REG - Leeds Group PLC - Final Results & Notice of AGM
08/11/2022 10:15
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RNS Number : 6841F Leeds Group PLC 08 November 2022
Date: 8 November 2022
Leeds Group plc
("Leeds Group" or "the Group")
Final Results for the year ended 31 May 2022
Notice of AGM
Leeds Group announces the final results of the Group for the year to 31 May
2022 and that its Annual General Meeting will be held at 12 noon on 30
November 2022 at the Radisson Blu Hotel, Chicago Avenue, Manchester Airport,
M30 3RA.
Strategic Report
Chairman's Statement
It has been another challenging year for the Group. In our interim report, we
announced that the Covid-19 pandemic had continued to impact the Group's
trading activities in the first half of the year. Despite the easing of the
Covid-19 restrictions in the second half of the year, the conflict in Ukraine
has had a major impact in both the global marketplace and in particular the
local German economy further affecting consumer confidence. The wholesale
trading in Hemmers and the retail chain business KMR were, therefore,
considerably affected in the last three months of the financial year.
With the conflict in Ukraine continuing, the uncertainty in the global markets
remains and the impact on the German economy has continued. We have reviewed
all options available to both Hemmers and KMR to meet these ongoing
challenges. Following an independent review, it was determined that the KMR
business was not viable. On 7 October 2022, the German Courts accepted
Hemmers' management decision to place its subsidiary KMR into an insolvency
process.
We are now completely focused on ensuring the core Hemmers business returns to
profitability. A detailed restructuring plan has been put in place which has
the support of the Group's lenders. Sales demand has improved, and the focus
is to increase sales within the wholesale markets. The Directors believe
that the outlook for the Company is positive, and the measures taken will
ensure Hemmers can operate efficiently and look to increase their market share
both in Germany and other European markets.
On behalf of shareholders, I want to thank all the management and staff within
the Group who have all continued with their best efforts to work through
difficult and challenging times.
Finance and Operating Review
Group result
Group revenue for the continuing operations in the year was £29,590,000
(2021: £33,013,000). The effects of the Covid-19 pandemic have affected
both Hemmers and KMR again this year although to a lesser effect than 2021.
The German government did not provide the same levels of financial support as
they did in 2021 as there were only local restrictions imposed rather than
country-wide lockdowns. Thus, the Group received government assistance of
£119,000 in the year as compared to £966,000 received in 2021. The Group has
also been affected by the conflict in Ukraine during the year. The reduced
sales figures for the Group have not generated enough contribution to cover
the fixed overheads and both Hemmers and KMR have, therefore, made losses
after interest for this financial year.
After the year end, management decided to place KMR into an insolvency
process. As a result of the insolvency, KMR will only generate future losses
and therefore, an impairment charge of £1,662,000 has been recognised in this
year's accounts with the assets relating to the KMR retail shops being written
down to a £nil net book value. The Group's operating loss was £2,990,000
(2021: loss £280,000) and the Group's loss before tax was £3,245,000 (2021:
loss £508,000).
The tax charge in the year was £4,000 (2021: credit £42,000). The tax
charge relates to the planned liquidation of Leeds Properties GmbH, which has
been dormant for the last year. In Germany, tax losses can only be carried
back against profits made in the previous two years so there is no relief for
the current year losses in both Hemmers and KMR.
The total loss per share was 11.9p (2021: loss per share 1.7p).
Hemmers
Hemmers is a global business engaged in designing, importing, warehousing and
wholesaling of fabrics from Germany. The market in Germany has been affected
by the ongoing Covid-19 pandemic and the current conflict in Ukraine. Consumer
confidence is low which has again reduced demand. External sales for the year
were therefore lower than last year at £23,998,000 (2021: £27,669,000).
