Final Results
Leeds Group PLC
31 January 2007
Issued on behalf of Leeds Group plc
Date Wednesday, 31 January 2007
IMMEDIATE RELEASE
LEEDS GROUP plc
Preliminary Results for the year ended 30 September 2006
- Group profit before tax and exceptional items was £743,000
(2005: £800,000).
- After an exceptional loss of £838,000 on the sale of Leeds Leasing,
Group loss before tax was £95,000 (2005: profit £935,000).
- Hemmers-Itex generated sales of £16.3 million and profit before tax of
£712,000 - increases over 2005 of 16% and 24% respectively.
- Further reductions of £104,000 in unallocated Central Costs.
- Share buy-back programme continued, with additional purchases of
1,390,000 shares at a cost of £289,000.
- Earnings per share from Continuing Operations were 1.0 pence
(2005: 0.3 pence).
- No dividend proposed while Board continues search for suitable
investment opportunities.
'Hemmers-Itex has widened its customer base to include manufacturers of
ready-made items as well as fabric retailers. Sales grew by 16%, and this
additional volume contributed to pre-tax profit of £712,000 which was 24% higher
than in 2005'
'...the Board continues to work to identify suitable acquisitions that can
strengthen the Group while creating and enhancing shareholder value.'
Vin Murria, Chairman
FULL STATEMENTS ATTACHED
Enquiries:
Leeds Group plc Citigate Dewe Rogerson
Malcolm Wilson, Company Secretary Fiona Tooley
Tel: 0113 391 9000 or 07801 224618 Tel: 0121 455 8370 or 07785 703523
Ewen Wigley, Director
Tel: 07815 134466
Leeds Group plc
Preliminary Results
STATEMENT BY THE CHAIRMAN, VIN MURRIA
Results
The Group's trading performance in 2006 was satisfactory. Group profit before
tax and exceptional items was £743,000 (2005: £800,000) with improved
profitability in our continuing operations and further reductions in Central
Costs just failing to offset the reduction of £441,000 in profit from Leeds
Leasing following its sale on October 31 2005.
Hemmers-Itex has widened its customer base to include manufacturers of
ready-made items as well as fabric retailers. Sales grew by 16%, and this
additional volume contributed to pre-tax profit of £712,000 which was 24% higher
than in 2005.
After the exceptional loss of £838,000 on disposal of Leeds Leasing, Group loss
before tax was £95,000 (2005: profit £935,000).
Strategic Developments
Following shareholder approval at the Extraordinary General Meeting on 31
October 2005, the Group completed the sale of Leeds Leasing to Bibby Asset
Finance Limited for a consideration of £3,700,000 plus the repayment of Group
loans of £1,350,000. This transaction has substantially strengthened the Group's
Balance Sheet: net proceeds and debt sold with the business amounted to
£19,572,000, which had the effect of transforming the Group from a position of
indebtedness to one of having net cash resources.
We have applied £289,000 during the year to continued purchases of Group shares,
bringing to 1,840,000 the total shares held in treasury, equal to 5% of the
issued share capital. Subject to shareholder approval at the forthcoming AGM,
the Company intends to continue this programme whenever opportunities arise to
make purchases for the benefit of shareholders at a price below net asset value.
Dividend
In view of the post-tax loss of £447,000 in the year, the Directors do not
propose a dividend. Future dividend policy will be determined in the light of
profitability and, in the short-term, the cost of investment opportunities that
we are working to identify.
Directors and Employees
During the year, Carol Roberts and Malcolm Wilson resigned from the Board. The
disposal programme that had begun when I joined the Board in 2002 is now
complete, and the Group's activities have been redirected from manufacturing to
trading.
With increasing commitments elsewhere, I have judged it right to step down and
leave the Company at the conclusion of the forthcoming AGM. At that time, Ewen
Wigley will succeed me as Chairman and it is the intention of the Board to
appoint Peter Gyllenhammar, a major shareholder in the Group, as a Director.
On behalf of shareholders I should like to thank the management and staff of
Hemmers-Itex for their efforts during the year, in which the volume of fabric
sales grew by 16% to almost 11 million metres.
Outlook
The new financial year has begun with strong sales at Hemmers-Itex. The Group
Balance Sheet contains cash of nearly £5 million, and the Board continues to
work to identify suitable acquisitions that can strengthen the Group while
creating and enhancing shareholder value.
Vin Murria
Chairman
31 January 2007
Leeds Group plc
Preliminary Results
OPERATING AND FINANCIAL REVIEW
Group Result
Group turnover in the year was £16,575,000 (2005: £17,188,000). The reduction of
£613,000 from the previous year is the net of turnover reduced by £2,820,000 in
Leeds Leasing, which was sold in October 2005, and increased sales of £2,207,000
(16%) generated by the Group's continuing business, Hemmers-Itex.
