RNS Number : 4759U
Leeds Group PLC
30 July 2015
Leeds Group plc
("Leeds Group" or the "Group")
Financial Highlights
q Leeds Group profit before was tax 1,571,000 (2014: 1,611,000).
q Aggregate sales volumes of our two business sectors increased by 9% to 15.8 million metres (2014: 14.5 million metres).
q Leeds Group sales revenue increased by 1.9% to 34,859,000 (2014: 34,210,000) with greater growth in subsidiaries' revenue disguised by sterling translation rates significantly stronger than 2014.
q Hemmers sales were 31,151,000 (2014: 31,378,000) and pre-tax profit was 1,443,000 (2014: 1,478,000).
q Hemmers results in Euros were: sales up 8.7% to 40,735,000 (2014: 37,475,000) and PBT up 5.7% to 1,871,000 (2014: 1,770,000).
q ChinohTex external sales were 3,708,000 (2014: 2,832,000) and pre-tax profit was 305,000 (2014: 129,000).
q 50% interest acquired in December 2014 in textile retailer Stoff-Ideen-KMR GmbH at a cost of 575,000, including additional share capital of 192,000 invested in May 2015.
q Leeds Group finished the year with cash net of bank debt of 596,000 (2014: 915,000).
q Leeds Group net asset value per share (excluding treasury shares) was 50.2 pence (2014: 50.7 pence).
q Earnings per Leeds Group share were 3.8 pence (2014: 3.9 p).
q In view of the investment in KMR and the planned expansion of the Nordhorn facility, as last year the Directors do not propose a dividend.
Enquiries:
Leeds Group plc
Cairn Financial Advisers plc
Jan Holmstrom, Chairman Tel: 0046 708 111 360
Tony Rawlinson Tel: 020 7148 7900
Malcolm Wilson, Company Secretary Tel: 07801224618
Avi Robinson Tel: 020 7148 7900
Chairman's Statement
I am pleased to present the results for the year ended 31 May 2015.
Results
In the year ended 31 May 2015 Leeds Group made a profit after tax of 1,053,000 (2014: 1,079,000). Pre-tax profit fell by 2.5% to 1,571,000 (2014: 1,611,000), and was heavily influenced by the weakness of the Euro.
Net asset value per share at 31 May 2015 was 50.2p (2014: 50.7p), and earnings per share for the year were 3.8p (2014: 3.9p). The Group closed the year with net cash of 596,000 (2014: 915,000).
Hemmers-Itex Textil Import Export GmbH ("Hemmers")
Total fabric sales in the year by Hemmers, Leeds Group's principal trading company, increased by 6.6% to 13.633 million linear metres (2014: 12.785 million). Revenue and pre-tax profit in Euro terms increased by 8.7% and 5.7% respectively, but during the year the Euro weakened considerably, masking the improved performance of Hemmers when translated to sterling. In sterling terms, revenue was 31,151,000 (2014: 31,378,000) and pre-tax profit was 1,443,000 (1,478,000).
The weakness of the Euro was a challenge throughout the year, as it leads to an increasing Euro cost of stock purchases invoiced in US dollars. We have sought to mitigate this by the use of forward exchange contracts. Our strategy continues to be to maintain margins by a combination of sales price increases and considerable effort to uncover cheaper sources of supply that do not compromise quality.
In December 2014 Hemmers acquired a 50% interest in Stoff-Ideen-KMR GmbH ("KMR"), a chain of retail fabric and haberdashery stores, at a cost of 383,000, and subsequently injected additional share capital of 192,000 in May 2015. Our ambition is, together with our joint venture partner, to exploit this growth opportunity.
ChinohTex, the Hemmers subsidiary based in Shanghai, made impressive progress in the year. External sales volumes increased by 29.0% to 2.191million linear metres (2014: 169 million). External sales revenue was 3,708,000 (2014: 2,832,000) and pre-tax profit was 305,000 (2014: 129,000). In the main this growth was achieved by large volume deliveries to customers in the EU although significant progress was also made in Australia from a relatively low base. ChinohTex continues to provide valuable assistance to its European parent in terms of purchasing, quality inspection and bulk shipping of material bought in China.
