Final Results

RNS Number : 0609M

Leeds Group PLC

10 August 2011

 



LEEDS GROUP plc

Preliminary Results for the eight months ended 31 May 2011

Financial Highlights

 

 q Following the change in the Group's accounting reference date, financial

      information presented relates to the eight months ended 31 May 2011, with

      comparative figures covering the year ended 30 September 2010.

q Group profit before tax was £809,000 (2010:  £307,000).

q Hemmers-Itex sales were £19,019,000 (2010: £27,655,000) and pre-tax profit was £589,000 (2010: £586,000).

q Net bank debt reduced by 59% to £1,774,000 (2010: £4,352,000).

q 250,000 shares were bought back in the year at a cost of £47,000 and 500,000 shares were cancelled.

q Net asset value per share (excluding treasury shares) increased by 6.7% to 46.1 pence (2010: 43.2 pence).

q Earnings per share were 1.7 pence (2010:  0.5 pence).

q No dividend proposed while Board continues search for suitable investment opportunities.

At the end of July Leeds Group plc changed its registered office to Old Mills, Whitehall Grove, Drighlington, Bradford, BD11 1BY.

Enquiries:
Leeds Group plc	Citigate Dewe Rogerson	Seymour Pierce Limited
Kathryn Davenport, Chairman	Fiona Tooley	Sarah Jacobs
Malcolm Wilson, Company Secretary	Tel: [phone] or 07785 703523	Tel: [phone]
Tel: [phone]

Chairman's Statement

Accounting reference date

In June 2011 Leeds Group announced a change in its accounting reference date from 30 September to 31 May which is the low point in the annual business cycle when reporting can be accommodated with least disruption to sales activities. This annual report therefore covers the eight month period ended 31 May 2011. Unless otherwise stated, comparative figures are taken from the audited accounts for the year ended 30 September 2010.

Results

The Group made a profit after tax of £483,000 in the eight month period ended 31 May 2011, compared with £131,000 in the year ended 30 September 2010. Net asset value per share at 31 May 2011 was 46.1 pence (30 Sep 2010: 43.2 pence), and earnings per share for the period were 1.7 pence (2010: 0.5 pence). 

Hemmers-Itex Textil Import Export GmbH ("Hemmers")

Total fabric sales by Hemmers were 8.6 million linear metres during the period, a reduction of 5.5% from the volumes achieved in the eight months ended 31 May 2010. This reduction reflected depressed demand in the face of generally unfavourable economic conditions made worse by the very large increase in the cost of cotton goods. However, increased sales prices for cotton goods imposed in line with our increased costs led to an increase of 5.5% in sales revenue in local currency terms and an acceptable rate of margin. Profit before tax of the operating subsidiaries in the period was £589,000 (2010 full year: £586,000). 

Hemmers bank debt was reduced in the period by £2,721,000 as a consequence of profitable trading and a reduction of more than £2 million in working capital. The implementation of improved inventory control systems contributed to an even greater reduction in working capital than is to be anticipated at this seasonal low point in the annual cycle. Debt and working capital will now tend to increase to their peak levels in November and December.

Investments

Leeds Group continues to hold approximately 29% of Dawson International PLC ("Dawson").  Dawson's latest results show a company with no debt and cash resources of £11.6m, but where there is a significant potential liability in a defined benefit pension scheme.  Leeds Group Board believes that any growth in the value of Dawson's shares will be subject to a satisfactory resolution of the pension scheme issues.

Although Leeds Group has no power to participate in the operating and financial policies of Dawson, the Directors will manage the Group's investment in a proactive manner that will encourage the management team to focus on realising the perceived incremental shareholder value that was at the root of the investment decision.

Share Buy-back

The Group has continued to use the authority granted by shareholders to purchase its own shares and, during a period when share trading volumes were low, 250,000 shares were acquired.  Following the cancellation of 500,000 shares the company now has 31,600,000 shares in issue, of which 2,940,658 (9.3%) are held in treasury.

