Final Results

Leeds Group PLC 19 December 2007 Issued on behalf of Leeds Group plc Date: Wednesday, 19 December 2007 Embargoed: 7.00am LEEDS GROUP plc Preliminary Results for the year ended 30 September 2007 â€¢ Group profit before tax was Â£760,000 (2006: Â£743,000 before exceptional costs of Â£838,000). â€¢ Hemmers-Itex sales were 7.4% higher at Â£17,523,000 (2006: Â£16,320,000) and profit before tax was Â£662,000 (2006: Â£712,000). â€¢ Investment in people and infrastructure taking place at Hemmers-Itex to exploit growth opportunities. â€¢ Further reductions of Â£42,000 in Central Costs. â€¢ 3,325,618 shares bought back in the year at a cost of Â£735,000, of which 1,698,603 shares were cancelled. â€¢ Net asset value per share increased by 10% to 34.4 pence. â€¢ Earnings per share from Continuing Operations were 1.5 pence (2006:1.0 pence). â€¢ No dividend proposed while Board continues search for suitable investment opportunities. 'The Board continues to look for other acquisitions or investments that will strengthen the Group and benefit shareholders. In the meantime, Hemmers-Itex continues to perform in line with the expectations of both its management and the Board.' Ewen Wigley, 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, Chairman Tel: 07815 134466 Seymour Pierce Limited Sarah Jacobs Tel: 020 7107 8000 -2- Leeds Group plc Preliminary Results STATEMENT BY THE CHAIRMAN, EWEN WIGLEY Results 2007 was a year of continued satisfactory trading performance for the Group. Profit before tax for the Group was Â£760,000, compared with Â£743,000 in the previous year before exceptional costs of Â£838,000. Continuing operations made an operating profit of Â£643,000 (2006: Â£645,000). The beneficial effect of the share buy-back programme discussed below and a lower effective tax rate mean that the earnings per share from continuing operations were 1.5 pence (2006: 1.0 pence) Hemmers-Itex increased their sales by 7.4% to Â£17,523,000 (2006: Â£16,320,000). Profit before tax was Â£662,000 (2006: Â£712,000) with an improved underlying performance by the business held back by some costs incurred at the end of the financial year in anticipation of growth in 2008. When Leeds Leasing was sold in October 2005, Â£500,000 of the sale price was held in escrow. That amount, together with accrued interest, was released in April 2007 as no claims had been made against the Group under the general warranties given in the terms of the sale agreement. Strategic Developments We continue to identify opportunities to grow the Hemmers-Itex business in a profitable manner. The demise of a competitor during 2007 has provided such an opportunity, and Hemmers-Itex is investing in both staff and infrastructure in order to take advantage of the potential for growth. The Group has continued to take advantage of the authority, granted at the last Annual General Meeting, to purchase its own shares into Treasury. During the year, Leeds Group purchased a total of 3,325,618 shares for a cost, including expenses, of Â£735,000. The acquisition of these shares increased the net asset value per share for the remaining shareholders by 3.5% to 34.4 pence per share. Following the cancellation of 1,698,603 Treasury shares during the year, the Group now has 34,900,000 shares in issue, of which 3,467,015 are held in Treasury. Subject to shareholder approval of the necessary resolution at the forthcoming Annual General Meeting, the Board intends to continue to buy back shares whenever the opportunity arises. The maximum number of shares which the Board currently seeks to buy back in the coming year is 4,825,000 and the maximum price to be paid for an ordinary share is an amount equal to not more than 105 per cent of the average middle market quotations for an ordinary share taken from The London Stock Exchange Daily Official List for the five business days immediately preceding the date of purchase. In buying back the Company's shares, the Board is returning capital to those shareholders who wish to sell their shares whilst improving the net asset value per share of the remaining shareholders. Dividend It is currently the intention of the Board to seek opportunities to maximise the long-term value of the Group by identifying appropriate investments. In the light of such a policy, the Directors do not propose a dividend. Directors and Employees On behalf of shareholders, I would like to thank the management and staff of Hemmers-Itex for their efforts during a year which saw continued growth in