The gross contribution percentage increased to 34% (2021: 30%) as prices have
been increased to mitigate the fall in sales volumes. However, with the
decrease in sales levels, the gross profit has fallen to £4,440,000 (2021:
£4,580,000). Fixed overheads have increased in the year due to increased
salary costs and computer depreciation with reduced government financial
assistance of £119,000 (2021: £274,000) thus Hemmers produced a loss
before interest of £415,000 (2021: profit £330,000).
Hemmers is completely focused on growing its business domestically and
internationally in its wholesale markets with a more customer focused sales
strategy. Our aim is for Hemmers to continue to compete in the global
marketplace gaining further market share and, therefore, returning to
profitability after interest.
Hemmers bank debt, net of cash, increased in the year to £5,643,000 (2021:
£3,558,000) with the reduced level of sales resulting in higher stock
levels. The bank debt is secured on the assets of Hemmers.
KMR
KMR is a retail trading business in Germany. KMR was badly affected by the
Covid-19 pandemic in 2021 resulting in the closure of all its retail shops
during countrywide lockdowns. In 2022, various local restrictions were
imposed by the German government, but to a lesser extent than 2021.
Therefore, the impact of the Covid-19 pandemic on KMR was lower than 2021.
Sales were slightly higher than last year at £5,592,000 (2021: £5,344,000).
The gross contribution percentage decreased slightly to 53.5% (2021: 56%).
Last year KMR received financial support from the German government amounting
to £692,000 as a result of the lockdowns, however, this year KMR has received
no financial support. As a result of the insolvency process after the year
end, KMR will only generate future losses and therefore, an impairment
provision of £1,662,000 has been made in relation to the assets of KMR. This
has resulted in a loss before interest for the year of £2,277,000 (2021: loss
£211,000) and a loss after interest of £2,370,000 (2021: loss £311,000).
KMR bank debt, net of cash, increased in the year to £1,017,000 (2021:
£749,000).
Fixed Assets
The net book amount of tangible fixed assets is £7,335,000 (2021:
£7,750,000). Capital additions in the year amounted to £447,000 (2021:
£562,000).
The net book value of right-to-use assets is £170,000 (2021: £2,453,000).
These relate to car leases, of which there were £45,000 additions during the
year (2021: £184,000).
As a result of the decision by management to place KMR into insolvency post
year end (see note 6), KMR will only generate future losses and therefore, an
impairment charge of £1,662,000 (2021: £333,000) has been recognised in this
financial year relating to right-of-use assets £1,620,000 and leasehold
improvements £42,000. Thus, all the KMR assets relating to leasehold shops
have been written down to £nil in the year.
Working Capital and Cash Flow
Net debt increased from £3,952,000 to £6,381,000 in the year. Net cash used
in the year at average exchange rates was £344,000 (2021: used £610,000).
Working capital, which comprises inventories, trade and other receivables and
trade and other payables, increased in the year by £1,139,000 (2021:
increased by £452,000) mainly due to increased stock levels as a result of
the reduced demand in the last three months of the financial year. Loan
repayments of £708,000 (2021: £771,000) have been made this year. New loans
taken out in the year £2,835,000 (2021: £787,000) relating to short term
debt. This has arisen due to the reduced trading and increased stock levels.
Lease liability repayments (including interest) of £1,059,000 (2021:
£1,059,000) have been made in the year.
The Group continues to carefully monitor its working capital requirements to
ensure it operates within its current banking facilities.
Net Asset Value
Net assets decreased in the year by £3,384,000 as follows:
Net assets Per share
£000 pence
At 31 May 2021 14,561 53.3
Loss after tax (3,249) (11.9)
Translation differences (135) (0.5)
At 31 May 2022 11,177 40.9
Debt Profile
The funding policy of the Group continues to match its funding requirement in
trading subsidiaries in a cost-effective fashion with an appropriate
combination of short and longer-term debt. Property investments have been
financed by long term loans at fixed interest rates between 1.05% and 1.65%.
