REG - Leeds Group PLC - Half-year Report

LeedsAnnouncement

28/01/2019 07:05

RNS Number : 2006O
Leeds Group PLC
28 January 2019
 


Leeds Group plc
("Leeds Group" or the "the Group")
Interim Results for the six months ended 30 November 2018
 
Leeds Group is pleased to report the Company's interim results for the six months ended 30 November 2018.
 
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 (MAR) and has been arranged for release by Jan G Holmstrom, Chairman.
 
Enquiries:
Leeds Group plc                                                    Cairn Financial Advisers LLP
Dawn Henderson - 07747 777055                        Tony Rawlinson / Liam Murray - 020 7213 0880
 
 
Chairman's Statement
 
The business of the Group is that of a wholesaler and retailer of fabrics and haberdashery and is conducted by its German trading subsidiary Hemmers/Itex Textil Import Export GmbH ("Hemmers"), Stoff-Ideen-KMR GmbH ("KMR"), a subsidiary of Hemmers based in Germany and by Chinoh-Tex Limited ("Chinoh-Tex''), a subsidiary of Hemmers based in Shanghai. These trading companies sell both basic commodity fabrics and also fabrics from their own fashion collections. Approximately 70% of sales are to retailers, with the remaining sales activities divided between the wholesale and garment manufacturing sectors.
 
The Group achieved sales in the period of £21,880,000 (2017: £22,180,000).  Market conditions have been challenging with increased competition in a reduced market place.  However, despite the reduction in turnover, the Group made a profit after tax of £939,000 (2017:  £404,000).  Earnings per share were 3.4 pence (2017: 1.5 pence).
 
Sales at Hemmers decreased to €19,718,000 (2017: €23,087,000) mainly due to decreased demand in its main markets.  However, profit before interest remained at a similar level as last year at €1,041,000 (2017: €1,043,000). Profit levels have been maintained by an ongoing cost cutting exercise to reduce fixed overheads and improve efficiencies. This will continue in to the second half of the year with the objective of ensuring that profitability is maintained at a similar level to last year.
 
On 5th July 2018, Hemmers became 100% owners of KMR following the buyout of our Joint Venture partner. The consideration was £444,000 partly paid in cash £222,000 and the balance being three shops valued at £222,000. The accounting effect of both transactions resulted in a gain on sale of the joint venture of £118,000 and negative goodwill arising on consolidation of £380,000 both of which have been credited to the profit and loss account.  KMR will be consolidated as a subsidiary company in the Group for eleven months of this financial year.  Sales at KMR decreased slightly to €4,904,000 (2017: €5,334,000) as the retail sector saw reduced demand in particular through the hot summer months. Thus, there was an operating loss for KMR in the first half year of €315,000 (2017: loss of €126,000). The loss is expected to be reduced for the full financial year due to reduced costs in the second half of the year.
 
Chinoh-Tex, the subsidiary of Hemmers which is based in Shanghai, achieved external sales revenue of €1,938,000 (2017: €2,134,000). Despite the reduced turnover, Chinoh-Tex achieved a pre-tax profit of €144,000 (2017: loss of €32,000).  Although trading has been somewhat difficult, the infrastructure and administrative costs were reduced last year to align to the expected reduction in demand and this has continued into this financial year.
 
Group net debt was £6,830,000 at 30 November 2018 (30 November 2017: £6,347,000; 31 May 2018: £4,485,000). The increase in this financial period is due to the purchase of the shares in KMR and consolidating debt in the KMR balance sheet.
 
The Board continues to believe that the result for the full year will be at a higher level to last year despite the challenging market conditions.  The Group have implemented a number of cost reduction and efficiency plans throughout to ensure cost bases are reduced in accordance to the current market conditions to ensure the companies remain profitable.
 
I would like to offer thanks to our employees throughout the Group for their continued hard work and support.
 
Jan G Holmstrom,
Chairman
28 January 2019
 
 
Unaudited Consolidated Statement of Comprehensive Income
for the 6 months ended 30 November 2018
 




 


6 months to
30 November
2018
£000


6 months to
30 November
2017
£000


Year to
31 May
2018
£000




 
Revenue


 
21,880


 
22,180


 
41,538




 
Cost of sales


 
(16,440)


 
(17,320)


 
(32,526)




 
Gross profit


 
5,440


 
4,860


 
9,012




 
Distribution costs


 
(1,776)


 
(1,413)


 
(2,722)




 
Administrative expenses


 
(2,881)


 
(2,684)


 
(5,188)




 
Other income


 
15


 
-


 
50  




 
Profit from operations


 
798


 
763


 
1,152




 
Finance expense


 
(92)


 
(88)


 
(160)




