Final Results

RNS Number : 3749Z

Leeds Group PLC

13 January 2011

 



Issued on behalf of Leeds Group plc                                                       Embargoed: 7.00am

Date: 13 January 2011

LEEDS GROUP plc

Preliminary Results for the year ended 30 September 2010

Financial Highlights

q Group profit before tax was £307,000 (2009: loss £24,000).

q Hemmers-Itex sales were £27,655,000 (2009: £25,685,000) and pre-tax profit was £586,000 (2009: £128,000).

q 340,000 shares were bought back in the year at a cost of £49,000 and 375,000 shares were cancelled.

q Net asset value per share (excluding treasury shares) was 43.2 pence (2009: 45.2 pence).

q Earnings per share were 0.5 pence (2009: loss of 0.5 pence).

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

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

Chairman's Statement

Results

Leeds Group made a profit after tax of £131,000 in the financial year ending 30 September 2010, compared with a loss of £144,000 in 2009.  After an extremely positive first six months, the second half of the financial year proved more challenging and the pronounced movement of the Euro currency has had a material impact on the results of the Group.  Earnings per share for the financial year were 0.5 pence (2009: loss 0.5 pence).  Net Asset Value per share at 30 September 2010 was 43.2 pence (30 Sep 2009: 45.2 pence), with the reduction primarily caused by the fall in the Euro against Sterling.

Hemmers-Itex

Material sales in Hemmers (both Europe and China) increased by 6.1% to 13.9 million linear metres during the financial year (2009: 13.1 million linear metres), whilst sales revenue increased by 7.7% to £27,655,000 (2009: £25,685,000).  Profit before tax of the operating subsidiaries in the financial year was £586,000 (2009: £128,000).  However profitability was held back by a loss on valuation of financial derivatives of £228,000 (2009: loss £208,000).  In addition the business incurred both a finance charge of £75,000 (2009: nil) as it took the opportunity to negotiate favourable amendments to the terms of its long-term debt, and non-recurring reorganisation costs of £89,000 (2009: nil).

Working capital increased by £1,516,000 during the financial year (2009: decrease of £884,000) primarily due to purchases of cotton stock late in the financial year in anticipation of price increases.  It is expected that the stock levels will reduce over the coming months, as your Board continues to focus on working capital reduction.

Investments

Leeds Group continues to hold approximately 29% of Dawson International PLC ("Dawson").  Dawson's latest results show that it is now a debt-free company, 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 year when share trading volumes were low, 340,000 shares were acquired.  Following the cancellation of 375,000 shares the company now has 32,100,000 shares in issue, of which 3,190,658 are held in treasury.

The 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.

Board changes

I joined the Board of Leeds Group in 2004 and have been Chairman since March 2007.  Following an increase in my other work commitments I have decided to step down from the Leeds Board with immediate effect.  The Company is actively seeking new candidates to add to and strengthen the existing Board and will update the market shortly regarding new appointments.  I would like to take this opportunity to thank all of the staff at Leeds for their hard work and commitment in what continues to be challenging economic times.

Trading in the first three months of the year has been ahead of budget.

Ewen Wigley

Chairman

12 January 2011

Operating and financial review

 

Group Result

Group revenue increased by £1,970,000 (7.7%) in the year to £27,655,000 (2009: £25,685,000), as the result of organic growth of £2,010,000 partly offset by a small translation difference of £40,000.

Group profit before tax was £307,000 (2009: loss £24,000), and an analysis of pre-tax profit in each year is as follows:

Profit before tax	2010 £000	2009 £000
Hemmers Europe	506	118
Hemmers China	75	41
Unrealised profit in stock	5	(31)
Total operating segments (local GAAP)	586	128
IFRS financial derivatives adjustment	(228)	(208)
IFRS goodwill adjustment	118	118
Unrealised exchange (losses)/gains in holding companies	(33)	91
Other net costs of holding companies	(136)	(153)
Group profit/(loss) before tax	307	(24)

After an encouraging first half-year in which profit before tax amounted to £744,000, the second half-year proved extremely challenging. Second half sales were 7% below the level of the first half, and margins were squeezed as the value of the Euro fell against the US dollar as the mounting debt crisis in Greece and elsewhere in the Eurozone shook confidence.