Working capital finance, when required, is via short term loans of three
months currently attracting interest at rates of between 1.5% and 3%. 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
The Board has identified the main categories of business risk in relation to
the Group's strategic aims and objectives, and has considered reasonable steps
to prevent, mitigate and manage these risks. The principal risks identified
are as follows:
Funding risk
The Group has a combination of short-term borrowing facilities and longer-term
loan agreements secured on Group assets. The Group remains dependent upon the
support of these funders and there is a risk that failure in a company to meet
banking covenants could have implications for the Group. Borrowing facilities
are monitored regularly and the facilities agreed are more than needed for the
Group's requirements. The Group has close working relationships with their
current funders but believe alternative banking funders could be secured if
required.
Hemmers has a maximum working capital facility of €11m, restricted to the
borrowing base which is calculated as 70% of eligible inventory and 80% of
eligible debtors. In the financial year 2022, this resulted in average
availability of €7.8m (2021: €7.7m) with a range of €6.5m to €8.8m
(2021: €6.9m to €8.3m) and minimum headroom of €3.2m (2021: €4.5m) in
the year. In the forecast period to 31 May 2024, the estimated availability
range is €7.9m to €9.4m and the minimum headroom €2.4m. The only
covenant on this facility is an equity ratio which must exceed 30% of gross
assets at the financial year end. At 31 May 2022, the ratio was 51% (2021:
60%). The facility is uncommitted, but the bank is obliged to give
reasonable notice of any change. Hemmers also has another working capital
facility of €1m secured on working capital which was fully drawn at the year
end. The facilities are uncommitted, but the bank is obliged to give
reasonable notice of any change.
KMR has a fixed working capital loan facility of €1m which was fully drawn
at the year end and a €0.5m bank overdraft facility secured on working
capital, of which €0.4m was utilised as at 31 May 2022. The covenants on
these facilities are (i) an equity ratio which must exceed 35% of gross assets
at the financial year end and (ii) the ratio of working capital/bank facility
should be a minimum 1.5x. At 31 May 2022, these ratios were 30.2% (2021:
55.5%) and 1.36 (2021: 1.54). The overdraft facility has now been withdrawn
and the overdraft repaid.
Considering the trading results in the first half of the current financial
year and the decision to put KMR into insolvency, the Directors consider there
will be sufficient headroom available on the Hemmers working capital facility
and, therefore, the Directors are of the opinion that it is appropriate to
apply the going concern basis of preparation to the financial statements.
Market risk
There is always the ongoing threat of reduced market demand. This has been
seen this year and the Group continues to strive to combat the reduced demand
by looking at other markets both domestically and internationally and looking
at expanding its product ranges. 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.
Foreign exchange risk
Most fabric purchased by Hemmers is paid for in US dollars, while the Euro is
the principal currency in which Hemmers sells its product. The Euro/dollar
rate is of greater significance to Leeds Group than the strength of Sterling.
The Hemmers' management continue to manage this transactional currency risk by
a combination of forward exchange contracts with reputable banks and sales
price increases where necessary.
Ukraine conflict
The Russian invasion of Ukraine has had a huge impact on global economies with
prices increasing especially utility prices. This has in turn had an effect
on consumer confidence which has resulted in reduced demand in the KMR retail
shops and therefore, the decision was taken to place KMR into insolvency post
year end.
Audit opinion
In auditing the financial statements for the year ended 31 May 2022, the Group
Auditors have concluded that the Directors' use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
However, the Independent Auditor's Report draws attention to note 2 in the
financial statements (note 1 below) which states that the Group and Parent
Company incurred substantial losses during the year and that the Group and
Parent Company's operational existence is dependent on the continued support
from the Group's bank facilities and the eventual return to profitability. The
impact of this gives rise to a material uncertainty around the going concern
of the Group. The auditor's opinion is unqualified and not modified in respect
of this matter. An extract from the Independent Auditor's Report is set out in
note 7 below.
