REG - Leeds Group PLC - Final Results <Origin Href="QuoteRef">LDSG.L</Origin>

LeedsAnnouncement

29/10/2014 13:24

RNS Number : 2517P
Leeds Group PLC
18 August 2014
18 August 2014
Leeds Group plc
("the Group")
Final Results
Financial Highlights
q Profit before tax increased to 1,611,000 (2013: 1,440,000 before an impairment charge of 745,000 against available-for-sale investments).
q Sales volumes increased to 14.5 million metres (2013: 13.2 million metres).
q Hemmers Europe sales increased to 31,378,000 (2013: 28,209,000) and pre-tax profit increased to 1,478,000 (2013: 1,056,000).
q ChinohTex external sales were slightly down at 2,832,000 (2013: 2,931,000) and pre-tax profit reduced to 129,000 (2013: 261,000).
q Opening net bank debt of 390,000 was eliminated, and the Group finished the year with net cash of 915,000.
q Net asset value per share (excluding treasury shares) increased to 50.7 pence (2013: 49.1 pence).
q Earnings per share were 3.9 pence (2013: 1.0 p).
q No dividend proposed while Board continues search for suitable investment opportunities.
Enquiries:
Leeds Group plc
Cairn Financial Advisers LLP
Kathryn Davenport, Chairman Tel: 01132859020
Tony Rawlinson Tel: 020 7148 7900
Malcolm Wilson, Company Secretary Tel: 07801224618