 
Share of post-tax loss of joint venture


 
(34)


 
(47)


 
(107)




 
 Gain on termination of joint venture


 
118


 
-


 
-




 
 Negative goodwill arising from acquisition


 
380


 
-


 
-




 
Profit before tax


 
1,170


 
628


 
885




 
Tax expense


 
(231)


 
(224)


 
(340)




 
Profit for the period attributable to the equity holders of the Parent Company


 
 
939


 
 
404


 
 
545




 
Other comprehensive income:


 


 


 




 
Translation differences on foreign operations


 
95


 
143


 
141




Other comprehensive income for the period


95


143


141




 


 


 


 




Total comprehensive income for the period attributable to the equity holders of the Company


 
1,034


 
547


 
686




 
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
2018


6 months to
30 November
2017


Year to
31 May
2018




 


 


 


 




Basic and diluted (pence)


3.4p


1.5p


2.0p




 
 
 
 
 
 
 
Unaudited Consolidated Statement of Financial Position
at 30 November 2018
 




 


As at
30 November
2018
£000


As at
30 November
2017
£000


As at
31 May
2018
£000




Assets


 


 


 




Non-current assets


 


 


 




Property, plant and equipment


8,872


8,470


7,755




Investment property


560


-


564




Intangible assets


1,291


1,068


1,057




Investment in joint venture


-


795


734




 


 


 


 




Total non-current assets


10,723


10,333


10,110




 


 


 


 




Current assets


 


 


 




Inventories


13,266


10,948


9,621




Trade and other receivables


6,168


6,820


6,252




Corporation tax recoverable


569


245


386




Derivative financial asset


27


4


-




Cash and cash equivalents


1,139


1,286


572




 


 


 


 




Total current assets


21,169


19,303


16,831




 


 


 


 




Total assets


31,892


29,636


26,941




 


 


 


 




Liabilities


 


 


 




Non-current liabilities


 


 


 




Loans and borrowings


(4,402)


(3,885)


(3,708)




Deferred tax


(279)


(280)


(277)




 


 


 


 




Total non-current liabilities


(4,681)


(4,165)


(3,985)




 


 


 


 




Current liabilities


 


 


 




Trade and other payables


(3,631)


(2,874)


(2,619)




Loans and borrowings


(3,567)


(3,748)


(1,349)




 


 


 


 




Total current liabilities


(7,198)


(6,622)


(3,968)




 


 


 


 




Total liabilities


(11,879)


(10,787)


(7,953)




 


 


 


 




TOTAL NET ASSETS


20,013


18,849


18,988




 
 




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


(807)


(798)


(798)




Foreign exchange reserve


2,585


2,492


2,490




Retained earnings


13,843


12,763


12,904




 


 


 


 




TOTAL EQUITY


20,013


18,849


18,988




 
 
 
 
 
 
 
 
 
 
Unaudited Consolidated Cash Flow Statement
for the 6 months ended 30 November 2018
 




 


6 months to
30 November
2018
£000


6 months to
30 November
2017
£000


Year to
31 May
2018
£000




Cash flows from operating activities


 


 


 




Profit for the period


939


404


545




Adjustments for:


 


 


 




Depreciation of property, plant and equipment


393


331


586




Depreciation of investment property


9


-


19




Amortisation of intangible assets


10


-


6




Finance expense


92


88


160




Movement in derivative financial assets


(28)


(52)


(48)




Share of post-tax loss of joint venture


34


47


107




Gain on termination of joint venture


(118)


-


-




Negative goodwill arising from acquisition


(380)


-


-




Income tax expense


231


224


340




 


 


 


 




Cash flows from operating activities before
changes in working capital and provisions


 
1,182


 
1,042


 
1,715




 


 


 


 




(Increase)/decrease in inventories


(761)


(716)


597




Decrease/(increase) in trade and other receivables


194


(6)


583




(Decrease) in trade and other payables


(536)


(572)


(835)




 


 


 


 




Cash generated/(used) by operating activities


79


(252)


2,060




Income taxes paid


(276)


(152)


(411)




 


 


 


 




Net cash flows (to)/from operating activities


(197)


(404)


1,649




 


 


 


 




Investing activities


 


 


 




Purchase of property, plant and equipment


(123)


(251)


(400)




Purchase of subsidiary net of debt


(1,865)


-


-




 


 


 


 




Net cash used in investing activities


(1,988)


(251)


(400)




 


 


 


 




Financing activities


 


 


 




Purchase of treasury shares


(9)


-


-




Net drawdown/(repayment) of bank borrowings


2,868


   464


(2,102)




Bank interest paid


(92)


(88)


(160)




 


 


 


 