However, the most significant feature contributing to the poor second half result was the requirement under IAS 39 to fair value the Group's forward exchange contracts. This requirement had led to an unrealised gain of £193,000 being reported in the first half, but in the second half there was an unrealised loss of £421,000. Of this, £297,000 arose in September alone when there was a large swing in exchange rates. The Directors regard the financial derivatives liability of £402,000 included in the balance sheet at 30 September 2010 as a timing difference that will reverse over the next few months as the forward contracts mature.  Compliance with IFRS does not impact on aggregate profits over the long term, but has introduced a considerable degree of volatility in reported profit from one period to the next.

The tax charge in the year was £176,000 (2009: £120,000). Earnings per share were 0.5 pence (2009: loss 0.5 pence).

Hemmers Europe

This German-based business is engaged in the import, warehousing and wholesaling of fabrics. Despite difficult market conditions, the business achieved growth of 4.4% in fabric sales to 12.9 million linear metres, and an increase of £1,365,000 (5.5%) in sales revenue to £26,301,000 (2009: £24,936,000).

Gross profit improvement of £563,000 was achieved over the 2009 level, of which £307,000 was attributable to volume growth and £256,000 to improved margins. This margin improvement occurred chiefly in the first half year as fabric costs fell as result of a favourable exchange rate, and as the Euro weakened in the second half there was some success in winning sales price increases in compensation. Overhead expenditure remained well controlled, growing by a modest 3% and overall, profit before tax improved by £388,000 to £506,000 (2009: £118,000).

Until 30 September 2010 the business segment Hemmers Europe comprised Hemmers-Itex Textil Import Export GmbH and its two European subsidiaries KMT Stoffe GmbH and Itex Brummen B.V. These three entities have now been merged to form a single, more cost-effective business structure for the future, which involved non-recurring restructuring costs of £89,000 in the financial year just ended.

Hemmers China

Chinoh-Tex is based in Shanghai and has been trading for a little over two years. Sales to external customers increased by 80.8% to £1,354,000 (2009: £749,000). Pre-tax profit grew more modestly to £75,000 (2009: £41,000) after taking a provision of approximately £60,000 against a trade receivable which is currently the subject of litigation in New York.

Holding Companies' Costs

Although Holding Companies' operating costs were contained a little below the level of 2009, there was nevertheless an increase in net costs from £62,000 last year to £169,000 in 2010 as an unrealised exchange gain of £91,000 on translating loans receivable from subsidiaries in 2009 reversed, and an unrealised loss of £33,000 was recognised in 2010.

Available-for-sale investments

The Group's investment in Dawson International PLC fell in value during the year by £324,000, and this unrealised loss has been taken directly to the available-for-sale reserve. Despite this setback, and 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 year amounted to £224,000 (2009: £200,000). Tangible fixed assets in the Consolidated Balance Sheet amount to £2,197,000 (2009: £2,350,000).

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. During the year a judicial review upheld that registration, a decision that the directors decided to appeal. This 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 are currently taking advice as to what further course of action may be open, and meanwhile they are of the opinion that, in its current use, the value of the land is negligible.

Working Capital

Working capital comprises inventories, trade and other receivables, and trade and other payables and increased during the year by £1,516,000 (2009: decrease £884,000).  The majority of this growth was caused by an increase in inventories of £1,088,000, partly as a result of the early purchase of certain basic items to beat the recent large increases in the cost of cotton. The directors anticipate that stock will now fall to more usual levels over the next few months.