Your Board intends to continue to buy back shares whenever the appropriate opportunity arises and will be seeking Shareholder approval of the necessary resolution at the forthcoming Annual General Meeting.  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 remains the intention of the Board to seek further opportunities to maximise the long-term value of the Group by identifying appropriate investments that will strengthen the Group and benefit all shareholders.  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-Itex for their continued hard work and commitment that has resulted in a satisfactory result in difficult economic conditions.

Trading in the first quarter of the current financial year has been in line with the expectations of the Board.

Kathryn Davenport

Chairman

9 August 2011

Operating and financial review

 

Change of accounting reference date

Following the change to the Group's accounting reference date this review covers the eight month period ended 31 May 2011, and for the better understanding of the reader, the following information presents the audited results of that period alongside the unaudited figures for the eight months ended 31 May 2010.

Profitability	Eight months ended 31 May 2011   £000	Eight months ended  31 May 2010 £000
Revenue	19,019	18,457
Cost of sales	(14,430)	(13,666)
Gross profit	4,589	4,791
Distribution costs	(1,408)	(1,403)
Administrative expenses	(2,277)	(2,538)
Profit from operations	904	850
Net finance expense	(95)	(131)
Profit before tax	809	719
Tax expense	(326)	(178)
Profit for the period	483	541

Segmental analysis of profit before tax	Eight months ended 31 May 2011   £000	Eight months ended  31 May 2010 £000
Hemmers Europe (local GAAP)	520	414
IFRS adjustment - financial derivatives	284	230
IFRS adjustment - goodwill	79	81
Hemmers Europe (IFRS)	883	725
Hemmers China	68	125
Unrealised profit in stock	1	12
Holding companies	(143)	(143)
Group profit before tax	809	719

Summarised balance sheet	31 May 2011   £000	31 May 2010 £000
Inventories	7,219	7,085
Trade and other receivables	6,424	5,814
Trade and other payables	(2,547)	(1,592)
Corporation tax (liability)/asset	(133)	22
Derivative financial (liability)/asset	(120)	48
	10,843	11,377
Non-current assets	4,278	4,304
Deferred tax	(123)	-
Net bank debt	(1,774)	(2,738)
Net assets	13,224	12,943

Operating and financial review (continued)

Group result

Compared to the eight months ended 31 May 2010, Group revenue increased in the eight months ended 31 May 2011 by £562,000 (3.0%) to £19,019,000 as the result of growth of £954,000 in local currency terms partly offset by a translation difference of £392,000.

Group profit before tax was £809,000, an increase of £90,000 over the level reached in the eight months to 31 May 2010.

The tax charge in the period was £326,000 of which £123,000 was deferred tax relating to temporary timing differences on goodwill and financial derivatives. Earnings per share were 1.7 pence (2010 full year: 0.5 pence).

Hemmers Europe

This German-based business is engaged in the import, warehousing and wholesaling of fabrics. During the period already difficult market conditions became even more challenging following very large increases in the cost of cotton items, necessitating two sales price increases within a few months. Customers generally understood market conditions and that our higher prices remained competitive, and little if any business was lost to competitors. Nevertheless, sales volumes of 8,165,000 metres represented a reduction of 4.7% from the levels of the equivalent period last year as customers sought to limit expensive replacement orders by running down stocks.

Despite the volume reductions and cost price increases, the sales price increases achieved meant that gross profit fell by only £110,000 compared to the eight months ended 31 May 2010. A significant reduction of in overheads and interest expense, chiefly as a result of the successful merger of the subsidiary companies KMT and Itex Brummen up into their parent Hemmers, led to an overall increase in pre-tax profit of £130,000.

