Half-year Report

Leeds

05/01/2017 07:00

RNS Number : 3670T

Leeds Group PLC

05 January 2017

LEEDS GROUP PLC

Interim Results for the six months ended 30 November 2016

STATEMENT BY THE GROUP CHAIRMAN, JAN G HOLMSTROM

I am pleased to present the interim report of Leeds Group plc ("the Group") for the six months ended 30 November 2016.

The business of Leeds Group is that of a wholesaler of fabrics and haberdashery, and is conducted by its German trading subsidiary Hemmers/Itex Textil Import Export GmbH ("Hemmers") and by Chinoh-Tex Limited, a subsidiary of Hemmers based in Shanghai. These trading companies sell both basic commodity fabrics and also fabrics from their own fashion collections. Approximately 55% of sales are to retailers, with remaining sales activities divided between the wholesale and garment manufacturing sectors.

The Group achieved sales in the period of 21,057,000 (2015: 18,489,000) and made a profit after tax of 848,000 (2015: 692,000). Earnings per share were 3.1 pence (2015: 2.5 pence). The weakness of sterling in recent months has had a material impact upon the Group's results. Sales growth of 13.9% over the first half of the previous financial year comprises a fall of 2.7% in sales at constant exchange rates, disguised by the translation effect of weaker sterling, which increased reported sales by 16.6%. Similarly, the translation effect on the balance sheet has increased net assets by 1,269,000 since the Group's year end on 31 May 2016. There has been a gain of some 300,000 in the value of the Euro denominated parent company loan to Hemmers, and this has been locked in by the use of derivatives. The Group's major transactional currency exposure relates to the value of the Euro against the US Dollar which, in contrast, has enjoyed a period of relative stability.

In Euro terms, revenue at Hemmers fell by 2.9% to 22,521,000 (2015: 23,203,000). Growth was achieved in the retail and garment manufacturing sectors but this was offset by reduced sales into the wholesale sector, caused in part by an inability to keep up with demand for double folded items, a problem now addressed with the expansion of facilities in Nordhorn and the acquisition of additional folding machines. The reduction in sales and an increased cost base led to a fall on pre-tax profit to 734,000 (1,227,000).

The KMR joint venture opened new shops in Berlin, Leipzig and Chemnitz in the period, to bring the total number of stores to 19, and also relocated shops in two other cities to more suitable premises. A project is underway to implement common business software across all shops and the costs associated with this project and with the opening of new shops amounted to some 150,000, leading to a pre-tax loss in the period, albeit a little lower than had been budgeted. The business continues to trade in line with the expectations of the Directors, with sales 25% greater than the equivalent period of last year.

External sales revenues and pre-tax profits at Chinoh-Tex were little changed from last year. As well as its contribution to Group pre-tax profit, ChinohTex continues to perform invaluable work in support of its European parent operation through its purchasing strengths, its ability to inspect locally purchased product for quality issues and the consolidation of freight shipments that minimises the cost of shipping stock to Europe.

The expansion of our facilities in Nordhorn is beginning to deliver the expected operational benefits including: increased double folding capacity as noted above; elimination of external warehousing rental costs; creation of a suitable showroom and bringing the KMR administration and warehousing in-house.

Group net debt, which has increased substantially because of the recent property investments, was 5,549,000 at 30 November 2015 (30November 2015: 579,000; 31 May 2016: 2,646,000). Net cash outflow in the 6 months ended 30 November 2016 reflected the seasonal increase in working capital and capital expenditure as the Nordhorn factory extension was completed. Working capital is expected to fall from its seasonally high level during the second half-year.

In order to maximise funds available for future investments and the investment in the Hemmers facility during the current year, the Board does not propose an interim dividend. Given the global economy with its uncertainties, the board is cautiously optimistic for further growth in the second half of the year. As ever, I offer thanks to our employees throughout the Group who have worked so hard in the period.

Jan G Holmstrom, Chairman.

4 January 2017

Unaudited Consolidated Statement of Comprehensive Income

for the 6 months ended 30 November 2016

6 months to
30 November
2016
000
6 months to
30 November
2015
000
Year to
31 May
2016
000
Revenue
21,057
18,489
36,272
Cost of sales
(16,492)
(14,373)
(28,563)
Gross profit
4,565
4,116
7,709
Distribution costs
(1,308)
(1,169)
(2,216)
Administrative expenses
(2,036)
(1,916)
(3,949)
Profit from operations
1,221
1,031
1,544
Finance expense
(83)
(39)
(92)
Finance income
1
2
4
Share of post-tax (loss)/profit of joint venture
(65)
20
51
Profit before tax
1,074
1,014
1,507
Tax expense
(226)
(322)
(468)
Profit for the period attributable to the equity holders of the Parent Company
848
692
1,039
Other comprehensive income:
Translation differences on foreign operations
1,269
(257)
693
Other comprehensive income for the period
1,269
(257)
693
Total comprehensive income for the period attributable to the equity holders of the Company
2,117
435
1,732

The results shown in the income statement derive wholly from continuing operations.

