulfilment logistics 14.8 12.4 +18.9%

Central logistics overheads (5.7) (4.8)

Total value-added logistics services 21.0 17.8 +17.6%

Commercial vehicles 2.5 2.3 +4.6%

Head office costs (2.6) (2.2)

Group EBIT 20.9 17.9 +16.3%

Revenue

EBIT

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Summary cash flow statement

Strong cash flow generated from operations £24.5m

(2017: £25.7m).

The working capital outflow in the year is not indicative

of a change in the working capital needs of the Group,

but merely a delay of one day in one large receipt at

the year end.

Acquisitions of Tesam (£9.6m) and RepairTech

(£2.2m) drove increased bank borrowings of £8.1m,

and interest costs to £1.9m (2017: £1.6m).

Cash capex of £7.7m (2017: £4.6m) offset by disposal

proceeds of £6.7m (2017: £2.3m), primarily on

disposal of the freehold property acquired with Tesam.

Tax increase in line with increased profits

£1.6m raised through share issues to employees

through Sharesave and Numis (£250k).

Dividends paid in line with stated policy at IPO.

£m Year to 30 April

2018 2017

EBIT1 20.9 17.9

Depreciation & amortisation 6.9 5.1

Other non-cash items2 (0.1) 0.6

Change in working capital (3.2) 2.0

Cash generated from operations 24.5 25.7

Net interest paid (1.9) (1.6)

Tax paid (4.0) (3.2)

Net cash flows from operating activities 18.6 20.8

Investment in joint venture - (2.0)

Acquisition (11.8) -

Net capital expenditure (1.0) (2.3)

Net cash flows from investing activities (12.8) (4.3)

Loan advance to joint venture (0.5) (1.4)

Net drawdown / (repayment of) bank loans 8.1 (6.0)

Finance leases advanced - 4.9

Repayment of capital on finance leases (7.3) (5.7)

Share issue 1.6 0.0

Dividends paid (7.6) (6.4)

Net cash flows from financing activities (5.7) (14.6)

Net increase in cash & cash equivalents 0.1 2.0

1. EBIT is defined as operating profit, including the Group’s share of operating profit in equity-accounted investees, before

amortisation of intangible assets arising on consolidation.

2. Other non cash items comprise exchange differences ,share based payments, share of joint venture, and movement in fair

value of derivatives

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Summary balance sheet

Investment in fixed assets included new mezzanine

floors at Northampton and Ollerton, site set up costs in

Poland, and the investment in new accounting and

warehouse management software to accommodate

further business growth.

Net current liabilities position reflects continuing

positive working capital model.

Net debt: EBITDA = 1.14

Unused bank facility as at 30 April 2018 £27.7m.

£m As at 30 April

2018 2017

Intangible assets 37.2 24.8

Property, plant & equipment 45.0 38.9

Interest in equity-accounted investees 1.3 2.2

Non-current financial assets 1.9 1.4

Deferred tax assets - 0.3

Non-current assets 85.4 67.6

Inventories 22.1 30.0

Trade & other receivables 73.4 47.7

Cash & cash equivalents 2.3 0.9

Current assets 97.8 78.6

Trade & other payables 102.4 85.1

Borrowings 9.2 7.4

Short term provisions 0.1 0.1

Current tax liabilities 2.5 2.2

Current liabilities 114.2 94.8

Borrowings 26.7 20.0

Long term provisions 1.5 1.3

Deferred tax liabilities 1.5 -

Non-current liabilities 29.7 21.3

Net assets 39.3 30.1

Net debt 31.7 25.1

Operational review 3

Overview

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During the year ended 30 April 2018, Clipper set out to:

Target pure-play e-tailers to grow our e-fulfilment & returns business.

Develop omni-channel solutions for our e-comm customers.

Tie in our Technical Services operation to the Boomerang proposition.

Develop software assets to enhance existing services and develop new services.

Develop an internal brand representing common ways of working and operational standards.

E-fulfilment & returns management update

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Pretty Little Thing: o Fastest growing global e-tailer

o 615,000 sq ft in Sheffield, dedicated site

o Planning expansion, mezzanine build

o Fulfilment & returns, largest ever contract win for Clipper

o Up to 1,500 employees

Wilko: o New 5 year contract

o Supporting growth with new systems (JDA)

o Mechanisation – Introduction of auto-baggers

Love Knitting: o New 5 year contract

o Moved operation from Worsley to Selby

o JDA implementation

Morrisons: o 4 year contract extension

o Awarded online operations for Nutmeg

Philip Morris o On-boarding of B2B and B2C services for New Generation Products including

NicoCigs

Browns: o Extended operations to support Browns c.300% YOY sales growth

Brissi: o New contract - high end furniture and home accessories.

Boomerang & Clipper Technical Services

RepairTech and Servicecare combined to create Clipper

Technical Services.

Clipper Technical Services and Clipper Logistics offering

integrated Boomerang solution.