Chairman's Statement
I am pleased to present the results of the year ended 31 May 2014.
Results
In the year ended 31 May 2014 the Group made a profit after tax of 1,079,000 (2013: 283,000). Comparable pre-tax profit increased by 11.9% to 1,611,000 (2013: 1,440,000, before an impairment charge of 745,000 against available-for-sale investments.)
Net asset value per share at 31 May 2014 was 50.7p (2013: 49.1p), and earnings per share for the year were 3.9p (2013:1.0p).
Net debt of 390,000 at 31 May 2013 was transformed in the year to net cash of 915,000.
Hemmers-Itex Textil Import Export GmbH ("Hemmers")
Total fabric sales in the year by Hemmers Europe increased by 9% to 12.8 million linear metres (2013: 11.7 million) and revenue was 31,378,000 (2013: 28,209,000). This volume growth was responsible for a significant increase in the rate and amount of gross profit. Overhead expenditure growth was below the rate of sales growth, and profit before tax grew by 40% to 1,478,000 (2013: 1,056,000). This excellent trading performance, coupled with continuing focus on working capital control, enabled bank debt in Hemmers to be reduced in the year from 1,825,000 to 446,000.
ChinohTex, the Hemmers subsidiary based in Shanghai, produced satisfactory results in the first half of the year, achieving significant volume growth thanks to sales of 531,000 (2013: 10,000) to a single customer in Mexico. Although these sales were at a low margin, they allowed the subsidiary to match the profit performance of the previous year. However, sales fell away sharply after the Chinese New Year in February, and margins were under constant pressure. For the year as a whole, sales volumes were 1.7 million linear metres (2013: 1.5 million), sales revenue was 2,832,000 (2013: 2,931,000) and pre-tax profit was 129,000 (2013: 261,000). ChinohTex continues to provide valuable assistance to its European parent in terms of purchasing, inspection and shipping of material.
Dividend
It remains the intention of the Board to seek further opportunities to maximise the long-term value of the Group to the benefit of all shareholders by identifying appropriate investments in businesses where they have relevant expertise and which may not necessarily be operating in the textile industry. In the light of such policy, the Directors do not propose a dividend.
Employees
On behalf of shareholders, I thank the management and staff of Hemmers and ChinohTex for their continued hard work and commitment that has resulted such a highly satisfactory result.
Outlook
In the current year we have identified potential growth opportunities for Hemmers, and shall be increasing our focus on the European garment manufacturers and the market for accessories to be sold by our customers in retail outlets. We also intend in the year to provide customers of ChinohTex the opportunity to buy on-line.
Sales in the first two months of the current financial year have been in line with the expectations of the Board.
Board composition
I have decided not to seek re-appointment at the next Annual General Meeting of the Company. My board colleagues, with the help of the Company's Nominated Adviser, are actively seeking an individual to join the board as an independent Non-executive director and a further announcement will be made in due course when such an appointment is made.
Kathryn Davenport
Chairman
18 August 2014
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 2014, 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
  borrowing requirements
 profit before tax
Group result
 Group revenue in the year was 34,210,000 (2013: 31,140,000), an increase of 9.9%. Of this, 8.1% reflected sales growth achieved by the subsidiaries in terms of their local currencies, and 1.8% was attributable to the translation effect as the average rate used to translate those sales to sterling was lower than in 2013. Paradoxically, the value of sterling at 31 May 2014 was 5.1% greater than at last year-end, giving rise to the negative translation difference on opening net assets of 631,000 disclosed in other comprehensive income. Since 31 May 2014 sterling has continued to appreciate.
Group profit before tax was 1,611,000 (2013: 695,000). Profits last year were adversely affected by an impairment charge of 745,000 relating to the Group's investment in Dawson International Limited. The impairment charge of 745,000 was not tax-deductible and was equal to 2.7p per share.
The tax charge in the year was 532,000 of which 32,000 was deferred tax relating to temporary differences on goodwill. Earnings per share were 3.9p (2013: 1.0p).
Hemmers Europe
This German-based business is engaged in the import, warehousing and wholesaling of fabrics.
Sales volumes increased in the year by 9% to 12.8 million linear metres as a result of the success of measures mentioned last year in the Chairman's statement. The growth was achieved predominantly in the retail sector following the appointment of two new sales people to cover Germany and Holland, and intensive sales activity and support and service given to key customers. Pre-tax profit in the year increased by 40% to 1,478,000 (1,056,000) and the increased volume was the major cause of this impressive result.
In Euro terms, average sales and cost prices were virtually unchanged from the previous year. Greater contribution from higher volumes combined with no growth in absorbed overhead led to an increase in the rate of gross profit to 23.06% (2013: 21.66%).
As ever, our German management team maintained close control of overhead expenditure that, in Euro terms, increased by 6.3% as a result of the sales volume increases and modest cost inflation. Bank debt was reduced in the year to 446,000 (2013: 1,825,000) and has now fallen in the past three years by 3.6 million (2.9 million).
Hemmers China
Chinoh-Tex is a textile trading company based in Shanghai and has been trading for six years. It purchases fabric from Chinese suppliers and in 2014 sold to customers in 26 countries.
2014 was a year of mixed fortunes for Chinoh-Tex. In the first half, metres sold were 48% higher than in the corresponding period of 2013 thanks to successfully winning orders of over 400,000 metres in Mexico, albeit at low margins. This enabled Chinoh-Tex to match the profits earned in the first half of 2013, despite additional overhead incurred to support anticipated volume growth. But in the second half of the year sales volumes took several months to recover from the lows of the Chinese New Year and a small loss was incurred.
The effects of the low margin sales to Mexico and a high proportion of intercompany sales to Hemmers Europe saw gross margin fall to 19.1% (2013: 23.2%). Overhead costs were little changed from last year and profit before tax was 129,000 (2013: 261,000). Importantly, Chinoh-Tex continues to give valuable assistance to its European parent with the purchasing, inspection and shipping of material.
Strategic Report (continued)
Holding Companies' Costs
Costs of the holding companies in the year, net of interest receivable, amounted to 102,000(2013: 733,000) as follows:
Year ended
31 May 2014
000
Year ended
31 May 2013
000
Holding companies' costs net of interest receivable
61
20
Impairment of available-for-sale investment
-
745
Exchange loss/(gain)
41
(32)
Net holding companies costs
102
733
Fixed Assets
Capital additions in the year amounted to 221,000 (2013: 209,000). The net book amount of tangible fixed assets in the Consolidated Statement of Financial Position is 1,900,000 (2013: 2,004,000).
Working Capital
Working capital comprises inventories, trade and other receivables, and trade and other payables and increased marginally in the year by 140,000. This increase of 1.2% is significantly lower than the rate of increase in sales volumes and revenue. The directors anticipate that working capital will now rise to its annual peak over the next few months.
Net Asset Value
Net assets increased in the year by 448,000 as follows:
Net assets
000
Per share
pence
At 31 May 2013
13,580
49.1
Profit after tax
1,079
3.9
Translation differences
(631)
(2.3)
At 31 May 2014
14,028
50.7
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 1.5%.
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.
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. The Directors therefore consider the principal operating risks of operating in this market to be the financial risks identified in note 3 to the financial statements.
Kathryn Davenport
Chairman
18 August 2014
Consolidated Statement of Comprehensive Income
for the year ended 31 May 2014
Audited
Year ended
31 May 2014
000
Audited
Year ended
31 May 2013
000
Revenue
34,210
31,140
Cost of sales
(26,440)
(24,350)
Gross profit
7,770
6,790
Distribution costs
(2,303)
(2,043)
Administrative expenses
(3,785)
(3,224)
Impairment of available-for-sale investment
-
(745)
Profit from operations
1,682
778
Finance expense
(81)
(95)
Finance income
10
12
Profit before tax
1,611
695
Tax expense
(532)
(412)
Profit for the year attributable to the equity holders of the Parent Company
1,079
283
Other comprehensive income
Translation differences on foreign operations
(631)
698
Other comprehensive income for the year
(631)
698
Total comprehensive income for the year attributable to the equity holders of the Parent Company
448
981
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.
Earnings per share for profit attributable
to the equity holders of the Company
Note
Audited
Year ended
31 May 2014
000
Audited
Year ended
31 May 2013
000
Basic and diluted (pence)
3
3.9p
1.0p
Consolidated Statement of Financial Position
at 31 May 2014