The strategic report was approved by the Board of Directors on 7 November and
signed on its behalf by:
Jan G Holmstrom
Non-Executive Chairman
Consolidated Statement of Comprehensive Income
for the year ended 31 May 2022
Year ended Year ended
31 May 2022 31 May 2021
£000 £000
Continuing operations
Revenue 29,590 33,013
Cost of sales (24,121) (26,700)
Gross profit 5,469 6,313
Distribution costs (2,483) (2,647)
Impairment of assets (1,662) (333)
Administrative costs
(4,461) (4,579)
Total administrative costs (6,123) (4,912)
Other income 147 966
Loss from operations (2,990) (280)
Finance expense (255) (228)
Loss before tax (3,245) (508)
Tax (charge)/credit (4) 42
Loss for the year attributable to the equity holders of the Parent Company
(3,249) (466)
Other comprehensive loss
Translation differences on foreign operations (135) (556)
Total comprehensive loss for the year attributable to the equity holders of
the Parent Company
(3,384) (1,022)
There is no tax effect relating to other comprehensive income for the year.
Amounts included in other comprehensive income may be reclassified
subsequently as profit or loss.
Loss per share attributable to the equity holders of the Company
Year ended Year ended
31 May 2022 31 May 2021
Basic and diluted total loss
per share (pence) 11.9p 1.7p
Consolidated Statement of Financial Position
at 31 May 2022
31 May 2022 31 May 2021
£000 £000
Assets
Non-current assets
Property, plant and equipment 7,335 7,750
Right-of-use assets 170 2,453
Intangible assets 52 58
Total non-current assets 7,557 10,261
Current assets
Inventories 11,994 10,287
Trade and other receivables 2,864 2,867
Tax recoverable 13 136
Cash on demand and on short term deposit 471 670
Total current assets 15,342 13,960
Total assets 22,899 24,221
Liabilities
Non-current liabilities
Loans and borrowings (836) (1,498)
Lease liabilities (1,165) (1,856)
Total non-current liabilities (2,001) (3,354)
Current liabilities
Trade and other payables (3,065) (2,265)
Loans and borrowings (5,671) (2,926)
Lease liabilities (885) (1,015)
Provisions (100) (100)
Total current liabilities (9,721) (6,306)
Total liabilities (11,722) (9,660)
TOTAL NET ASSETS 11,177 14,561
Capital and reserves attributable to
equity holders of the Company
Share capital 3,279 3,279
Capital redemption reserve 1,113 1,113
Foreign exchange reserve 2,050 2,185
Retained earnings 4,735 7,984
TOTAL EQUITY 11,177 14,561
The financial statements were approved and authorised for issue by the Board
of Directors on 7 November 2022 and were signed on behalf of the Board by:-
Jan G Holmstrom
Non-Executive Chairman
Consolidated Cash Flow Statement
for the year ended 31 May 2022
Year ended Year ended
31 May 2022 31 May 2021
£000 £000
Cash flows from operating activities
Loss for the year (3,249) (466)
Adjustments for:
Government assistance credit (119) (966)
Depreciation of property, plant and equipment 735 624
Impairment of property, plant and equipment 42 -
Depreciation of right-of-use assets 827 1,062
Impairment of right-of-use assets 1,620 333
Amortisation of intangible assets 5 6
Finance expense - interest on bank loans 179 154
Finance expense - interest lease liabilities 76 74
Gain on sale of property, plant and equipment - (14)
Tax charge/(credit) 4 (42)
Cash from operating activities before changes in working capital and
provisions
120 765
Increase in inventories (1,818) (571)
(Increase)/decrease in trade and other receivables (43) 718
Increase/(decrease) in trade and other payables 722 (599)
Cash (used in)/generated from operating activities (1,019) 313
Tax received 114 110
Net cash flows (used in)/generated from operating activities
(905) 423
Investing activities
Purchase of property, plant and equipment (447) (562)
Proceeds from the sale of fixed assets - 21
Net cash used in investing activities (447) (541)
Financing activities
Bank borrowings drawn 2,835 787
Bank borrowings repaid (708) (771)
Repayment of principal on lease liabilities (983) (985)
Repayment of interest on lease liabilities (76) (74)
Bank interest paid (179) (154)
Government assistance received 119 705
Net cash generated from/(used in) financing activities 1,008 (492)
Net decrease in cash and cash equivalents (344) (610)