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. As part of this strategy, the warehouse constructed in 2008 in Germany was financed by a 20-year loan at fixed interest of 5.1%.  When that loan was drawn down, a fee of €100,000 was paid to enable the terms of the loan to be subsequently renegotiated if an advantageous opportunity arose, and during the year revised terms were indeed agreed, and are detailed in note 20 to the accounts. Having negotiated revised terms, it is no longer appropriate to amortise the fee paid on original draw-down over the life of the loan, and the unamortised portion of €86,000 (£75,000) has been written off in the year to finance expense.

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

Ewen Wigley

Chairman

12 January 2011

Consolidated Statement of Comprehensive Income

for the year ended 30 September 2010

	2010   £000	2009 £000
Revenue	27,655	25,685
Cost of sales	(21,378)	(20,114)
Gross profit	6,277	5,571
Distribution costs	(2,064)	(2,000)
Administrative expenses	(3,632)	(3,365)
Profit from operations	581	206
Finance expense	(289)	(270)
Finance income	15	40
Profit/(loss) before tax	307	(24)
Tax expense	(176)	(120)
Profit/(loss) for the year, attributable to the equity holders of the Parent Company	131	(144)
Other comprehensive income
Translation differences on foreign operations	(498)	1,201
Unrealised (loss)/gain taken to available-for-sale reserve	(324)	240
Other comprehensive income for the year	(822)	1,441
Total comprehensive income for the year, attributable to the equity holders of the Parent Company	(691)	1,297

The results shown in the consolidated statement of comprehensive income derive wholly from continuing operations.

There is no tax effect relating to other comprehensive income for the year.

Earnings/(loss) per share for profit attributable

to the equity holders of the Company

	2010	2009
Basic and diluted (pence)  (note 3)	0.5p	(0.5)p

Consolidated Balance Sheet

at 30 September 2010

Company number 00067863	2010 £000	2009 £000
Assets
Non-current assets
Property, plant and equipment	2,197	2,350
Goodwill	959	1,014
Available-for-sale investments	971	1,295
Total non-current assets	4,127	4,659
Current assets
Inventories	7,377	6,660
Trade and other receivables	7,240	6,973
Corporation tax recoverable	-	52
Cash available on demand	2,192	2,574
Total current assets	16,809	16,259
Total assets	20,936	20,918
Liabilities
Non-current liabilities
Loans and borrowings	(2,150)	(2,273)
Total non-current liabilities	(2,150)	(2,273)
Current liabilities
Trade and other payables	(1,469)	(1,350)
Loans and borrowings	(4,394)	(3,823)
Corporation tax liability	(29)	(54)
Derivative financial liabilities	(402)	(186)
Total current liabilities	(6,294)	(5,413)
Total liabilities	(8,444)	(7,686)
TOTAL NET ASSETS	12,492	13,232

Capital and reserves attributable to equity holders of the Company
Share capital	3,852	3,897
Capital redemption reserve	540	495
Treasury share reserve	(572)	(605)
Available-for-sale reserve	(10)	314
Foreign exchange reserve	1,768	2,266
Retained earnings	6,914	6,865
TOTAL EQUITY	12,492	13,232

Consolidated Cash Flow Statement

for the year ended 30 September 2010

	2010 £000	2009 £000
Cash flows from operating activities
Profit/(loss) for the period	131	(144)
Adjustments for:
Depreciation	221	198
Reversal of impairment of available-for-sale investments	-	(231)
Loss on sale of available-for-sale investment	-	269
Foreign exchange differences	228	214
Translation (loss)/gain on cash and cash equivalents	(19)	18
Finance expense	289	270
Finance income	(15)	(40)
Loss on sale of property, plant and equipment	10	7
Income tax expense	176	120
Cash flows from operating activities before changes in working capital and provisions	1,021	681
(Increase)/decrease in inventories	(1,088)	859
(Increase)/decrease in trade and other receivables	(642)	649
Increase/(decrease) in trade and other payables	214	(624)
Cash generated from operating activities	(495)	1,565
Income taxes (paid)/ recovered	(147)	20
Net cash flows from operating activities	(642)	1,585
Investing activities
Purchase of property, plant and equipment	(224)	(200)
Sale of property, plant and equipment	21	3
Purchase of available-for-sale investments	-	(200)
Sale of available-for-sale investments	-	207
Bank interest received	15	40
Net cash used in investing activities	(188)	(150)
Financing activities
Purchase of treasury shares	(49)	(78)
Proceeds from bank borrowings	790	-
Repayment of bank borrowings	-	(884)
Bank interest paid	(289)	(270)
Net cash generated/(used) in financing activities	452	(1,232)
Net (decrease)/increase in cash and cash equivalents	(378)	203
Cash and cash equivalents at beginning of the period	2,570	2,367
Cash and cash equivalents at end of the period	2,192	2,570