There is no tax effect relating to other comprehensive income.

Earnings per share for profit attributable

to the equity holders of the Company

6 months to
30 November
2016
6 months to
30 November
2015
Year to
31 May
2016
Basic and diluted (pence)
3.1p
2.5p
3.8p

Unaudited Consolidated Statement of Financial Position

at 30 November 2016

As at
30 November
2016
000
As at
30 November
2015
000
As at
31 May
2016
000
Assets
Non-current assets
Property, plant and equipment
7,444
2,271
5,864
Intangible assets
946
784
855
Investment in joint venture
642
559
640
Total non-current assets
9,032
3,614
7,359
Current assets
Inventories
10,030
8,142
7,765
Trade and other receivables
7,633
6,255
5,779
Corporation tax recoverable
82
-
-
Derivative financial asset
102
112
-
Cash and cash equivalents
1,681
2,875
1,612
Total current assets
19,528
17,384
15,156
Total assets
28,560
20,998
22,515
Liabilities
Non-current liabilities
Loans and borrowings
(4,205)
(2,380)
(3,843)
Deferred tax
(256)
(254)
(230)
Total non-current liabilities
(4,461)
(2,634)
(4,073)
Current liabilities
Trade and other payables
(3,445)
(2,847)
(2,283)
Loans and borrowings
(3,025)
(1,074)
(415)
Derivative financial liability
-
-
(40)
Corporation tax liability
-
(204)
(192)
Total current liabilities
(6,470)
(4,125)
(2,930)
Total liabilities
(10,931)
(6,759)
(7,003)
TOTAL NET ASSETS
17,629
14,239
15,512

Capital and reserves attributable to
equity holders of the company
Share capital
3,792
3,792
3,792
Capital redemption reserve
600
600
600
Treasury share reserve
(767)
(743)
(767)
Foreign exchange reserve
1,911
(308)
642
Retained earnings
12,093
10,898
11,245
TOTAL EQUITY
17,629
14,239
15,512

Unaudited Consolidated Cash Flow Statement

for the 6 months ended 30 November 2016

6 months to
30 November
2016
000
6 months to
30 November
2015
000
Year to
31 May
2016
000
Cash flows from operating activities
Profit for the period
848
692
1,039
Adjustments for:
Depreciation
294
124
300
Finance expense
83
39
92
Finance income
(1)
(2)
(4)
Movement in derivative financial assets
(145)
(55)
99
Loss on sale of property, plant and equipment
-
-
1
Share of post-tax loss/(profit) of joint venture
65
(20)
(51)
Income tax expense
226
322
468
Cash flows from operating activities before
changes in working capital and provisions
1,370
1,100
1,944
Increase in inventories
(1,434)
(1,070)
(44)
(Increase)/decrease in trade and other receivables
(1,234)
(382)
538
Increase/(decrease) in trade and other payables
668
277
(621)
Cash (absorbed)/generated by operating activities
(630)
(75)
1,817
Income taxes paid
(517)
(390)
(613)
Net cash flows from operating activities
(1,147)
(465)
1,204
Investing activities
Purchase of property, plant and equipment
(1,248)
(686)
(4,156)
Purchase of intangible assets
(84)
-
-
Bank interest received
1
2
4
Net cash used in investing activities
(1,331)
(684)
(4,152)
Financing activities
Purchase of treasury shares
-
(18)
(42)
Net drawdown of bank borrowings
2,511
2,098
2,640
Bank interest paid
(83)
(39)
(92)
Net cash generated by financing activities
2,428
2,041
2,506
Net (decrease)/ increase in cash and cash equivalents
(50)
892
(442)
Translation gain/(loss) on cash and cash equivalents
119
(44)
27
Cash and cash equivalents at beginning of the period
1,612
2,027
2,027
Cash and cash equivalents at end of the period
1,681
2,875
1,612

Unaudited Consolidated Statement of Changes in Equity

for the six months ended 30 November 2016

Share capital
000
Capital redemption reserve
000
Treasury share reserve
000
Foreign exchange reserve
000
Retained earnings
000
Total equity
000
At 1 June 2016
3,792
600
(767)
642
11,245
15,512
Profit for the period
-
-
-
-
848
848
Other comprehensive income
-
-
-
1,269
-
1,269
At 30 November 2016
3,792
600
(767)
1,911
12,093
17,629

