Retail logistics firm Clipper Logistics (CLG) has been a rare success story during the coronavirus outbreak after revealing significantly higher demand for its services.
Its shares shot up 11% to 150p as it said in an update that it has received ‘notable additional requests’ from several of its supermarket customers to ease supply chain pressures as a result of the demands placed upon them recently.
This includes warehousing, cross-docking, picking and transportation, and Clipper is now actively engaging with all the major food retailers to provide such support services.
In addition, it has also received requests for logistical support from non-retail clients, and said it is developing solutions in non-retail supply chains.
'APPROACHED BY ALL THE BIG SUPERMARKETS'
Clipper Logistics’ chief financial officer David Hodkin told Shares the firm has been approached by ‘all the major supermarkets’ and is currently working with them to assist with the pressures of people panic buying.
He added that the company has already been working with some supermarkets, including Asda, Morrisons (MRW) and Tesco (TSCO), for several years.
Giving an example of how Clipper is helping at the moment, Hodkin said that for one supermarket, it has established a regional centre for them where goods are immediately unloaded from an incoming container and put directly on an outbound carrier.
This helps to keep supply chains moving in a productive and effective manner.
STRONG FINANCIAL POSITION
Even if demand for Clipper’s services does slow down as a result of the outbreak, the company has insisted it is in a strong financial position.
Hodkin said: ‘Around 60% of our revenue comes from open book contracts, and 18% from volume contracts, so we’ve got good profit and cash protection against volume downside.’
Net debt at its 30 April 2020 year end is expected to be around £42m, slightly more than 1x EBITDA, which would give it headroom of over £30m in its banking facilities, and substantial headroom against its net debt covenant of 2.5x EBITDA.
The company also pointed out it is owed £29m from customers for capital expenditure it made on their behalf.
Hodkin said he has full confidence that money will be repaid as the firm only funds capex for ‘high quality clients’ with a strong credit status, with Clipper also having repayment mechanisms in place.
The company’s ‘look through’ year end net debt, adjusting for the money, is therefore expected to be around £13m.