A feature of the performance in the period was the reduction in Hemmers net bank debt from £6,224,000 at 30 September 2010 to £3,612,000 at 31 May 2011, which was attributable to profitable trading and a seasonal reduction in working capital of £2,097,000. At 31 May 2011 working capital in Hemmers was, at constant exchange rates, £589,000 lower than twelve months earlier

Hemmers China

Chinoh-Tex is based in Shanghai and has been trading for three years. Sales to external customers were adversely affected by the price of cotton goods, and compared to the equivalent period last year volumes were lower by 99,000 metres (17%).  However, sales to Hemmers Europe were more than three times the level of the equivalent period in 2010 and enabled the subsidiary to record a lower but acceptable level of profit.

Holding Companies' Costs

By coincidence, net costs of the holding companies in the period, at £143,000, were at the same level as the equivalent period last year.

Available-for-sale investments

The Group's investment in Dawson International PLC rose in value during the period by £162,000, and this unrealised profit has been taken directly to the available-for-sale reserve. Subject to a satisfactory resolution of the pension issues referred to in the Chairman's statement, the Directors continue to believe that the current share price of Dawson does not fully reflect its long-term value.

Fixed Assets

Capital additions in the period amounted to £124,000. Tangible fixed assets in the Consolidated Balance Sheet amount to £2,171,000 (30 September 2010: £2,197,000).

Working Capital

Working capital comprises inventories, trade and other receivables, and trade and other payables and was reduced during the period by £2,210,000.  This reduction in working capital follows the annual seasonal trade pattern, and the directors anticipate that working capital will now rise again to its annual peak over the next few months.

Operating and financial review (continued)

Property at Haw Lane, Yeadon

The Group owns the freehold title to a plot of land of approximately 5 acres in Haw Lane, Yeadon, adjacent to the site of the former Scott & Rhodes factory, and in February 2007 Leeds City Council resolved to register this land as a town or village green. An appeal was heard on 24 and 25 November 2010 and the two-to-one majority decision of the court was against the Group. The Directors have decided to appeal again, and the case is expected to be heard in October 2011. Although the land has considerable potential development value, in the opinion of the Directors its value in its current use is negligible.

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 two equal 20-year loans, one of which is at variable rate (currently 2.12%) and the other is at a fixed interest rate of 4.07%.  Working capital finance is via a series of short term loans of three months currently attracting interest at approximately 2.5%.

Bank debt in the subsidiaries is secured by charges on inventories, receivables and property and is without recourse to the Parent Company.

Kathryn Davenport

Chairman

9 August 2011

Consolidated Statement of Comprehensive Income

for the eight months ended 31 May 2011

		Eight months ended 31 May 2011   £000	Year ended 30 September 2010 £000
Revenue		19,019	27,655
Cost of sales		(14,430)	(21,378)
Gross profit		4,589	6,277
Distribution costs		(1,408)	(2,064)
Administrative expenses		(2,277)	(3,632)
Profit from operations		904	581
Finance expense		(104)	(289)
Finance income		9	15
Profit before tax		809	307
Tax expense		(326)	(176)
Profit for the period, attributable to the equity holders of the Parent Company		483	131
Other comprehensive income
Translation differences on foreign operations		134	(498)
Unrealised gain/(loss) taken to available-for-sale reserve		162	(324)
Other comprehensive income for the period		296	(822)
Total comprehensive income for the period, attributable to the equity holders of the Parent Company		779	(691)

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 period.

Earnings per share for profit attributable

to the equity holders of the Company

		Eight months ended 31 May 2011   £000	Year ended 30 September 2010 £000
Basic and diluted (pence)		1.7p	0.5p