Translation loss on cash and cash equivalents (2) (22)
Cash and cash equivalents at the beginning of the year 472 1,104
Cash and cash equivalents at the end of the year 126 472
Cash on demand or on short term deposit 471 670
Bank overdrafts (345) (198)
Cash and cash equivalents at the end of the year 126 472
Consolidated Statement of Changes in Equity
for the year ended 31 May 2022
Share capital Capital redemption reserve Treasury share reserve Foreign exchange reserve Retained earnings
£000 £000 £000 Total equity
£000 £000 £000
At 31 May 2020 3,792 600 (807) 2,741 9,257 15,583
Cancellation of treasury shares (513) 513 807 - (807) -
Loss for the year - - - - (466) (466)
Other comprehensive loss - - - (556) - (556)
Total comprehensive loss - - - (556) (466) (1,022)
At 31 May 2021 3,279 1,113 - 2,185 7,984 14,561
Loss for the year - - - - (3,249) (3,249)
Other comprehensive loss - - - (135) - (135)
Total comprehensive loss - - - (135) (3,249) (3,384)
At 31 May 2022 3,279 1,113 - 2,050 4,735 11,177
The following describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Share capital The nominal value of issued ordinary shares in the Company.
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. Basis of preparation
The Group financial statements have been properly prepared in accordance with
UK adopted International Financial Reporting Standards (UK adopted IFRS) and
in accordance with the Companies Act 2006.
Going Concern
When considering its opinion about the application of the going concern basis
of preparation of the financial statements the Directors have given due
consideration to:
· The performance of the Group in the last financial year and the
robustness of forecasts for the next 24 months, which return the Group to
profit.
· The impact of ongoing Ukraine conflict on the business, its suppliers
and its customers.
· The financing facilities available to the Group and the circumstances
in which these could be limited or withdrawn.
Financial performance and forecasts
Forecasts have been prepared for the 24-month period to May 2024 which
indicate a return to modest profit over that period due to cost reductions.
These forecasts have been prepared in the knowledge of current Ukraine
conflict conditions. At the end of the first half of the current financial
year sales and profit were in line with forecast. The Company has sensitised
these forecasts for a reduction in revenues for Hemmers and the banking
facilities remain adequate. The Directors are of the opinion that this is a
reasonable worst case, and the currently available facilities would be
sufficient in this scenario.
Ukraine conflict
The Russian invasion of Ukraine has had a huge impact on global economies with
prices increasing especially utility prices. This has in turn had an effect
on consumer confidence which has resulted in reduced demand in the KMR retail
shops and therefore, the decision was taken to place KMR into insolvency post
year end.
Financing facilities
The operating businesses of the Group are Hemmers and KMR, both located in
Germany. The Parent Company, which has no borrowing facilities, is located
in the UK.
Hemmers has four sources of funding:
· Term loans which have funded property purchases. These are repayable
in instalments over the term as detailed in note 5. They are secured over the
associated properties and that security could be called in the event that the
business defaulted on repayment.
· A maximum working capital facility of €11m, restricted to the
borrowing base which is calculated as 70% of eligible inventory and 80% of
eligible debtors. In the financial year 2022, this resulted in average
availability of €7.8m (2021: €7.7m) with a range of €6.5m to €8.8m
(2021: €6.9m to €8.3m) and minimum headroom of €3.2m (2021: €4.5m) in
the year. In the forecast period to 31 May 2024, the estimated availability
range is €7.9m to €9.4m and the minimum headroom €2.4m. The only
covenant on this facility is an equity ratio which must exceed 30% of gross
assets at the financial year end. At 31 May 2022, the ratio was 51% (2021:
60%). The facility is uncommitted, but the bank is obliged to give
reasonable notice of any change.