Share capital
000
Capital redemption reserve
000
Treasury share reserve
000
Foreign exchange reserve
000
Retained earnings
000
Total equity
000
At 1 June 2015
3,792
600
(725)
(51)
10,206
13,822
Profit for the period
-
-
-
-
692
692
Other comprehensive income
-
-
-
(257)
-
(257)
Transaction with shareholders:
Purchase of treasury shares
-
-
(18)
-
-
(18)
At 30 November 2015
3,792
600
(743)
(308)
10,898
14,239

Share capital
000
Capital redemption reserve
000
Treasury share reserve
000
Foreign exchange reserve
000
Retained earnings
000
Total equity
000
At 1 June 2015
3,792
600
(725)
(51)
10,206
13,822
Profit for the year
-
-
-
-
1,039
1,039
Other comprehensive income
-
-
-
693
-
693
Transaction with shareholders:
Purchase of treasury shares
-
-
(42)
-
-
(42)
At 31 May 2016
3,792
600
(767)
642
11,245
15,512

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


Interim results

for the 6 months ended 30 November 2016

Notes to the accounts

1. The financial information in this report does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

The interim results for the six months ended 30 November 2016 and 30 November 2015 are unaudited. The interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as endorsed by the European Union. The same accounting policies, presentation and methods of computation have been followed in the preparation of these results as were applied in the Company's latest annual audited financial statements.

The financial information for the year ended 31 May 2016 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 May 2016 have been filed with the Registrar of Companies. The Independent Auditor's Report on the Annual Report and Financial Statements for the year ended 31 May 2016 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.

2. Ordinary shares of 12 pence each used in the calculation of earnings per share:

6 months to
30 November
2016
6 months to
30 November
2015
Year to
31 May
2016
27,435,843
27,532,496
27,506,459

3. Reconciliation of movements in net bank debt

6 months to
30 November
2016
000
6 months to
30 November
2015
000
Year to
31 May
2016
000
(Decrease)/increase in cash & cash equivalents
(50)
892
(442)
Translation gain/(loss) on cash and cash equivalents
119
(44)
27
Increase in loans
(2,511)
(2,098)
(2,640)
Translation (loss)/gain on loans
(461)
75
(187)
Net cash outflow
(2,903)
(1,175)
(3,242)
Net (bank debt)/cash at beginning of period
(2,646)
596
596
Net bank debt at end of period
(5,549)
(579)
(2,646)

4. Analysis of net bank debt

6 months to
30 November
2016
000
6 months to
30 November
2015
000
Year to
31 May
2016
000
Cash
1,681
2,875
1,612
Loans repayable in less than one year
(3,025)
(1,074)
(415)
Loans repayable in more than one year
(4,205)
(2,380)
(3,843)
Net bank debt at end of period
(5,549)
(579)
(2,646)

5. Segmental information

6 months to
30 November
2016
000
6 months to
30 November
2015
000
Year to
31 May
2016
000
External revenue
Hemmers Europe
19,008
16,608
32,775
Hemmers China
2,049
1,881
3,497
Total Group external revenue
21,057
18,489
36,272

6 months to
30 November
2016
000
6 months to
30 November
2015
000
Year to
31 May
2016
000
Profit before tax
Hemmers Europe (local GAAP)
616
875
1,258
Share of post-tax (loss)/profit of JV
(65)
20
51
IFRS adjustment - financial derivatives
89
55
(99)
Hemmers Europe (IFRS)
640
950
1,210
Hemmers China
143
155
267
Unrealised profit in stock
(2)
(9)
3
Holding company
293
(82)
27
Group profit before tax
1,074
1,014
1,507

6 months to
30 November
2016
000
6 months to
30 November
2015
000
Year to
31 May
2016
000
Net assets
Hemmers Europe (local GAAP)
12,660
10,024
11,117
IFRS adjustment - financial derivatives
33
80
(28)
IFRS adjustment - goodwill amortisation
618
562
613
Hemmers Europe (IFRS)
13,311
10,666
11,702
Hemmers China
1,223
915
1,003
Unrealised profit in stock
(37)
(41)
(32)
Holding company
3,132
2,699
2,839
Group net assets
17,629
14,239
15,512

Enquiries:
Leeds Group plc
Cairn Financial Advisers LLP
Malcolm Wilson
Tony Rawlinson / Liam Murray
07801 224618
020 7213 0880

This information is provided by RNS

The company news service from the London Stock Exchange

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