Consolidated Balance Sheet

at 31 May 2011

Company number 00067863		31 May 2011 £000	30 September 2010 £000
Assets
Non-current assets
Property, plant and equipment		2,171	2,197
Goodwill		974	959
Available-for-sale investments		1,133	971
Total non-current assets		4,278	4,127
Current assets
Inventories		7,219	7,377
Trade and other receivables		6,424	7,240
Cash and cash equivalents		2,264	2,192
Total current assets		15,907	16,809
Total assets		20,185	20,936
Liabilities
Non-current liabilities
Loans and borrowings	20	(2,122)	(2,150)
Deferred tax	8	(123)	-
Total non-current liabilities		(2,245)	(2,150)
Current liabilities
Trade and other payables	19	(2,547)	(1,469)
Loans and borrowings	20	(1,916)	(4,394)
Corporation tax liability		(133)	(29)
Derivative financial liabilities	17	(120)	(402)
Total current liabilities		(4,716)	(6,294)
Total liabilities		(6,961)	(8,444)
TOTAL NET ASSETS		13,224	12,492

Capital and reserves attributable to equity holders of the Company
Share capital		3,792	3,852
Capital redemption reserve		600	540
Treasury share reserve		(510)	(572)
Available-for-sale reserve		152	(10)
Foreign exchange reserve		1,902	1,768
Retained earnings		7,288	6,914
TOTAL EQUITY		13,224	12,492

Consolidated Cash Flow Statement

for the eight months ended 31 May 2011

		Eight months ended 31 May 2011   £000	Year ended 30 September 2010 £000
Cash flows from operating activities
Profit for the period		483	131
Adjustments for:
Depreciation		139	221
Movement in financial derivative liabilities		(284)	228
Translation gain/(loss) on cash and cash equivalents		5	(19)
Finance expense		104	289
Finance income		(9)	(15)
Loss on sale of property, plant and equipment		17	10
Income tax expense		326	176
Cash flows from operating activities before changes in working capital and provisions		781	1,021
Decrease/(increase) in inventories		258	(1,088)
Decrease/(increase) in trade and other receivables		901	(642)
Increase in trade and other payables		1,051	214
Cash generated from operating activities		2,991	(495)
Income taxes paid		(101)	(147)
Net cash flows from operating activities		2,890	(642)
Investing activities
Purchase of property, plant and equipment		(124)	(224)
Sale of property, plant and equipment		23	21
Bank interest received		9	15
Net cash used in investing activities		(92)	(188)
Financing activities
Purchase of treasury shares		(47)	(49)
Proceeds from bank borrowings		-	790
Repayment of bank borrowings		(2,575)	-
Bank interest paid		(104)	(289)
Net cash (used)/generated in financing activities		(2,726)	452
Net increase/(decrease) in cash and cash equivalents		72	(378)
Cash and cash equivalents at beginning of the period		2,192	2,570
Cash and cash equivalents at end of the period		2,264	2,192

Consolidated Statement of Changes in Equity

for the eight months ended 31 May 2011

	Share capital £000	Capital redemption reserve £000	Treasury share reserve £000	Available- for- sale reserve £000	Foreign exchange reserve         £000	Retained earnings £000	Total equity £000
At 1 October 2009	3,897	495	(605)	314	2,266	6,865	13,232
Total comprehensive income*	-	-	-	(324)	(498)	131	(691)
Purchase of treasury shares	-	-	(49)	-	-	-	(49)
Cancellation of treasury shares	(45)	45	82	-	-	(82)	-
At 30 September 2010	3,852	540	(572)	(10)	1,768	6,914	12,492
Total comprehensive income*	-	-	-	162	134	483	779
Purchase of treasury shares	-	-	(47)	-	-	-	(47)
Cancellation of treasury shares	(60)	60	109	-	-	(109)	-
At 31 May 2011	3,792	600	(510)	152	1,902	7,288	13,224

* The components of total comprehensive income are disclosed on page 6

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.
Available-for-sale reserve	Gains/losses arising on financial assets classified as available-for-sale.
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

	Eight months ended 31 May 2011	Year ended 30 September 2010
Numerator
Profit for the period from continuing operations, being the earnings used in basic and diluted earnings per share	£483,000	£131,000
Denominator
Weighted average number of shares used in basic and diluted earnings per share (excluding treasury shares)	28,847,819	29,033,616
Basic and diluted earnings per share	1.7p	0.5p

4.                 The financial information set out above does not constitute the company's statutory accounts for 2011 or 2010.