Net cash generated/(used) by financing activities


2,767


376


(2,262)




 


 


 


 




Net increase/(decrease) in cash and cash equivalents


582


(279)


(1,013)




 


 


 


 




Translation (loss)/gain on cash and cash equivalents


(15)


(2)


18




 


 


 


 




Cash and cash equivalents at beginning of the period


572


1,567


1,567




 


 


 


 




Cash and cash equivalents at end of the period


1,139


1,286


572




 
 
 
 
 
 
 
 
 
 
 
Unaudited Consolidated Statement of Changes in Equity
for the six months ended 30 November 2018
 




 


Share capital
   
£000


Capital redemption reserve
£000


Treasury share reserve
£000


Foreign exchange reserve
        £000


Retained earnings
 
£000


Total equity
 
£000




 


 


 


 


 


 


 




At 1 June 2018


3,792


600


(798)


2,490


12,904


18,988




Profit for the period


-


-


-


-


939


939




Other comprehensive income


-


-


-


95


-


95




Transaction with shareholders:


 


 


 


 


 


 




Purchase of treasury shares


-


-


(9)


-


-


(9)




 


 


 


 


 


 


 




At 30 November 2018


3,792


600


(807)


2,585


13,843


20,013




 
 




 


Share capital
   
£000


Capital redemption reserve
£000


Treasury share reserve
£000


Foreign exchange reserve
        £000


Retained earnings
 
£000


Total equity
 
£000




 


 


 


 


 


 


 




At 1 June 2017


3,792


600


(798)


2,349


12,359


18,302




Profit for the period


-


-


-


-


404


404




Other comprehensive income


-


-


-


143


-


143




 


 


 


 


 


 


 




At 30 November 2017


3,792


600


(798)


2,492


12,763


18,849




 
 




 


Share capital
   
£000


Capital redemption reserve
£000


Treasury share reserve
£000


Foreign exchange reserve
        £000


Retained earnings
 
£000


Total equity
 
£000




 


 


 


 


 


 


 




At 1 June 2017


3,792


600


(798)


2,349


12,359


18,302




Profit for the year


-


-


-


-


545


545




Other comprehensive income


-


-


-


141


-


141




 


 


 


 


 


 


 




At 31 May 2018


3,792


600


(798)


2,349


12,904


18,988




 
 
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 to the Interim Results
for the six months ended 30 November 2018
 
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 2018 and 30 November 2017 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 directors have adopted the following accounting standards which became effective for periods beginning on or after 1 January 2018:
IFRS 9 (Financial instruments)
IFRS 15 (Revenue from contracts with customers)
There has been no financial impact of these accounting standards and therefore the 2017 comparative figures have not been restated.
The directors will adopt the following forthcoming accounting standard which becomes effective for periods beginning on or after 1 January 2019:
IFRS 16 (Leases)
Under IFRS 16, the Group will be required to recognise a right-of-use asset and a lease liability for future lease commitments (excluding low value leases and leases less than 12 months) on the consolidated balance sheet and replace straight line operating lease rental charges with depreciation of right-to-use assets and an interest charge on the lease liabilities in the consolidated income statement. The directors are currently evaluating the impact of applying this new standard and any changes, as a result of this new standard, will impact the comparative results shown in the 31 May 2020 financial statements.
The financial information for the year ended 31 May 2018 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 May 2018 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 2018 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
2018


6 months to
30 November
2017


Year to
31 May
2018




 


 


 


 




 


27,340,679


27,350,843


27,350,843




 
3.  Reconciliation of movements in net bank debt
 




 


6 months to
30 November
2018
£000


6 months to
30 November
2017
£000


Year to
31 May
2018
£000




 


 


 


 




Increase/(decrease) in cash & cash equivalents


582


(279)


(1,013)




Translation (loss)/gain on cash and cash equivalents


(15)


(2)


18




(Increase)/decrease in loans


(2,868)


(464)


2,102




Translation loss on loans


(44)


(82)


(72)




 


 


 


 




Net cash (outflow)/inflow


(2,345)


(827)


1,035




Net bank debt at beginning of period


(4,485)


(5,520)


(5,520)




 


 


 


 




Net bank debt at end of period


(6,830)


(6,347)


(4,485)




 
4.  Analysis of net bank debt




 


6 months to
30 November
2018
£000


6 months to
30 November
2017
£000


Year to
31 May
2018
£000




 


 


 


 




Cash


1,139


1,286


572




Loans repayable in less than one year


(4,420)


(3,748)


(1,349)




Loans repayable in more than one year


(3,549)


(3,885)


(3,708)




 


 


 


 




Net bank debt at end of period


(6,830)


(6,347)


(4,485)




 
5.  Segmental information




 


