Final Results & Notice of AGM

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.

L ease 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 £000	Per share 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 31 May 2022   £000	Year ended 31 May 2021   £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 Administrative costs	(1,662) (4,461)	(333) (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 31 May 2022	Year ended 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 £000		31 May 2021      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 31 May 2022 £000	Year ended 31 May 2021   £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 £000	Capital redemption reserve £000	Treasury share reserve £000	Foreign exchange reserve   £000	Retained earnings £000	Total equity    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 31 May 2022	Year ended 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 31 May 2022 Continuing operations	Hemmers   £000	KMR £000	Inter segmental £000	Parent Company £000	Total Group £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 Continuing operations	Hemmers  000	KMR £000	Adj £000	Parent Company £000	Total Group £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 31 May 2021 Continuing operations	Hemmers   £000	KMR £000	Inter segmental £000	Parent Company £000	Total Group £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 Continuing operations	Hemmers  000	KMR £000	Adj £000	Parent Company £000	Total Group £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 £000	31 May 2021 £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 interest rate	Repayment profile	Final repayment date	31 May 2022 £000		31 May 2021 £000
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. 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.

 

END

 

 

FR BVLFBLFLBFBF