Contract wins:

o Hi-Sense – Consumer TV repair

o Servicepower – TV repair

o Toshiba – Loan Pool Management services

o Vestel – Brown goods strategic partner

o TCL – 3rd largest global TV company

Contract extensions:

o Amazon – 3 year extension, including new European work

o Argos – 2 year extension

o Richer sounds - 2 year extension

o Nintendo

European expansion:

o Refurbishment centre set up at Clipper’s Kempen site in

Germany for Amazon

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Clicklink update

Current service offering:

Next Day Click and Collect – Pre 13:00 for 7 days per week: o John Lewis into Waitrose is the largest contributor for this service

Retail Replenishment Deliveries: o Often these will include Click and Collect; Superdry and Urban Outfitters/Anthropology are

currently the biggest volume for this service offering

o Many of our customers are utilising Clicklink’s ability to handle both hanging and flat product, as

well as “Out of Hours” deliveries

John Lewis Store Consolidation: o This is where Clicklink are delivering SOR supplier stock such as Whistles, Mint Velvet, LK

Bennett, Jaegar and Ted Baker into all JL outlets including Northampton ADC for online pre-retail,

and the full store estate.

Returns: o The collecting and tracking of returns from stores both for online returns and recall stock for all

customers

Other: o We also adapt to customer requirement from the clearance of stores, to new store builds; transfers

of stock between locations; and return and consolidation of recycling waste

Recent developments:

Inditex Brands launch, Jaeger consolidation.

Waitrose Collect project continues.

Added Consignor to CMS integrations.

Additional investment in capacity.

Non e-fulfilment update

American Golf: won retail fulfilment, to go into Worsley alongside e-

commerce operation.

Superdry: 5 year contract extension.

Morrisons: 4 year contract extension – awarded wholesale

operations for secure general merchandise (“SGM”).

Halfords: extended relationship, opening second warehouse shortly

after the year end.

Extended relationship with Zara for retail fulfilment:

o Site capacity increased with second mezzanine

o Circa 700,000 sq ft of warehousing

Pep & Co: extended relationship. Pep & Co have increased high

street footprint by 173 stores in 2017/18.

Edinburgh Woollen Mill: 1,200 store transport network went live in

Sept 2017.

Crosswater: new contract – bathroom fitments.

Neon Sheep: new contract – same group as Mountain Warehouse,

opportunities for growth.

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New developments and innovation

Data Analytics

Working with Superdry and LIDA (Leeds Institute of Data Analytics):

o Project 1: development of methodologies and tools to support sales planning and replenishment.

o Project 2: returns data analytics.

Solutions Design/IT

Expanded on template solution in conjunction with JDA to create rapid roll out capability for new

customers: now includes e-comm, retail, returns and pre-retailing. Inbuilt continuous improvement.

Current IT projects include:

o Data Centre: working towards moving to an externally managed service – maintain robust 24x7 service

level with increased levels of security and support.

o Implementing Office 365 – increased security and added functionality for users.

Environmental

11 x natural gas powered artics and 16 x long semi trailer double deck trailers will enter the fleet in Q4

2018 which will save c. 500 tonnes of CO2 per year, and increase the carrying capacity of each trailer

by 30%, decreasing the number of trunks required.

Delivery Mates

2 x electric bikes x 7 days a week for Browns. Skateboards for last part of delivery. Enhances speed

of delivery from DC to store, store to store, and store to VIC (Very Important Customer).

Plan to extend offering – additional riders – wider geographical coverage.

Team Clipper

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Team Clipper - background

• Cultural programme to develop a “one-team” ethos.

• Key drivers: collaboration, continuous improvement, engagement, motivation and performance improvement.

• An operationally- and functionally-led programme designed to achieve higher engagement across the entire organisation.

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Graduate Scheme

• Our new Graduate scheme has now been in operation for 12 months.

• In 2018 we will have 30 graduates/under-graduates on the programme.

• Partnered with Sheffield Hallam University – creation of a bespoke Clipper Logistics Degree.

• Funded through the Apprenticeship Levy.

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Management Apprenticeship Programme

• 3.5 year programme.

• School leavers (18 years+).

• Partnered with Sheffield Hallam University – BA Hons in Management – Clipper Management Degree.

• End-point Assessment through Institute of Leadership and Management – Level 6.

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Fresh Start - overview

• Clipper Logistics response to 2 key challenges: > Brexit’s forecasted labour shortage > Our Corporate and Social Responsibilities (CSR)

• We are offering work opportunities to people who are: > mentally and physically disabled > Ex-offenders > Ex-military > Ex-homeless > Refugees > Retirees > Full-time parents

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Fresh Start update

• Launched in early summer of 2018.

• 8 Key partners on board – and expanding.

• Significant operational and customer engagement.

• Fresh-start champions employed on sites to support workers during their early period of employment.

• Targeting 5% of new recruits over next 12 months through Fresh Start.

Outlook 4

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Outlook

Headwinds facing retailers:

o Brexit

o Economic uncertainty

o Transition online

BUT:

o Creates opportunities: online and leveraging Clipper’s shared use model

Strong pipeline: conservative view taken on:

o Conversion rate

o Time to go-live

Strong strategic positioning in e-commerce.

Growing European business: Significant contract wins.

Clipper Technical Services: winning new business.

Search for complementary acquisitions.

Resilient business model: FY18 issues were non-recurring.

Management confident of continuing to deliver significant returns to shareholders.

Summary and Q&A 5