6 months to
30 November
2018
£000


6 months to
30 November
2017
£000


Year to
31 May
2018
£000




External revenue


 


 


 




Hemmers Europe


16,640


20,501


38,299




Hemmers China


1,583


1,679


3,239




KMR


3,657


-


-




 


 


 


 




Total Group external revenue


21,880


22,180


41,538




 




 


6 months to
30 November
2018
£000


6 months to
30 November
2017
£000


Year to
31 May
2018
£000




Profit before tax


 


 


 




Hemmers Europe (local GAAP)


747


722


1,123




KMR


(233)


-


-




Share of post-tax loss of JV


(34)


(47)


(107)




IFRS adjustment - financial derivatives


28


4


-




 


 


 


 




Hemmers Europe (IFRS)


508


679


1,016




Hemmers China


128


(29)


(86)




Unrealised profit in stock


16


-


(13)




Holding company


20


(22)


(32)




Gain on termination of joint venture


    118


-


-




Negative goodwill arising from acquisition


380


-


-




 


 


 


 




Group profit before tax


1,170


628


885




 




 
 


6 months to
30 November
2018
£000


6 months to
30 November
2017
£000


Year to
31 May
2018
£000




Net assets


 


 


 




Hemmers Europe (local GAAP)


13,426


14,024


14,197




KMR


1,743


-


-




IFRS adjustment - financial derivatives


27


3


-




IFRS adjustment - goodwill amortisation


709


705


703




 


 


 


 




Hemmers Europe (IFRS)


15,905


14,732


14,900




Hemmers China


1,130


1,056


1,049




Unrealised profit in stock


(21)


(25)


(37)




Holding company


2,999


3,086


3,076




 


 


 


 




Group net assets


20,013


18,849


18,988




 
 
 
 
 
6.  Acquisition of KMR
 
On 5th July 2018 Hemmers became 100% owners of KMR following the buyout of our joint venture partner. The consideration was €500,000 (£444,000) comprising €250,000 (£222,000) paid in cash and the balance being three shops at a value of €250,000 (£222,000). Hemmers invested a further €370,000 (£329,000) in the company during the period. KMR is a retailer of fabric and haberdashery, operating shops located throughout Germany.
 
The joint venture investment was accounted for in the consolidated financial statements of Leeds Group using the equity accounting method and at 30 June 2018, was held at a cost of €796,000 (£707,000).
 
The directors continue to assess the acquisition accounting entries and the below represents provisional figures, which will be finalised during the remainder of the measurement period.
 
Accounting for the step acquisition of KMR requires the directors to fair value the original 50% joint venture investment, with the resulting gain credited to the profit and loss as follows:
 




 


€000


£000




 


 


 




As at 30 June 2018:


 


 




Fair value share of original joint venture


929


825




Carrying value of investment in consolidated financial statements


796


707




 


 


 




Gain on fair valuing of joint venture investment


133


118




 
Upon obtaining 100% control of the KMR entity, the cost of the investment for the purposes of determining the goodwill is calculated as follows:
 




 


€000


£000




 


 


 




Fair value share of original 50% joint venture


929


825




Fair value of the consideration paid to obtain control


500


444




 


 


 




Cost of investment


1,429


1,269




 
The net assets of the newly acquired subsidiary are as follows:
 




 


€000


£000




 


 


 




Fair value of net assets as at 30 June 2018:


 


 




Fixed assets


1,745


1,549




Stock


3,436


3,050




Cash


259


230




Debtors


335


297




Creditors


(1,731)


(1,537)




Loans


(2,186)


(1,940)




 


 


 




Fair value of assets acquired


1,858


1,649




 
The directors consider that the book values of the new assets acquired approximate to the fair value of the new assets and that there are no separately identifiable intangible assets.
 
Goodwill on consolidation is calculated as follows:
 




 


€000


€000




 


 


 




Cost of investment


1,429


1,269




Fair value of net assets acquired


1,858


1,649




 


 


 




Negative goodwill arising on consolidation


429


380




 
This negative goodwill is credited to the profit and loss account.
 
The cash flow effect of the step acquisition is as follows:
 




 


€000


                  £000




 


 


 




Cash


335


297




Further cash investment


370


329




Loans


(2,186)


 (1,940)




 


 


 




Net debt


(1,481)


(1,314)




Cost of purchase


(1,080)


(959)




Further cash investment


(370)


(329)




 


 


 




Total investment


(1,450)


(1,288)
 




Net cash effect


(2,931)


(2,602)




 
The amounts of revenue and profit before tax included in the consolidated statement of comprehensive income in respect of KMR's trading since the acquisition date are shown in note 5.
 




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END
 
 
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