Group profit before tax and exceptional items was £743,000 (2005: £800,000) as
the absence of profit from Leeds Leasing for 11 months of the year was not quite
offset by the increased profitability of Hemmers-Itex, further reductions in
Central Costs, and interest income on the proceeds of the divestment.
There was an exceptional loss on the disposal of Leeds Leasing of £838,000 and
this was approximately equal to the deferred tax asset recognised in the
completion accounts. After charging this exceptional loss, the loss before tax
for the year was £95,000 (2005: profit £935,000).
The tax charge in the year was £352,000 (2005: £236,000) and included UK
deferred tax of £75,000 that no longer appears recoverable in the near future.
The German tax charge of £273,000 included a prior year charge of £32,000
following a tax audit covering the years from 2000 to 2003.
Earnings per share from continuing operations before exceptional items were 1.0
pence (2005: 0.3 pence).
Hemmers-Itex
This German-based subsidiary is engaged in the import, warehousing and
wholesaling of fabrics. This business enjoyed a year of impressive growth in
both volumes and profits. Sales grew by 16% to almost 11 million linear metres
of fabric, and by a similar percentage to £16,320,000. This was achieved despite
depressed market conditions, which have been affecting our traditional customer
base of fabric retailers. A feature of the year was a further increase in sales
to manufacturers of ready-made items of apparel and household goods, a market
that we identified a few years ago as important to future growth.
The changing nature of our customer base requires changes to our sales
structure. During the year we strengthened our sales force, as well as the team
of agents generating sales on our behalf throughout Europe. During the current
year we shall discontinue our sales lorries that have served our German retailer
customer base for many years, switching to a highly mobile sales force that will
be able to display the entire collection and offer guaranteed delivery in 24
hours.
Gross profit grew by 4% to £3,774,000. The rate of gross margin declined a
little from 25.7% in 2005 to 23.1% in 2006 reflecting the increasing
significance of the ready-made sector in our sales. Despite the sales growth,
overheads fell by £31,000 from the level of 2005, when approximately £200,000
had been spent on restructuring our team of agents in France and certain Eastern
European markets. In the current year we shall achieve operational efficiencies
by consolidating onto our principal facility at Nordhorn the warehousing and
distribution activities of our KMT operation currently located in Cologne.
In view of the increased exposure to newer market sectors, where customer
delivery and quality expectations are higher, the Directors have implemented a
more robust stock provisioning methodology whose impact on profits in the year
was approximately £130,000.
The net result of increased gross profit and reduced overhead was an increase in
pre-tax profit of 24% to £712,000. The current financial year has begun well,
with sales after three months in line with last year.
Leeds Leasing
The sale of Leeds Leasing to Bibby Asset Finance Limited was completed on 31
October 2005, and accordingly only the pre-tax profit of £21,000 earned in
October 2005 is included in the Group profit and loss account for the year ended
30 September 2006.
There was a loss on disposal, after transaction costs, of £838,000 but a
positive impact on the Group's cash position of £19,572,000 as follows:
£000
Consideration for sale 3,700
Repayment of parent company loan 1,350
Bank overdraft disposed of 155
Bank debt and HP commitments disposed of 14,571
Transaction costs (204)
-------
19,572
-------
Head office costs
The table below illustrates the continuing downward trend in Head office costs.
2006 2005 2004 2003
£000 £000 £000 £000
Head office expenses 262 373 545 556
Exchange loss/(gain) 9 2 56 (112)
----------------------------------
Administrative expenses 271 375 601 444
Interest income (281) (140) (179) (369)
----------------------------------
Net Head office (income)/costs before
exceptional items and tax (10) 235 422 75
Exceptional items (note 2) - (135) 1,431 77
----------------------------------
Net head office (income)/costs before tax (10) 100 1,853 152
----------------------------------
Further reductions can be expected in the current year which will feel the full
year benefit of cost savings achieved in 2006 as well as further economies made
since the year-end.
Textile manufacturing
The withdrawal from textile manufacture is now complete, with very few issues
remaining outstanding. The Langholm Dyeing business was sold to its management
in February 2002, and the Group remains entitled to participate to a maximum of
£375,000 in the proceeds of any onward sale completed before December 2008. The
Group owns the freehold title to a plot of land of approximately 5 acres
adjacent to the site of the former Scott & Rhodes factory in Yeadon, and during
the year an attempt to include this land within the green belt was successfully
resisted. More recently, a public enquiry was held to deal with an attempt to
have the land registered as a town or village green, the outcome of which is
expected in the Spring of 2007. The Directors are of the opinion that, in its
current use, the value of the land is negligible.