· A further working capital facility of €1m secured on working
capital which was fully drawn at the year end. The facilities are uncommitted,
but the bank is obliged to give reasonable notice of any change.
· A €3m Parent Company loan which is currently subordinated to the
working capital facility.
KMR has a fixed working capital loan facility of €1m which was fully drawn
at the year end and a €0.5m bank overdraft facility secured on working
capital, of which €0.4m was utilised as at 31 May 2022. The covenants on
these facilities are (i) an equity ratio which must exceed 35% of gross assets
at the financial year end and (ii) the ratio of working capital/bank facility
should be a minimum 1.5x. At 31 May 2022, these ratios were 30.2% (2021:
55.5%) and 1.36 (2021: 1.54). The overdraft facility has now been withdrawn
and the overdraft repaid.
Considering the trading results in the first half of the financial year to 31
May 2023 and the decision to put KMR into insolvency, the Directors consider
there will be sufficient headroom available in the Hemmers working capital
facility and, therefore, the Directors are of the opinion that it is
appropriate to apply the going concern basis of preparation to the financial
statements.
However, the Directors acknowledge that the volatile global situation could
have an impact on the future trading result of Hemmers and in turn could
affect the ability of the Group to meet its forecasts. This therefore gives
rise to a material uncertainty around the going concern of the Group.
2. Dividends
The Directors do not recommend the payment of a dividend in 2022 (2021:
£nil).
3. Loss per share
Year ended Year ended
31 May 2022 31 May 2021
Numerator
Total loss for the year £3,249,000 £466,000
Denominator
Weighted average number of shares 27,320,843 27,320,843
Basic and diluted total loss per share 11.9p 1.7p
Since there are no outstanding share options, there is no difference between
basic and diluted earnings per share.
4. Segmental information
Year ended Hemmers KMR Inter segmental Parent Company Total
31 May 2022 £000 £000 Group
Continuing operations £000 £000 £000
External revenue 23,998 5,592 - - 29,590
Inter-segmental revenue 1,069 - (1,069) - -
Cost of sales (20,627) (4,551) 1,057 - (24,121)
Gross profit/(loss) 4,440 1,041 (12) - 5,469
Distribution costs (1,401) (1,082) - - (2,483)
Admin expenses (3,763) (2,268) 194 (286) (6,123)
Other income 309 32 (194) - 147
Operating loss (415) (2,277) (12) (286) (2,990)
Finance expense (162) (93) - - (255)
Internal interest (204) - - 204 -
Loss before tax (781) (2,370) (12) (82) (3,245)
At 31 May 2022 Hemmers KMR Adj Parent Company Total
Continuing operations £000 Group
£000 £000 £000 £000
Total assets 17,392 2,819 (123) 2,811 22,899
Total liabilities (8,091) (3,540) - (91) (11,722)
Total net assets 9,301 (721) (123) 2,720 11,177
Year ended Hemmers KMR Inter segmental Parent Company Total
31 May 2021 £000 £000 Group
Continuing operations £000 £000 £000
External revenue 27,669 5,344 - - 33,013
Inter-segmental revenue 1,071 1 (1,072) - -
Cost of sales (24,160) (3,602) 1,062 - (26,700)
Gross profit/(loss) 4,580 1,743 (10) - 6,313
Distribution costs (1,499) (1,148) - - (2,647)
Admin expenses (3,212) (1,498) 187 (389) (4,912)
Other income 461 692 (187) - 966
Operating profit/(loss) 330 (211) (10) (389) (280)
Finance expense (128) (100) - - (228)
Internal interest (213) - - 213 -
Loss before tax (11) (311) (10) (176) (508)
At 31 May 2021 Hemmers KMR Adj Parent Company Total
Continuing operations £000 Group
£000 £000 £000 £000
Total assets 15,803 5,688 (174) 2,904 24,221
Total liabilities (5,589) (3,969) - (102) (9,660)
Total net assets 10,214 1,719 (174) 2,802 14,561