The launch of online sales systems in both Germany and China is imminent, and plans are well advanced for an expansion of the facility in Nordhorn, Germany which, if approved, will be completed by this time next year.
Dividend
In view of the investment in KMR and the planned expansion of the Nordhorn facility, as last year the Directors do not propose a dividend. The Board is of the view that this maximises the long-term value of the Group to the benefit of all shareholders.
Employees
On behalf of shareholders, I thank the management and staff of Hemmers and ChinohTex for their continued hard work and commitment that has produced such a highly satisfactory result.
Outlook
In the current year we believe potential growth opportunities exist for Hemmers in their traditional wholesale business, and we shall be looking to add our expertise to that of our joint venture partner to develop our more recent interest in retail. An initial project which is already at the detailed planning stage is to invest in modern IT systems enabling improved stock control among other benefits.
Sales in the first two months of the current financial year have been in line with the expectations of the Board.
Board composition
I was delighted to welcome to the board both David Cooper on his appointment as an independent non-executive director in October 2014, and Jrg Hemmers who was appointed as an executive director in March 2015.
Jan G Holmstrom
Chairman
30 July 2015
Strategic Report
Business review
The Companies Act 2006 requires the directors to set out in this report a fair review of the business of the Group during the year ended 31 May 2015, including an analysis of the position of the Group at the end of the year and a description of the principal risks and uncertainties facing the Group. This information includes a discussion of the Key Performance Indicators used by the directors to monitor the business which are:
revenue
profit after tax
gross profit margin
earnings per share
fabric sales volumes, measured in linear metres
working capital levels
operating overheads and central costs
debt profile
profit before tax
net assets per share
Group result
Group revenue in the year was 34,859,000 (2014: 34,210,000), and pre-tax profit was 1,571,000 (2014: 1,611,000). Both sales and profits were heavily influenced by the continuing depreciation of the Euro. A weaker Euro increases the Euro cost of stock invoiced in US Dollars but we were able to mitigate this and preserve margins close to their usual level by the combined effects of the stockholding period, forward exchange contracts and sales price increases. The sales and pre-tax profits reported in sterling were respectively 1,565,000 and 68,000 lower than would have been the case if translated from Euros at last year's rates, but the most significant profit effect was felt in the parent company which incurred an unrealised exchange loss of 253,000 on its Group loan to Hemmers. The movement of exchange rates also gave rise to the negative translation difference on opening net assets of 1,215,000 disclosed in other comprehensive income.
The tax charge in the year was 518,000 of which 35,000 was deferred tax relating to temporary differences on goodwill and financial derivatives. Earnings per share were 3.8p (2014: 3.9p).
Hemmers Europe
This German-based business is engaged in the import, warehousing and wholesaling of fabrics.
Sales volumes increased in the year by 6.6% to 13.633 million linear metres (2014: 12.785 million) and this growth was achieved predominantly in the German home market. In local currency, sales revenue and pre-tax profit increased by 8.6% and 5.7% respectively.
As mentioned above, despite the weakness of the Euro gross margins were little changed at 22.2% (2014: 23.0%). As we have come to expect, our German management team maintained close control of overhead expenditure that, in local currency, increased by 4.1% as a result of the sales volume increases and modest cost inflation.
In December 2014 Hemmers acquired a 50% interest in Stoff-Ideen-KMR GmbH ("KMR"), a chain of retail fabric and haberdashery stores, at a cost of 500,000 (383,000). KMR will be operated as a joint venture and in May 2015 each of the two joint venture partners subscribed for additional capital of 250,000 (192,000) bringing the total investment by Hemmers to 750,000 (575,000).
Largely as a result of the KMR investment bank debt increased in the year to 1,077,000 (2014: 446,000).
Hemmers China
Chinoh-Tex is a textile trading company based in Shanghai and has been trading for seven years. It purchases fabric from Chinese suppliers and in 2015 sold to customers in 26 countries. External sales increased in the year by 29.0% to 2.191 million linear metres (2014: 1.699 million). 60% of sales were made to EU countries, where Germany, UK and Spain proved to be the biggest growth markets.