their business. Outlook The Board continues to look for other acquisitions or investments that will strengthen the Group and benefit shareholders. In the meantime, Hemmers-Itex continues to perform in line with the expectations of both its management and the Board. Ewen Wigley Chairman 19 December 2007 -3- Leeds Group plc Preliminary Results OPERATING AND FINANCIAL REVIEW Group Result Group turnover in continuing operations increased in the year by 7.4% to Â£17,523,000 (2006: Â£16,320,000). Profit before tax was Â£760,000 (2006: loss Â£95,000 after exceptional costs of Â£838,000). Profits in Hemmers-Itex, the Group's principal trading operation, were 7% lower than in the previous year and the small improvement in the Group's overall profit before exceptional items is attributable to further reductions in central costs and increased interest income in the parent company. The tax charge in the year was Â£245,000 (2006: Â£352,000 including Â£75,000 UK deferred tax charge). Earnings per share from continuing operations items were 1.5 pence (2006: 1.0 pence). Hemmers-Itex This German-based subsidiary is engaged in the import, warehousing and wholesaling of fabrics. In another successful year, fabric sales grew by 4.5% to 11.5 million linear metres. Although market conditions remained difficult in the year for our retail customers, Hemmers-Itex obtained further increases in sales to the ready-made manufacturing sector and overall turnover increased by 4.4% to â‚¬25.1million (2006: â‚¬24.1 million). With Sterling having depreciated during the year, reported sales in Sterling show an increase of 7.4%. Gross margin was 23.6%, fractionally ahead of the 23.1% achieved last year, and our German management team once again demonstrated their commitment to strict control of overheads. Profit before tax was Â£662,000 (2006: Â£712,000) and there would undoubtedly have been profit growth but for costs incurred in preparing to exploit the growth opportunities described below. During the year the lease expired on the property in Cologne occupied by KMT Stoffe, the Hemmers-Itex subsidiary acquired in 2004, and the management took this opportunity to achieve operational economies by relocating the business to the principal facility at Nordhorn. We face the future with confidence. In the fourth quarter of the year a competitor company ceased operations and Hemmers-Itex moved quickly to recruit several senior salespeople and to appoint several former sales agents of that competitor. In total, the headcount at Hemmers-Itex grew in the year by 21 to 93 people. To handle the increased volumes now anticipated for 2008 and beyond, the Directors have approved an increase in the size of the Nordhorn facility, a project that we expect to be completed in 2008 at a cost of approximately Â£1.85 million. Head Office costs The table below illustrates the continuing downward trend in head office costs. 2007 2006 2005 2004 2003 Â£000 Â£000 Â£000 Â£000 Â£000 Head office expenses 242 262 373 545 556 Exchange loss/(gain) (13) 9 2 56 (112) ---------------------------------------- Administrative expenses 229 271 375 601 444 Interest income (327) (281) (140) (179) (369) ---------------------------------------- Net head office (income)/costs before exceptional (98) (10) 235 422 75 items and tax Exceptional items - - (135) 1,431 77 ---------------------------------------- Net head office (income)/costs before tax (note 2) (98) (10) 100 1,853 152 ---------------------------------------- -4- Leeds Group plc Preliminary Results OPERATING AND FINANCIAL REVIEW (continued) 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 Â£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 Leeds City Council resolved to register this land as a town or village green. The Directors are seeking a judicial review of that decision, and meanwhile 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 Â£155,000 (2006: Â£42,000). Tangible fixed assets in the Balance Sheet amount to Â£308,000 (2006: Â£245,000). A project to enlarge the Hemmers-Itex facility was approved in September 2007, and this is expected to be completed during 2008 at a cost of approximately Â£1,850,000. Working Capital At constant exchange rates, working capital increased during the year by Â£652,000 of which Â£490,000 reflects higher stockholding in Hemmers-Itex made necessary by increased sales volumes in 2007 and the further increases expected in 2008. 