5. Loans and borrowings
The book value of loans and borrowings are as follows:
31 May 2022 31 May 2021
£000 £000
Current
Secured bank loans 5,671 2,926
Non - current
Secured bank loans 836 1,498
Total loans and borrowings 6,507 4,424
Current loans and borrowings
At 31 May 2022 current loans and borrowings of £5,671,000 (2021: £2,926,000)
comprise short term loans of £5,373,000 (2021: £2,562,000) and instalments
due on long term loans detailed below of £298,000 (2021: £364,000). The
interest rate on the short-term loans range from 1.5% to 3% (2021: 1.25% to
3%) and these loans are secured on working capital of Hemmers and KMR. The
short-term loans are drawn down by Hemmers against short-term borrowing
facilities of up to a maximum of £10.2m (€12m) and by KMR against
short-term borrowing facilities of £0.9m (€1m). KMR also has an overdraft
facility of £0.4m (€0.5m) which has now been repaid. At 31 May 2022, the
total borrowing facility available totalled £9.2m (€10.9m) of which £5.7m
(€6.7m) has been utilised including any overdrafts, therefore the headroom
within the facility was £3.5m (€4.1m). Neither the Parent Company nor any
of its subsidiaries other than Hemmers and KMR have borrowing facilities. The
bank borrowing facilities are reviewed annually every May and remain in place
for Hemmers for the forthcoming year.
Non-current loans and borrowings
A non-current loan was drawn down in 2007 from Kreissparkasse to finance the
freehold extension of the warehouse in Nordhorn. In 2016 and 2017 further
loans were drawn down to finance developments at Nordhorn.
The Group's loans and borrowings are within the accounts of Hemmers. They are
denominated in Euros, and their principal terms are as follows:
Fixed Repayment Final repayment date 31 May 2022 31 May 2021
interest profile £000 £000
rate
Loan 1 4.07% Equal monthly instalments September 2027 - 353
Loan 2 1.65% Equal quarterly instalments September 2025 590 835
Loan 3 1.05% Equal quarterly instalments March 2026 246 310
Non-current loans 836 1,498
Loan 1 was repaid earlier as it attracted a high interest rate.
6. Post Balance Sheet Events
Sale of property
On 4 October 2022, the freehold property held by KMR was sold for €600,000
(£510,000). The net book value as at 31 May was €440,000 (£374,000).
KMR
Since the year end, the conflict in Ukraine remains and the uncertainty in
global markets continues. The impact on the German economy has deepened and
this has affected consumer confidence in Germany. KMR has seen reduced sales
demand and has continued to make losses despite cost cutting measures.
Following an independent review undertaken in September 2022, management have
decided that the KMR business is unsustainable. On 6 October 2022, KMR was
placed into an insolvency process which was accepted by the German courts on 7
October 2022.
As the KMR business will not generate any future profit, the right-to-use
assets and any leasehold improvements have been impaired in these financial
statements with a provision of £1,662,000. Thus, all assets relating to the
leased retail shops have been written down to a £nil valuation. The
right-to-use lease liability of £1,879,000 remains in these accounts but the
full liability may not be payable.
7. Other information
The financial information set out above does
not constitute the Company's statutory accounts for 2022 or 2021.
Statutory accounts for the year ended 31 May 2022 have
been reported on by MHA MacIntyre Hudson, Statutory Auditor and for the year
ended 31 May 2021 have been reported on by BDO LLP, Statutory Auditor. The
Independent Auditor's Report on the Annual Report and Financial Statements for
both 2022 and 2021 was unqualified.