With the overwhelming majority of its sales invoiced in US Dollars, against which the Chinese Yuan is effectively pegged, the performance of ChinohTex did not suffer any adverse currency effects.
Activity was again greater in the first half of the financial year than in the second, although not to the same marked degree as 2014. External sales revenue grew by 31% to 3,708,000 (2014: 2,832,000) and gross margin improved to 22% (2014: 19%) chiefly owing to a changed market mix. The improved volumes and margin drove pre-tax profits up handsomely to 305,000 (2014: 129,000).
Importantly, ChinohTex continues to give valuable assistance to its European parent with the purchasing, inspection and shipping of material.
Holding Companies' Costs
Costs of the holding companies in the year, net of interest receivable, amounted to 295,000 (2014: 102,000) as follows:
Year ended 31 May 2015 000
Year ended 31 May 2014 000
Holding companies' costs net of interest receivable
42
61
Unrealised exchange loss on Group loan
253
41
Total holding companies' costs
295
102
Fixed Assets
Capital additions in the year amounted to 298,000 (2014: 221,000) and included expenditure on the Group's on-line sales platform which is about to go live. The net book amount of tangible fixed assets in the Consolidated Statement of Financial Position is 1,760,000 (2014: 1,900,000).
Working Capital
Working capital comprises inventories, trade and other receivables, and trade and other payables and increased in the year by 555,000 reflecting greater activity levels and the increased cost of imports priced in US Dollars. The directors anticipate that working capital will now rise to its annual peak over the next few months.
Net Asset Value
Net assets decreased in the year by 206,000 as follows:
Net assets 000
Per share pence
At 31 May 2014
14,028
50.7
Profit after tax
1,053
3.8
Purchase of own shares for treasury (cost)
(44)
(0.1)
Purchase of own shares for treasury (reduced denominator)
-
0.2
Translation differences
(1,215)
(4.4)
At 31 May 2015
13,822
50.2
Debt Profile
The funding policy of the Group continues to be to match its funding requirement in trading subsidiaries in a cost-effective fashion with an appropriate combination of short and longer-term debt. The warehouse constructed in 2008 in Germany is financed by a 20-year loan at a fixed interest rate of 4.07%. Working capital finance, when required, is via short term loans of three months currently attracting interest at approximately 1.25%.
Bank debt in the subsidiaries is secured by charges on inventories, receivables and property and is without recourse to the Parent Company.
Principal risks and uncertainties
As referred to in the Group result section above, foreign exchange risk arises when a member of the Group enters into transactions denominated in a currency other than its functional currency. It is Group policy that exposures should, wherever appropriate, be commercially hedged locally by entering into forward exchange contracts with reputable banks
Principal risks and uncertainties (continued)
Fire risk is mitigated by insurance, including consequential loss insurance to cover the loss of business opportunity while replacement stocks are obtained. There is an adequate disaster recovery programme in place with regard to essential computer systems. The commercial risks of operating in the highly competitive European fabric market are limited by the fact that Hemmers has a wide range of suppliers, and no customer accounts for more than 5% of revenues.
Jan G Holmstrom
30 July 2015
Chairman
Consolidated Statement of Comprehensive Income
for the year ended 31 May 2015
Note
Year ended 31 May 2015 000
Year ended 31 May 2014 000
Revenue
6
34,859
34,210
Cost of sales
(27,066)
(26,440)
Gross profit
7,793
7,770
Distribution costs
(2,316)
(2,303)
Administrative expenses
(3,855)
(3,785)
Profit from operations
1,622
1,682
Finance expense
(71)
(81)
Finance income
7
10
Share of post-tax profit of joint venture
13
-
Profit before tax
6
1,571
1,611
Tax expense
(518)
(532)
Profit for the year attributable to the equity holders of the Parent Company
1,053
1,079
Other comprehensive income
Translation differences on foreign operations
(1,215)
(631)
Other comprehensive income for the year
(1,215)
(631)
Total comprehensive income for the year attributable to the equity holders of the Parent Company
(162)
448
The results shown in the consolidated statement of comprehensive income derive wholly from continuing operations. There is no tax effect relating to other comprehensive income for the year.