Note
Audited
31 May 2014
000
Audited
31 May 2013
000
Assets
Non-current assets
Property, plant and equipment
1,900
2,004
Goodwill
908
955
Total non-current assets
2,808
2,959
Current assets
Inventories
7,050
6,551
Trade and other receivables
6,097
6,920
Cash and cash equivalents
1,772
2,334
Total current assets
14,919
15,805
Total assets
17,727
18,764
Liabilities
Non-current liabilities
Loans and borrowings
(813)
(1,829)
Deferred tax
(239)
(219)
Total non-current liabilities
(1,052)
(2,048)
Current liabilities
Trade and other payables
(2,062)
(1,979)
Loans and borrowings
(44)
(895)
Corporation tax liability
(541)
(262)
Total current liabilities
(2,647)
(3,136)
Total liabilities
(3,699)
(5,184)
TOTAL NET ASSETS
6
14,028
13,580
Capital and reserves attributable to
equity holders of the Company
Share capital
3,792
3,792
Capital redemption reserve
600
600
Treasury share reserve
(681)
(681)
Foreign exchange reserve
1,164
1,795
Retained earnings
9,153
8,074
TOTAL EQUITY
14,028
13,580
Consolidated Cash Flow Statement 
for the year ended 31 May 2014


Audited
Year ended
31 May 2013
000
Audited
Year ended
31 May 2013
000
Cash flows from operating activities

Profit for the year

1,079
283
Adjustments for:

Depreciation

223
215
Impairment of available-for-sale investment

-
745
Finance expense

81
95
Finance income

(10)
(12)
Profit on sale of property, plant and equipment

(1)
(1)
Income tax expense

532
412

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

1,904
1,737


(Increase)/decrease in inventories
(849)
268
Decrease in trade and other receivables
453
190
Increase/(decrease) in trade and other payables
256
(511)
Cash generated from operating activities
1,764
1,684
Income taxes paid
(199)
(334)
Net cash flows from operating activities
1,565
1,350
Investing activities
Purchase of property, plant and equipment
(221)
(209)
Sale of property, plant and equipment
3
2
Bank interest received
10
12
Net cash used in investing activities
(208)
(195)
Financing activities
Purchase of treasury shares
-
(23)
Repayment of bank borrowings
(1,786)
(724)
Bank interest paid
(81)
(95)
Net cash used in financing activities
(1,867)
(842)
Net (decrease)/increase in cash and cash equivalents
(510)
313
Translation (loss)/gain on cash and cash equivalents

(52)
54
Cash and cash equivalents at beginning of the year
2,334
1,967
Cash and cash equivalents at end of the year
1,772
2,334
Analysis of Net Debt
Cash and cash equivalents
1,772
2,334
Non-current loans and borrowings
(813)
(1,829)
Current loans and borrowings
(44)
(895)
Net cash/(net debt) at 31 May
915
(390)
Consolidated Statement of Changes in Equity
for the year ended 31 May 2013

Share capital
 
000
Capital redemption reserve
000
Treasury share reserve
000
Foreign exchange reserve
 000
Retained earnings
000
Total equity
000
At 31 May 2012
3,792
600
(658)
1,097
7,791
12,622
Profit for the year
-
-
-
-
283
283
Other comprehensive income*
-
-
-
698
-
698
Purchase of treasury shares
-
-
(23)
-
-
(23)
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
* 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
Leeds Group plc
Preliminary Results
Notes
1. This preliminary announcement has been prepared using the recognition and measurement principles of IFRSs as adopted by the European Union.
2. The Directors do not recommend the payment of a dividend.
3. Earnings per share
Year ended 31 May 2013
Year ended 31 May 2012
Numerator
Profit for the year from continuing operations, being the earnings used in basic and diluted earnings per share
1,079,000
283,000
Denominator
Weighted average number of shares used in basic and diluted earnings per share (excluding treasury shares)
27,674,342
27,775,274
Basic and diluted earnings per share
  3.9p
  1.0p
4. The financial information set out above does not constitute the company's statutory accounts for 2014 or 2013.
Statutory accounts for the years ended 31 May 2014 and 31 May 2013 have been reported on by the Independent Auditors.
The Independent Auditors' Report on the Annual Report and Financial Statements for both 2014 and 2013 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 2013 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 May 2014 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
Notes (continued)
6 Segmental information