In auditing the financial statements for the year ended 31 May 2022, the Group
Auditors have concluded that the Directors' use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
However, the Independent Auditor's Report draws attention to note 2 in the
Group financial statements (note 1 above) which states that the Group and
Parent Company incurred substantial losses during the year and that the Group
and Parent Company's operational existence is dependent on the continued
support from the Group's bank facilities and the eventual return to
profitability. The impact of this gives rise to a material uncertainty around
the going concern of the Group. The auditor's opinion is unqualified and not
modified in respect of this matter. An extract from the Independent Auditor's
Report is set out below:
Material uncertainty related to going concern
We draw your attention to note 2 in the financial statements which states that
the Group and Parent Company incurred substantial losses during the year and
that the Group and Parent Company's operational existence is dependent on the
continued support from the Group's bank facilities and the eventual return to
profitability.
The impact of this together with other matters set out in the note, indicate
that a material uncertainty exists that may cast significant doubt on the
Group's ability to continue as a going concern. Our opinion is not modified in
respect of this matter. In auditing the financial statements, we have
concluded that the Directors' use of the going concern basis of accounting in
the preparation of the financial statements is appropriate. Our evaluation of
the Directors' assessment of the Group and Parent Company's ability to
continue to adopt the going concern basis of accounting included:
· The consideration of inherent risks to the Group's
operations and specifically its business model.
· The evaluation of how those risks might impact on the
Group's available financial resources.
· Review of the mathematical accuracy of the cashflow forecast
model prepared by management and corroboration of key data inputs to
supporting documentation for consistency of assumptions used with our
knowledge obtained during the audit.
· Challenging management's assumptions in respect of the timing
and quantum of cash receipts and payments included in the cash flow model to
ensure these are reasonable.
· Where additional resources may be required the reasonableness
and practicality of the assumptions made by the Directors when assessing the
probability and likelihood of those resources becoming available.
· Holding discussions with management regarding future financing
plans, corroborating these where necessary and assessing the impact on the
cash flow forecast.
· Evaluating the accuracy of historical forecasts against actual
results to ascertain the accuracy of management's forecasts.
· Review of correspondence and documentation from the
Group's finance provider to ascertain their intent to maintain the current
facilities.
· Review of the independent report prepared by the Group's
insolvency practitioner to determine the future implications on the Group's
operations.
Statutory accounts for the year ended 31 May 2021 have been
filed with the Registrar of Companies. The statutory accounts for the year
ended 31 May 2022 will be delivered to the Registrar in due course. The Annual
Report and Accounts giving notice of the 2022 Annual General Meeting, have
been today published on the Group's website at www.leedsgroup.plc.uk
(http://www.leedsgroup.plc.uk) . and have been sent to those shareholders who
have elected to receive a hard copy of the Annual Report and Accounts by the
post.
The Annual General Meeting will be held at 12 noon on
30 November 2022 at the Radisson Blu Hotel, Chicago Avenue, Manchester
Airport, M30 3RA.
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and has been arranged for release by Jan G Holmstrom,
Non-Executive Chairman. The Directors of the Company are responsible for the
release of this announcement.
Enquiries:
Leeds Group plc
Cairn Financial Advisers LLP (nominated adviser)
Dawn Henderson - 01937 547877
Liam Murray/Sandy Jamieson - 020 7213 0880
Note:
Certain statements made in this announcement are forward-looking statements.
These forward-looking statements are not historical facts but rather are based
on the Company's current expectations, estimates, and projections about its
industry; its beliefs; and assumptions. Words such as 'anticipates,'
'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar
expressions are intended to identify forward-looking statements. These
statements are not a guarantee of future performance and are subject to known
and unknown risks, uncertainties, and other factors, some of which are beyond
the Company's control, are difficult to predict, and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements. The Company cautions security holders and
prospective security holders not to place undue reliance on these
forward-looking statements, which reflect the view of the Company only as of
the date of this announcement. The forward-looking statements made in this
announcement relate only to events as of the date on which the statements are
made. The Company will not undertake any obligation to release publicly any
revisions or updates to these forward-looking statements to reflect events,
circumstances, or unanticipated events occurring after the date of this
announcement except as required by law or by any appropriate regulatory
authority.
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