Amounts included in other comprehensive income will not be reclassified subsequently as profit or loss.
Earnings per share attributable to
the equity holders of the Company
Note
Year ended 31 May 2015 000
Year ended 31 May 2014 000
Basic and diluted earnings per share
3
3.8p
3.9p
Consolidated Statement of Financial Position
at 31 May 2015
Note
31 May 2015 000
31 May 2014 000
Assets
Non-current assets
Property, plant and equipment
1,760
1,900
Goodwill
802
908
Investment in joint venture
553
-
Total non-current assets
3,115
2,808
Current assets
Inventories
7,258
7,050
Trade and other receivables
6,000
6,097
Derivative financial asset
59
-
Cash and cash equivalents
2,027
1,772
Total current assets
15,344
14,919
Total assets
18,459
17,727
Liabilities
Non-current liabilities
Loans and borrowings
(665)
(813)
Deferred tax
(244)
(239)
Total non-current liabilities
(909)
(1,052)
Current liabilities
Trade and other payables
(2,666)
(2,062)
Loans and borrowings
(766)
(44)
Corporation tax liability
(296)
(541)
Total current liabilities
(3,728)
(2,647)
Total liabilities
(4,637)
(3,699)
TOTAL NET ASSETS
6
13,822
14,028
Capital and reserves attributable to equity holders of the Company
Share capital
3,792
3,792
Capital redemption reserve
600
600
Treasury share reserve
(725)
(681)
Foreign exchange reserve
(51)
1,164
Retained earnings
10,206
9,153
TOTAL EQUITY
13,822
14,028
Consolidated Cash Flow Statement
for the year ended 31 May 2015
Year ended 31 May 2015 000
Year ended 31 May 2014 000
Cash flows from operating activities
Profit for the year
1,053
1,079
Adjustments for:
Depreciation
226
223
Finance expense
71
81
Finance income
(7)
(10)
Movement in derivative financial asset
(63)
-
Loss/(profit) on sale of property, plant and equipment
2
(1)
Share of post-tax profit of joint venture
(13)
-
Income tax expense
518
532
Cash flows from operating activities before changes in working capital and provisions
1,787
1,904
Increase in inventories
(1,063)
(849)
(Increase)/decrease in trade and other receivables
(495)
453
Increase in trade and other payables
1,003
256
Cash generated from operating activities
1,232
1,764
Income taxes paid
(679)
(199)
Net cash flows from operating activities
553
1,565
Investing activities
Purchase of property, plant and equipment
(298)
(221)
Sale of property, plant and equipment
-
3
Investment in joint venture
(575)
-
Bank interest received
7
10
Net cash used in investing activities
(866)
(208)
Financing activities
Purchase of treasury shares
(44)
-
Bank borrowings drawn down/(repaid)
717
(1,786)
Bank interest paid
(71)
(81)
Net cash used in financing activities
602
(1,867)
Net increase/(decrease) in cash and cash equivalents
289
(510)
Translation loss on cash and cash equivalents
(34)
(52)
Cash and cash equivalents at the beginning of the year
1,772
2,334
Cash and cash equivalents at the end of the year
2,027
1,772
Consolidated Statement of Changes in Equity
for the year ended 31 May 2015
Share capital 000
Capital redemption reserve 000
Treasury share reserve 000
Foreign exchange reserve 000
Retained earnings 000
Total equity 000
At 31 May 2013
3,792
600
(681)
1,795
8,074
13,580
Profit for the year
-
-
-
-
1,079
1,079
Other comprehensive income*
-
-
-
(631)
-
(631)
At 31 May 2014
3,792
600
(681)
1,164
9,153
14,028
Profit for the year
-
-
-
-
1,053
1,053
Other comprehensive income*
-
-
-
(1,215)
-
(1,215)
Transaction with Shareholders: Purchase of treasury shares
-
-
(44)
-
-
(44)
At 31 May 2015
3,792
600
(725)
(51)
10,206
13,822
* The components of other comprehensive income are disclosed as part of the consolidated statement of comprehensive income.