Statutory accounts for the periods ended 31 May 2011 and 30 September 2010 have been reported on by the Independent Auditors. 

The Independent Auditors' Report on the Annual Report and Financial Statements for both 2011 and 2010 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.

Statutory accounts for the year ended 30 September 2010 have been filed with the Registrar of Companies. The statutory accounts for the eight month period ended 31 May 2011 will be delivered to the Registrar in due course.

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, Old Mills, Whitehall Grove, Drighlington, Bradford, BD11 1BY or from the Group's website, www.leedsgroup.plc.uk.

Leeds Group plc

Preliminary Results

Notes (continued)

6.                 Segmental information

						IFRS adjustments
Eight months ended 31 May 2011	Hemmers Europe       £000	Hemmers China £000	Inter segmental £000	Total Hemmers £000	Holding companies £000	Financial derivatives £000	Goodwill amortisation         £000	Group total £000
External revenue	18,138	881	-	19,019	-	-	-	19,019
Inter-segmental revenue	-	558	(558)	-	-	-	-	-
Cost of sales	(14,060)	(1,213)	559	(14,714)	-	284	-	(14,430)
Gross profit	4,078	226	1	4,305	-	284	-	4,589
Distribution costs	(1,350)	(58)	-	(1,408)	-	-	-	(1,408)
Administrative expenses	(2,001)	(100)	-	(2,101)	(255)	-	79	(2,277)
Profit from operations	727	68	1	796	(255)	284	79	904
Finance expense	(104)	-	-	(104)	-	-	-	(104)
Finance income	-	-	-	-	9	-	-	9
Internal interest	(103)	-	-	(103)	103	-	-	-
Profit before tax	520	68	1	589	(143)	284	79	809

						IFRS adjustments
At 31 May 2011	Hemmers Europe       £000	Hemmers China £000	Inter segmental £000	Total Hemmers £000	Holding companies £000	Financial derivatives £000	Goodwill amortisation         £000	Group total £000
Property, plant & equipment	2,150	21	-	2,171	-	-	-	2,171
Goodwill	420	-	-	420	-	-	554	974
A-f-s investments	-	-	-	-	1,133	-	-	1,133
Inventories	7,140	104	(25)	7,219	-	-	-	7,219
Trade receivables	5,249	231	-	5,480	-	-	-	5,480
Other receivables	756	160	-	916	28	-	-	944
Cash & equivalents	426	129	-	555	1,709	-	-	2,264
Total assets	16,141	645	(25)	16,761	2,870	-	554	20,185
Group loans & current accounts	(1,932)	(187)	-	(2,119)	2,119	-	-	-
Derivative financial liabilities	-	-	-	-	-	(120)	-	(120)
Non-current liabilities	(2,122)	-	-	(2,122)	-	34	(157)	(2,245)
Trade payables	(1,409)	(173)	-	(1,582)	-	-	-	(1,582)
Other payables	(666)	(101)	-	(767)	(198)	-	-	(965)
Corporation tax	(133)	-	-	(133)	-	-	-	(133)
Loans & borrowings	(1,916)	-	-	(1,916)	-	-	-	(1,916)
Total liabilities	(8,178)	(461)	-	(8,639)	1,921	(86)	(157)	(6,961)
Net assets	7,963	184	(25)	8,122	4,791	(86)	397	13,224

Leeds Group plc

Preliminary Results

Notes (continued)