IFRS adjustment

Year ended
31 May 2014
Hemmers Europe
 000
Hemmers China
000
Inter segmental
000
Total Hemmers
000
Holding companies
000
Goodwill amortisation
 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 amortisation
 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)
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
Notes (continued)
6 Segmental information (continued)






IFRS adjustment

Year ended
31 May 2013
Hemmers Europe
 000
Hemmers China
000
Inter segmental
000
Total Hemmers
000
Holding companies
000
Goodwill amortisation
 000
Group total
000








External revenue
28,209
2,931
-
31,140
-
-
31,140
Inter-segmental revenue
-
638
(638)
-
-
-
-
Cost of sales
(22,100)
(2,890)
640
(24,350)
-
-
(24,350)
Gross profit
6,109
679
2
6,790
-
-
6,790
Distribution costs
(1,859)
(184)
-
(2,043)
-
-
(2,043)
Admin expenses
(2,949)
(234)
-
(3,183)
(150)
109
(3,224)
Impairment of a-f-s
investment
-
-
-
-
(745)
-
(745)
Profit from operations
1,301
261
2
1,564
(895)
109
778
Finance expense
(95)
-
-
(95)
-
-
(95)
Finance income
-
-
-
-
12
-
12
Internal interest
(150)
-
-
(150)
150
-
-
Profit before tax
1,056
261
2
1,319
(733)
109
695






IFRS adjustment

At 31 May 2013
Hemmers Europe
 000
Hemmers China
000
Inter segmental
000
Total Hemmers
000
Holding companies
000
Goodwill amortisation
 000
Group total
000








Property, plant & equipment
1,994
10
-
2,004
-
-
2,004
Goodwill
182
-
-
182
-
773
955
Inventories
6,491
87
(27)
6,551
-
-
6,551
Trade receivables
5,113
323
-
5,436
-
-
5,436
Other receivables
1,006
460
-
1,466
18
-
1,484
Cash & equivalents
899
173
-
1,072
1,262
-
2,334
Total assets
15,685
1,053
(27)
16,711
1,280
773
18,764
Group loans & current accounts
(2,046)
(124)
-
(2,170)
2,170
-
-
Non-current liabilities
(1,829)
-
-
(1,829)
-
(219)
(2,048)
Trade payables
(881)
(306)
-
(1,187)
-
-
(1,187)
Other payables
(618)
(121)
-
(739)
(53)
-
(792)
Corporation tax
(251)
(11)
-
(262)
-
-
(262)
Loans & borrowings
(895)
-
-
(895)
-
-
(895)
Total liabilities
(6,520)
(562)
-
(7,082)
2,117
(219)
(5,184)
Net assets
9,165
491
(27)
9,629
3,397
554
13,580
Notes (continued)
6 Segmental information (continued) - Analysis of revenue by destination

Year ended 31 May 2014
Year ended 31 May 2013

Hemmers
Europe
000
Hemmers
China
000
Group
total
000
Hemmers
Europe
000
Hemmers
China
000
Group
total
000

Germany
19,228
328
19,556
16,788
459
17,247
France
1,592
234
1,826
1,283
133
1,416
Netherlands
1,686
-
1,686
1,735
-
1,735
Spain
857
369
1,226
923
321
1,244
Austria
899
52
951
730
91
821
Sweden
635
-
635
644
2
646
Switzerland
571
-
571
581
6
587
Serbia
567
-
567
482
-
482
Mexico
2
531
533
1
10
11
Belgium
507
-
507
425
-
425
Denmark
463
-
463
543
-
543
Bulgaria
90
235
325
25
235
260
Croatia
313
-
313
323
-
323
Greece
285
-
285
208
-
208
Portugal
280
-
280
273
-
273
USA
93
177
270
85
691
776
Finland
255
-
255
322
-
322
Australia
106
146
252
48
101
149
China
25
227
252
16
167
183
Czech Republic
196
-
196
195
-
195
Estonia
192
-
192
76
-
76
40 other countries
1,193
370
1,563
1,157
482
1,639

30,035
2,669
32,704
26,863
2,698
29,561
UK
1,343
163
1,506
1,346
233
1,579
Total revenue
31,378
2,832
34,210
28,209
2,931
31,140
Other information
Year ended 31 May 2014
Year ended 31 May 2013
Hemmers
Europe
000
Hemmers
China
000
Group
total
000
Hemmers
Europe
000
Hemmers
China
000
Group
total
000
Additions to property, plant & equipment
141
80
221
208
1
209
Depreciation
216
7
223
207
8
215

This information is provided by RNS
The company news service from the London Stock Exchange
  END
FR GGUWARUPCURA