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Capital redemption reserve
Amounts transferred from share capital on redemption of issued shares.
Treasury share reserve
Cost of own shares held in treasury.
Foreign exchange reserve
Gains/losses arising on retranslation of the net assets of overseas operations into sterling.
Retained earnings
Cumulative net gains/losses recognised in the consolidated statement of comprehensive income after deducting the cost of cancelled treasury shares.
Notes
1. This preliminary announcement has been prepared using the recognition and measurement principles of IFRS as adopted by the European Union.
2. The Directors do not recommend the payment of a dividend.
3. Earnings per share
Since there are no outstanding share options, there is no difference between basic and diluted earnings per share.
Year ended 31 May 2015
Year ended 31 May 2014
Numerator
Profit for the year from continuing operations, being the earnings used in earnings per share
1,053,000
1,079,000
Denominator
Weighted average number of shares used in earnings per share (excluding treasury shares)
27,583,006
27,674,342
Basic and diluted earnings per share
3.8p
3.9p
4.The financial information set out above does not constitute the company's statutory accounts for 2015 or 2014.
Statutory accounts for the years ended 31 May 2015 and 31 May 2014 have been reported on by the Independent Auditors.
The Independent Auditors' Report on the Annual Report and Financial Statements for both 2015 and 2014 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
5.Statutory accounts for the year ended 31 May 2014 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 May 2015 will be delivered to the Registrar in due course. The Annual Report, giving notice of the Annual General Meeting, will be sent to shareholders shortly. Further copies will be available from the Company's Registered Office, Old Mills, Whitehall Grove, Drighlington, Bradford, BD11 1BY or from the Group's website, www.leedsgroup.plc.uk
6 Segmental information
IFRS adjustments
Year ended 31 May 2015
Hemmers Europe 000
Hemmers China 000
Inter segmental 000
Total Hemmers 000
Holding companies 000
Financial derivatives 000
Goodwill 000
Group total 000
External revenue
31,151
3,708
-
34,859
-
-
-
34,859
Inter-segmental revenue
68
924
(992)
-
-
-
-
-
Cost of sales
(24,303)
(3,815)
989
(27,129)
-
63
-
(27,066)
Gross profit
6,916
817
(3)
7,730
-
63
-
7,793
Distribution costs
(2,082)
(234)
-
(2,316)
-
-
-
(2,316)
Admin expenses
(3,177)
(278)
-
(3,455)
(458)
-
58
(3,855)
Profit from operations
1,657
305
(3)
1,959
(458)
63
58
1,622
Finance expense
(71)
-
-
(71)
-
-
-
(71)
Finance income
-
-
-
-
7
-
-
7
Internal interest
(156)
-
-
(156)
156
-
-
-
Share of JV profit
13
-
-
13
-
-
-
13
Profit before tax
1,443
305
(3)
1,745
(295)
63
58
1,571
IFRS adjustments
At 31 May 2015
Hemmers Europe 000
Hemmers China 000
Inter segmental 000
Total Hemmers 000
Holding companies 000
Financial derivatives 000
Goodwill 000
Group total 000
Property, plant & equipment
1,678
82
-
1,760
-
-
-
1,760
Goodwill
-
-
-
-
-
-
802
802
Investment in JV
553
-
-
553
-
-
-
553
Inventories
7,107
184
(33)
7,258
-
-
-
7,258
Trade receivables
4,522
238
-
4,760
-
-
-
4,760
Other receivables
742
480
-
1,222
18
-
-
1,240
Derivative financial asset
-
-
-
-
-
59
-
59
Cash & equivalents
354
595
-
949
1,078