Fixed assets
Capital additions in the year amounted to £42,000 (2005: £134,000). Tangible
fixed assets in the Balance Sheet amount to £245,000 (2005: £449,000). There
were no capital commitments at the year-end, and no material capital projects
are contemplated for the current financial year.
Working capital
At constant exchange rates, working capital increased during the year by
£587,000 of which £407,000 reflects higher stockholding in Hemmers-Itex made
necessary by increased sales volumes and the need to offer to customers
guaranteed 24-hour delivery of samples and sales goods.
Leeds Group plc
Preliminary Results
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 medium-term debt. The Group's net cash balances at 30
September 2006 can be analysed as follows:
Holding Hemmers- Total
Companies Itex Group
£000 £000 £000
Cash (4,682) (24) (4,706)
Overdrafts - 228 228
-----------------------------------
Total on demand (4,682) 204 (4,478)
Fixed rate loans due within one year - 1,695 1,695
-----------------------------------
Net cash balances (4,682) 1,899 (2,783)
-----------------------------------
Bank debt in the subsidiaries is unsecured and without recourse to the Parent
Company.
Ewen Wigley
Director
31 January 2007
Leeds Group plc
Preliminary Results
Consolidated Profit and Loss Account
for the year ended 30 September 2006
Continuing 2006 Total Continuing 2005 Total
operations Discontinued £000 operations Discontinued £000
£000 operations £000 operations
£000 £000
Turnover 16,320 255 16,575 14,113 3,075 17,188
Cost of sales (12,546) (24) (12,570) (10,483) (287) (10,770)
-----------------------------------------------------------------------
Gross profit 3,774 231 4,005 3,630 2,788 6,418
Distribution
costs (874) - (874) (937) - (937)
Administrative
expenses (2,255) (125) (2,380) (2,327) (1,402) (3,729)
-----------------------------------------------------------------------
Operating
profit 645 106 751 366 1,386 1,752
Exceptional
(loss)/profit
on sale of a
business
operation - (838) (838) 135 - 135
-----------------------------------------------------------------------
Profit/(Loss)
before
interest 645 (732) (87) 501 1,386 1,887
----------------------- -----------------------
Interest
receivable and
similar income 207 32
Interest
payable and
similar
charges (215) (984)
------- ------
(Loss)/profit
on ordinary
activities
before
taxation (95) 935
Taxation on
(loss)/profit
on ordinary
activities (352) (236)
------- ------
(Loss)/profit
for the
financial year (447) 699
------- ------
Basic and diluted earnings/(loss) per share:
From continuing and discontinued activities
before exceptional items 1.1p 1.5p
exceptional items (2.4)p 0.4p
------- ------
after exceptional items (1.3)p 1.9p
------- ------
From continuing activities
before exceptional items 1.0p 0.3p
exceptional items - 0.4p
------- ------
after exceptional items 1.0p 0.7p
------- ------
Consolidated Statement of Recognised Gains and Losses
for the year ended 30 September 2006
2006 2005
£000 £000
(Loss)/profit
for the
financial year (447) 699
Foreign
currency
translation
differences (33) (25)
------- ------
Total
recognised
(loss)/profit
relating to
the financial
year (480) 674
------- ------
Leeds Group plc
Preliminary Results
Balance Sheets
at 30 September 2006
Group Company
2006 2005 2006 2005
Fixed assets
Intangible assets 757 853 - -
Tangible assets 245 449 2 -
Investments - - 3,681 3,731
---------------------------------------
1,002 1,302 3,683 3,731
---------------------------------------
Current assets
Stocks 4,552 4,170 - -
---------------------------------------
Debtors 3,990 5,062 883 1,857
Deferred taxation - 875 - 75
Finance lease debtors - 20,606 - -
---------------------------------------
Total debtors 3,990 26,543 883 1,932
Cash at bank and in hand 4,706 756 4,682 730
---------------------------------------
13,248 31,469 5,565 2,662
Creditors: amounts falling due (3,375) (13,676) (1,136) (1,289)
within one year
---------------------------------------
Net current assets 9,873 17,793 4,429 1,373
---------------------------------------
Of which:
---------------------------------------
due within one year 9,873 4,708 4,429 1,298
due after more than one year - 13,085 - 75
---------------------------------------
---------------------------------------
Total assets less current liabilities 10,875 19,095 8,112 5,104
Creditors: amounts falling due - (7,451) - -
after more than one year
---------------------------------------
Net assets 10,875 11,644 8,112 5,104
---------------------------------------
Capital and reserves
Called up equity share capital 4,392 4,392 4,392 4,392
Profit & loss account 6,483 7,252 3,720 712
---------------------------------------
Equity shareholders' funds 10,875 11,644 8,112 5,104
---------------------------------------
Reconciliation of movements in equity shareholders' funds
(Loss)/profit for the financial year (447) 699 3,297 (163)
Purchase of own shares (289) (61) (289) (61)
Foreign currency translation
differences (33) (25) - -
---------------------------------------
Net transfer (from)/to equity
shareholders' funds (769) 613 3,008 (224)
Opening equity shareholders' funds 11,644 11,031 5,104 5,328
---------------------------------------
Closing equity shareholders' funds 10,875 11,644 8,112 5,104
---------------------------------------
Leeds Group plc
Preliminary Results
Consolidated Cash Flow Statement
for the year ended 30 September 2006 2006 2005
£000 £000
Cash inflow/(outflow) from operating activities 324 (626)
Return on investments and servicing of finance (8) (952)
Taxation (431) (266)
Capital expenditure and financial investment (18) (129)
Acquisitions and disposals 5,001 135
---------------------
Cash inflow/(outflow) before financing 4,868 (1,838)
Financing (435) 1,279
---------------------
Increase/(decrease) in cash in the year 4,433 (559)
---------------------
Reconciliation of Net Cash Flow to Movement in Net Debt
2006 2005
£000 £000
Increase/(decrease) in cash in the year 4,433 (559)
Net decrease/(increase) in loans and hire purchase
commitments 146 (1,340)
---------------------
Change in net debt resulting from cash flows 4,579 (1,899)
Net debt disposed of with subsidiary 14,571 -
Foreign currency translation difference 15 11
---------------------
Movement in net debt 19,165 (1,888)
Net debt at beginning of the year (16,382) (14,494)
---------------------
Net cash/(net debt) at end of the year 2,783 (16,382)
---------------------
Reconciliation of Operating Profit to Operating Cash Flows
2006 2005
£000 £000
Operating profit 751 1,752
Depreciation of fixed assets 103 235
Amortisation of goodwill 91 93
(Profit)/loss on sale of tangible fixed assets (4) 4
Increase in stocks (407) (321)
Decrease/(increase) in debtors 136 (215)
(Decrease)/increase in creditors (316) 104
Increase in finance lease debtors (30) (2,278)
--------------------
Net cash inflow/(outflow) from operating activities 324 (626)
--------------------
Leeds Group plc
Preliminary Results
Notes
1. The Directors do not recommend the payment of a dividend.
2. Exceptional items
2006
Sale of Leeds Leasing
On 31 October 2005 Leeds Leasing was sold to Bibby Asset Finance Limited. The
book value of the assets and liabilities disposed of are summarised in the
following table:
£000
Tangible fixed assets 121
Current assets:
Finance lease debtors 20,636
Other debtors 911
Deferred tax 800
Creditors (2,058)
Hire purchase commitments (11)
Bank overdrafts (155)
Bank loans (14,560)
Parent company loan (1,350)
---------
Net assets 4,334
Consideration (3,700)
---------
Loss on sale before disposal costs 634
Disposal costs 204
---------
Exceptional loss on sale of a business operation 838
---------
Analysis of net cash flow £000
Consideration 3,700
Repayment of parent company loan 1,350
Bank overdrafts disposed of 155
Disposal costs (204)
---------
5,001
Bank loans disposed of 14,560
Hire purchase commitments disposed of 11
---------
19,572
---------
2005
Langholm Dyeing Co. Limited
In 2002, the Group sold its UK Dyeing Division to Langholm Dyeing Co. Ltd
('Langholm'), a company established and owned by the Division's management. The
consideration consisted of £4,450,000 in cash and deferred consideration of
£1,550,000 in the form of a loan note. Subsequently, under the terms on which
the Group sold the loan note to the Directors of Langholm in December 2004,
further payments of £50,000 remained due from the Directors of Langholm on each
of the first three anniversaries of the sale. On grounds of prudence, the Group
retained a full provision against this debt, which was discharged in full in May
2005 by a single payment of £135,000. This receipt was included in the profit &
loss account for that year as an exceptional profit on sale of a business
operation. The Group remains entitled to participate to a maximum of £375,000 in
the proceeds of any sale of Langholm or its business before December 2008.
3. The financial information set out on pages 6 to 8 does not constitute the
Company's statutory accounts for the year ended 30 September 2006 or the year
ended 30 September 2005 but is derived from those accounts.
4. Statutory accounts for the year ended 30 September 2005 have been delivered
to the Registrar of Companies, and those for the year ended 30 September 2006
will be delivered following the Company's Annual General Meeting. KPMG Audit Plc
reported on the 2005 accounts while BDO Stoy Hayward LLP have reported on the
2006 accounts: their respective reports were unqualified, did not include
references to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and did not contain statements under
section 237(2) or (3) of the Companies Act 1985.
5. 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, Schofield House, Gateway Drive, Yeadon, Leeds, LS19 7XY, or
from the Group's website, www.leedsgroup.plc.uk.
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