6              Segmental information (continued)

						IFRS adjustments
Year ended 30 September 2010	Hemmers Europe       £000	Hemmers China £000	Inter segmental £000	Total Hemmers £000	Holding companies £000	Financial derivatives £000	Goodwill amortisation         £000	Group total £000
External revenue	26,301	1,354	-	27,655	-	-	-	27,655
Inter-segmental revenue	4	326	(330)	-	-	-	-	-
Cost of sales	(20,155)	(1,330)	335	(21,150)	-	(228)	-	(21,378)
Gross profit	6,150	350	5	6,505	-	(228)	-	6,277
Distribution costs	(1,980)	(84)	-	(2,064)	-	-	-	(2,064)
Administrative expenses	(3,245)	(191)	-	(3,436)	(314)	-	118	(3,632)
Profit from operations	925	75	5	1,005	(314)	(228)	118	581
Finance expense	(289)	-	-	(289)	-	-	-	(289)
Finance income	-	-	-	-	15	-	-	15
Internal interest	(130)	-	-	(130)	130	-	-	-
Profit before tax	506	75	5	586	(169)	(228)	118	307

						IFRS adjustments
At 30 September 2010	Hemmers Europe       £000	Hemmers China £000	Inter segmental £000	Total Hemmers £000	Holding companies £000	Financial derivatives £000	Goodwill amortisation         £000	Group total £000
Property, plant, & equipment	2,170	27	-	2,197	-	-	-	2,197
Goodwill	491	-	-	491	-	-	468	959
A-f-s investments	-	-	-	-	971	-	-	971
Inventories	7,332	71	(26)	7,377	-	-	-	7,377
Trade receivables	6,373	161	-	6,534	-	-	-	6,534
Other receivables	619	74	-	693	13	-	-	706
Cash & equivalents	320	20	-	340	1,852	-	-	2,192
Total assets	17,305	353	(26)	17,632	2,836	-	468	20,936
Group loans & current accounts	(1,907)	(143)	-	(2,050)	2,050	-	-	-
Derivative financial liabilities	-	-	-	-	-	(402)	-	(402)
Non-current liabilities	(2,150)	-	-	(2,150)	-	-	-	(2,150)
Trade payables	(722)	(51)	-	(773)	(7)	-	-	(780)
Other payables	(596)	(9)	-	(605)	(84)	-	-	(689)
Corporation tax	(29)	-	-	(29)	-	-	-	(29)
Loans & borrowings	(4,394)	-	-	(4,394)	-	-	-	(4,394)
Total liabilities	(9,798)	(203)	-	(10,001)	1,959	(402)	-	(8,444)
Net assets	7,507	150	(26)	7,631	4,795	(402)	468	12,492

Leeds Group plc

Preliminary Results

Notes (continued)

6              Segmental information (continued) - Analysis of revenue by destination

	Eight months ended 31 May 2011			Year ended 30 September 2010
	Hemmers Europe £000	Hemmers China £000	Group total £000	Hemmers Europe £000	Hemmers China £000	Group total £000
Germany	10,637	73	10,710	13,897	198	14,095
Netherlands	1,339	-	1,339	2,215	-	2,215
France	1,109	-	1,109	1,517	-	1,517
Austria	655	-	655	838	85	923
Spain	535	64	599	1,093	20	1,113
Denmark	376	-	376	642	-	642
Sweden	291	-	291	514	-	514
Croatia	290	-	290	412	-	412
Switzerland	268	-	268	557	6	563
Greece	256	-	256	428	-	428
USA	113	135	248	125	242	367
Portugal	225	-	225	431	-	431
Belgium	208	-	208	428	-	428
Bulgaria	86	92	178	269	-	269
Finland	178	-	178	328	-	328
Serbia	166	-	166	321	-	321
Czech Republic	150	7	157	130	6	136
35 other countries	759	292	1,051	1,325	428	1,753
	17,641	663	18,304	25,470	985	26,455
UK	497	218	715	831	369	1,200
Total revenue	18,138	881	19,019	26,301	1,354	27,655

Other information

	Eight months ended 31 May 2011			Year ended 30 September 2010
	Hemmers Europe £000	Hemmers China £000	Group total £000	Hemmers Europe £000	Hemmers China £000	Group total £000
Additions to property, plant & equipment	124	-	124	220	4	224
Depreciation	133	6	139	213	8	221

 

END

 

 

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