-
-
2,027
Total assets
14,956
1,579
(33)
16,502
1,096
59
802
18,459
Group loans & current accounts
(1,629)
(204)
-
(1,833)
1,833
-
-
-
Non-current liabilities
(665)
-
-
(665)
-
(17)
(227)
(909)
Trade payables
(1,364)
(418)
-
(1,782)
(3)
-
-
(1,785)
Other payables
(705)
(132)
-
(837)
(44)
-
-
(881)
Corporation tax
(269)
(15)
-
(284)
(12)
-
-
(296)
Current loans & borrowings
(766)
-
-
(766)
-
-
-
(766)
Total liabilities
(5,398)
(769)
-
(6,167)
1,774
(17)
(227)
(4,637)
Net assets
9,558
810
(33)
10,335
2,870
42
575
13,822
6 Segmental information (continued)
IFRS adjustment
Year ended 31 May 2014
Hemmers Europe 000
Hemmers China 000
Inter segmental 000
Total Hemmers 000
Holding companies 000
Goodwill 000
Group total 000
External revenue
31,378
2,832
-
34,210
-
-
34,210
Inter-segmental revenue
-
904
(904)
-
-
-
-
Cost of sales
(24,142)
(3,194)
896
(26,440)
-
-
(26,440)
Gross profit
7,236
542
(8)
7,770
-
-
7,770
Distribution costs
(2,130)
(173)
-
(2,303)
-
-
(2,303)
Admin expenses
(3,390)
(240)
-
(3,630)
(269)
114
(3,785)
Profit from operations
1,716
129
(8)
1,837
(269)
114
1,682
Finance expense
(81)
-
-
(81)
-
-
(81)
Finance income
-
-
-
-
10
-
10
Internal interest
(157)
-
-
(157)
157
-
-
Profit before tax
1,478
129
(8)
1,599
(102)
114
1,611
IFRS adjustment
At 31 May 2014
Hemmers Europe 000
Hemmers China 000
Inter segmental 000
Total Hemmers 000
Holding companies 000
Goodwill 000
Group total 000
Property, plant & equipment
1,822
78
-
1,900
-
-
1,900
Goodwill
62
-
-
62
-
846
908
Inventories
6,945
139
(34)
7,050
-
-
7,050
Trade receivables
4,709
245
-
4,954
1
-
4,955
Other receivables
705
421
-
1,126
16
-
1,142
Cash & equivalents
411
178
-
589
1,183
-
1,772
Total assets
14,654
1,061
(34)
15,681
1,200
846
17,727
Group loans & current accounts
(1,895)
(179)
-
(2,074)
2,074
-
-
Non-current liabilities
(813)
-
-
(813)
-
(239)
(1,052)
Trade payables
(1,045)
(239)
-
(1,284)
-
-
(1,284)
Other payables
(599)
(128)
-
(727)
(51)
-
(778)
Corporation tax
(528)
-
-
(528)
(13)
-
(541)
Current loans & borrowings
(44)
-
-
(44)
-
-
(44)
Total liabilities
(4,924)
(546)
-
(5,470)
2,010
(239)
(3,699)
Net assets
9,730
515
(34)
10,211
3,210
607
14,028
Inter-segment sales are priced on an arms-length basis, and this policy has been applied consistently throughout the years ended 31 May 2015 and 31 May 2014.
6 Segmental information (continued) - Analysis of revenue by destination
Year ended 31 May 2015
Year ended 31 May 2014
Hemmers Europe 000
Hemmers China 000
Group total 000
Hemmers Europe 000
Hemmers China 000
Group total 000
UK
1,087
324
1,411
1,343
163
1,506
Germany
20,205
822
21,027
19,228
328
19,556
Rest of EU
8,215
1,059
9,274
8,976
1,034
10,010
Total EU
29,507
2,205
31,172
29,547
1,525
31,072
Rest of Europe
1,070
157
1,227
1,278
-
1,278
Total Europe
30,577
2,362
32,939
30,825
1,525
32,350
North America
251
669
920
164
762
926
Asia
102
295
397
193
369
562
Oceania
106
350
456
110
165
275
South America
113
11
124
80
7
87
Africa
2
21
23
6
4
10
Total revenue
31,151
3,708
34,859
31,378
2,832
34,210
Other information
Year ended 31 May 2015
Year ended 31 May 2014
Hemmers Europe 000
Hemmers China 000
Group total 000
Hemmers Europe 000
Hemmers China 000
Group total 000
Additions to property, plant & equipment
284
14
298
141
80
221
Depreciation
208
18
226
216
7
223
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGUBCMUPAGCB