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 Group's net cash balances at 30 September 2007 can be analysed as follows: Holding Hemmers- Total Companies Itex Group Â£000 Â£000 Â£000 Cash 4,002 762 4,764 Overdrafts - (70) (70) ------------------------------ Total on demand 4,002 692 4,694 Fixed rate loans due within one year - (1,465) (1,465) Fixed rate loans due after more than one year - (1,569) (1,569) ------------------------------ Net cash balances 4,002 (2,342) 1,660 ------------------------------ Bank debt in the subsidiaries is unsecured and without recourse to the Parent Company. International Financial Reporting Standards (IFRS) Action is in hand to ensure that the Group is able to meet the requirement to report in future under IFRS, commencing with the next Interim Report that will cover the six months ending 31 March 2008. Ewen Wigley Director 19 December 2007 -5- Leeds Group plc Preliminary Results Consolidated Profit and Loss Account for the year ended 30 September 2007 2007 2006 2006 2006 Continuing Continuing Discontinued Total operations operations operations Â£000 Â£000 Â£000 Â£000 Turnover 17,523 16,320 255 16,575 Cost of sales (13,392) (12,546) (24) (12,570) -------- ----------------------------------- Gross profit 4,131 3,774 231 4,005 Distribution costs (1,096) (874) - (874) Administrative expenses (2,392) (2,255) (125) (2,380) -------- ----------------------------------- Operating profit 643 645 106 751 Exceptional loss on sale of a business operation - - (838) (838) -------- ----------------------------------- Profit/(loss) before interest 643 645 (732) (87) ------------------------- Interest receivable and similar income 238 207 Interest payable and similar charges (121) (215) -------- -------- Profit/(loss) on ordinary activities before taxation 760 (95) Taxation on profit/(loss) on ordinary activities (245) (352) -------- -------- Profit/(loss) for the financial year 515 (447) -------- -------- Basic and diluted earnings/ (loss) per share 2007 2006 From continuing and discontinued activities: before exceptional items 1.5p 1.1p exceptional items in discontinued activities - (2.4)p -------- -------- after exceptional items 1.5p (1.3)p -------- -------- -------- -------- From continuing activities 1.5p 1.0p -------- -------- Consolidated Statement of Recognised Gains and Losses for the year ended 30 September 2007 2007 2006 Â£000 Â£000 Profit/(loss) for the financial year 515 (447) Foreign currency translation differences 167 (33) -------- -------- Total recognised gains and losses relating to the financial year 682 (480) -------- -------- -6- Leeds Group plc Preliminary Results Balance Sheets at 30 September 2007 Group Company 2007 2006 2007 2006 Fixed assets Intangible assets 683 757 - - Tangible assets 308 245 1 2 Investments - - 4,300 3,681 ------------------------------------ 991 1,002 4,301 3,683 ------------------------------------ Current assets Stock 5,172 4,552 - - Debtors 4,344 3,990 918 883 Cash at bank and in hand 4,764 4,706 4,002 4,682 ------------------------------------ 14,280 13,248 4,920 5,565 Creditors: amounts falling due (2,880) (3,375) (580) (1,136) within one year ------------------------------------ Net current assets (all due within one year) 11,400 9,873 4,340 4,429 ------------------------------------ Total assets less current liabilities 12,391 10,875 8,641 8,112 Creditors: amounts falling due (1,569) - - - after more than one year ------------------------------------ Net assets 10,822 10,875 8,641 8,112 ------------------------------------ Capital and reserves Called up equity share capital 4,188 4,392 4,188 4,392 Capital redemption reserve 204 - 204 - Profit & loss account 6,430 6,483 4,249 3,720 ------------------------------------ Equity shareholders' funds 10,822 10,875 8,641 8,112 ------------------------------------ Reconciliation of movements in equity shareholders' funds Profit/(loss) for the financial year 515 (447) 1,264 3,297 Purchase of own shares for treasury (735) (289) (735) (289) Foreign currency translation differences 167 (33) - - ------------------------------------ Net transfer (from)/to equity shareholders' funds (53) (769) 529 3,008 Opening equity shareholders' funds 10,875 11,644 8,112 5,104 ------------------------------------ Closing equity shareholders' funds 10,822 10,875 8,641 8,112 ------------------------------------ -7- Leeds Group plc Preliminary Results Consolidated Cash Flow Statement for the year ended 30 September 2007 2007 2006 Â£000 Â£000 Cash inflow from operating activities 174 324 Return on investments and servicing of finance 117 (8) Taxation (482) (431) Capital expenditure and financial investment (143) (18) Acquisitions and disposals - 5,001 --------------------- Cash (outflow)/inflow before financing (334) 4,868 Financing 652 (435) --------------------- Increase in cash in the year 318 4,433 --------------------- Reconciliation of Net Cash Flow to Movement in Net Debt 2007 2006 Â£000 Â£000 Increase in cash in the year 318 4,433 Net (increase)/decrease in loans (1,387) 146 ----------------------- Change in net cash resulting from cash flows (1,069) 4,579 Net debt disposed of with subsidiary - 14,571 Foreign currency translation difference (54) 15 ----------------------- Movement in net cash (1,123) 19,165 Net cash/(net debt) at beginning of the year 2,783 (16,382) ----------------------- Net cash at end of the year 1,660 2,783 ----------------------- Reconciliation of Operating Profit to Operating Cash Flows 2007 2006 Â£000 Â£000 Operating profit 643 751 Depreciation of fixed assets 94 103 Amortisation of goodwill 96 91 Profit on sale of tangible fixed assets (7) (4) Increase in stocks (490) (407) (Increase)/decrease in debtors (241) 136 Increase/(decrease) in creditors 79 (316) Increase in finance lease debtors - (30) --------------------- Net cash inflow from operating activities 174 324 --------------------- -8- Leeds Group plc Preliminary Results Notes 1. The Directors do not recommend the payment of a dividend. 2. The tables below set out a segmental analysis of the Group's operations. 2007 Hemmers Unallocated Group -Itex central costs Total Â£000 Â£000 Â£000 Turnover 17,523 - 17,523 Cost of sales (13,392) - (13,392) ------------------------------------------- Gross profit 4,131 - 4,131 Distribution costs (1,096) - (1,096) Administrative expenses (2,163) (229) (2,392) ------------------------------------------- Operating profit/(loss) 872 (229) 643 Net interest (payable)/receivable (210) 327 117 ------------------------------------------- Profit before taxation 662 98 760 ------------------------------------------- 2006 Leeds Hemmers Unallocated Group Leasing -Itex central costs Total Â£000 Â£000 Â£000 Â£000 Turnover 255 16,320 - 16,575 Cost of sales (24) (12,546) - (12,570) --------------------------------------------- Gross profit 231 3,774 - 4,005 Distribution costs - (874) - (874) Administrative expenses (125) (1,984) (271) (2,380) --------------------------------------------- Operating profit/(loss) 106 916 (271) 751 Profit on sale of a business operation (838) - - (838) --------------------------------------------- (Loss)/profit before interest (732) 916 (271) (87) Net interest (payable)/receivable (85) (204) 281 (8) --------------------------------------------- (Loss)/profit before taxation (817) 712 10 (95) --------------------------------------------- 2007 Hemmers Holding Group -Itex Companies Total Â£000 Â£000 Â£000 Intangible fixed assets 683 - 683 Tangible fixed assets 307 1 308 Working capital 8,387 (191) 8,196 ------------------------------------- Trading capital employed 9,377 (190) 9,187 Current tax (25) - (25) (Net external debt)/net cash (2,342) 4,002 1,660 Net internal debt (payable)/receivable (1,478) 1,478 - ------------------------------------- Net assets 5,532 5,290 10,822 ------------------------------------- -9- Leeds Group plc Preliminary Results Notes 2. Segmental analysis (continued) 2006 Hemmers Holding Group -Itex Companies Total Â£000 Â£000 Â£000 Intangible fixed assets 757 - 757 Tangible fixed assets 243 2 245 Working capital 7,495 (150) 7,345 ------------------------------------- Trading capital employed 8,495 (148) 8,347 Current tax (255) - (255) (Net external debt)/net cash (1,899) 4,682 2,783 Net internal debt (payable)/receivable (1,371) 1,371 - ------------------------------------- Net assets 4,970 5,905 10,875 ------------------------------------- 3. The financial information set out on pages 5 to 8 does not constitute the Company's statutory accounts for the year ended 30 September 2007 or the year ended 30 September 2006 but is derived from those accounts. 4. Statutory accounts for the year ended 30 September 2006 have been delivered to the Registrar of Companies, and those for the year ended 30 September 2007 will be delivered following the Company's Annual General Meeting. BDO Stoy Hayward LLP have reported on the accounts of both years: their 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. This information is provided by RNS The company news service from the London Stock Exchange

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