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Clipper Logistics growing at a fair clip

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The share price of Clipper Logistics PLC (LON:CLG) has quadrupled over the last year, more than reversing a decline seen in the prior two years.

Given it is a company focused on the retail supply chain, it would be fair to say that the changes brought on or accelerated by the on-again/off-again lockdown environment have benefited the company.

As is widely acknowledged, the coronavirus pandemic has accelerated the trend towards online shopping, such that even traditional bricks & mortar retailers are having to adapt to multi-channel retailing.

As Clipper sees it, “having an online presence is no longer an optional extra – it’s “a must”.

It’s a viewpoint with which it is hard to argue but it’s no good a retailer having an online shop that delivers shoddy service as that just damages the brand.

If you are in a rush or you just don’t know what the pitfalls might be to making the transition to a multi-channel service then, to borrow a phrase from the film Ghostbusters, who’re you gonna call?

Clipper Logistics, that’s who.

Bespoke service

The company prides itself on avoiding a “one size fits all” approach and it works with customers to overcome logistical problems.

Parcel tracking, account management, inventory management, gift-wrapping, order picking, advanced IT solutions and returns processing are all aspects of retail Clipper can assist with.

This has been the case for many years but the market did not seem to appreciate it until the last year or so. From the beginning of January 2018, the shares had tumbled from about 470p to around 286p at the end of 2019.

The shares now trade at close to 600p, helped by some very positive news flow.

Take, for example, the company’s performance over November and December of last year, a period that encompasses “Black Friday”, the Christmas shopping bonanza and the Boxing Day sales.

The company experienced “unprecedented levels of activity” in its logistics operations in both the UK and continental Europe over that period.

Revenues for its logistics business in November and December were 50% higher year-on-year, with “strong growth” in both its e-commerce and non-e-fulfilment services, continuing what Clipper said was a strong performance in the first half of its financial year.

2020 also saw the company extend its reach beyond the retail sector as it worked alongside the NHS on two initiatives. The first was a separate channel to deliver personal protective equipment (PPE) to hospitals; the second saw Clipper develop an online portal for fulfilling orders for PPE to GP surgeries, small care homes and home care providers.

The company has thus far fulfilled more than one-billion items of PPE ordered online through a portal established with eBay in the spring of last year, with the service now extended beyond local health care providers including GP surgeries and nursing homes to educational and other communal establishments.

In short, the company has been benefiting from the online shopping boom and providing a service in delivering PPE; no wonder the company likes to describe its business model as “agile”.

The contracts keep rolling in

Before we get too carried away, the company did caution in its January trading update that additional revenues “will not necessarily have a proportionate impact on operating profit” given its contract mechanisms, but the activity levels provided it with “an excellent level of confidence in the year ahead” and that it is continuing to enjoy a strong pipeline of new business opportunities.

House broker Shore Capital called it “a highly positive update from the group covering a key trading period”.

“Clearly the outturn for the full year to April 2021 is not yet apparent; however, the current trading picture is strong,” the broker said.

At the time of the January update, Shore had pencilled in a figure of £647mln for full-year revenues, up from £547mln in 2020, since when Clipper has announced a new eCommerce operation for Farfetch – “the global destination for modern luxury” – to provide pan-European e-fulfilment and returns management services from a new facility in Venray, Netherlands, plus two major new contract wins with River Island and Mountain Warehouse.

The FarFetch contract kicks in next month so won’t have much of an impact on the current fiscal year’s earnings but it runs for five years so will bring benefits for years to come.

Furthermore, the deal represents a significant extension of Clipper’s trading activities in mainland Europe, representing organic growth of nearly 30% in Clipper’s European operations when fully functional, as well as its first site in the Benelux region.

As for the River Island and Mountain Warehouse contracts, they represent “a significant step-change in activity levels” and will enhance earnings for the next financial year which commences on 1 May 2021.
That was enough to have analysts scurrying to update their forecasts for fiscal 2021/2.

If you are looking for red flags, you might point to executive chairman Steve Parkin selling 11mln shares in January at 565p a pop.

The sale was undertaken by Parkin, who founded Clipper, as part of an estate planning exercise and to improve the number of Clipper shares available in the market, i.e. improve liquidity.

His investment vehicle still holds a 13.9% stake in the company so he has plenty of skin in the game.

“I remain as confident and focused as ever in the future growth prospects of Clipper,” Parkin said in a statement.

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