Consolidated Statement of Changes in Equity

for the year ended 30 September 2010

	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 2008	3,972	420	(667)	74	1,065	7,149	12,013
Total comprehensive income*	-	-	-	240	1,201	(144)	1,297
Purchase of treasury shares	-	-	(78)	-	-	-	(78)
Cancellation of treasury shares	(75)	75	-	-	-	-	-
Cost of shares cancelled	-	-	140	-	-	(140)	-
At 30 September 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	-	-	-	-	-
Cost of shares cancelled	-	-	82	-	-	(82)	-
At 30 September 2010	3,852	540	(572)	(10)	1,768	6,914	12,492

* The components of total comprehensive income are disclosed on page 5

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

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/(loss) per share

	2010	2009
Numerator
Profit/(loss) for the year from continuing operations, being the earnings/(loss) used in basic and diluted earnings or loss per share	£131,000	£(144,000)
Denominator
Weighted average number of shares used in basic and diluted earnings or loss per share (excluding treasury shares)	29,033,616	29,514,410
Basic and diluted earnings/(loss) per share	0.5p	(0.5) p

4.              The following tables set out a segmental analysis of the Group's operations

						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	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

						IFRS adjustments
Year ended 30 September 2009	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	24,936	749	-	25,685	-	-	-	25,685
Inter-segmental revenue	-	388	(388)	-	-	-	-	-
Cost of sales	(19,349)	(914)	357	(19,906)	-	(208)	-	(20,114)
Gross profit	5,587	223	(31)	5,779	-	(208)	-	5,571
Distribution costs	(1,926)	(74)	-	(2,000)	-	-	-	(2,000)
Administrative expenses	(3,147)	(108)	-	(3,255)	(228)	-	118	(3,365)
Profit from operations	514	41	(31)	524	(228)	(208)	118	206
Finance expense	(270)	-	-	(270)	-	-	-	(270)
Finance income	-	-	-	-	40	-	-	40
Internal interest	(126)	-	-	(126)	126	-	-	-
Profit before tax	118	41	(31)	128	(62)	(208)	118	(24)

						IFRS adjustments
At 30 September 2009	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	2,320	30	-	2,350	-	-	-	2,350
Goodwill	643	-	-	643	-	-	371	1,014
A-f-s investments	-	-	-	-	1,295	-	-	1,295
Inventories	6,678	15	(33)	6,660	-	-	-	6,660
Trade receivables	6,628	25	-	6,653	-	-	-	6,653
Other receivables	229	66	-	295	25	-	-	320
Corporation tax	52	-	-	52	-	-	-	52
Cash	353	81	-	434	2,140	-	-	2,574
Total assets	16,903	217	(33)	17,087	3,460	-	371	20,918
Group loans & current accounts	(1,961)	(97)	-	(2,058)	2,058	-	-	-
Derivative financial liabilities	-	-	-	-	-	(186)	-	(186)
Non-current liabilities	(2,273)	-	-	(2,273)	-	-	-	(2,273)
Trade payables	(575)	(16)	-	(591)	(3)	-	-	(594)
Other payables	(642)	(15)	-	(657)	(99)	-	-	(756)
Corporation tax	(54)	-	-	(54)	-	-	-	(54)
Loans & borrowings	(3,823)	-	-	(3,823)	-	-	-	(3,823)
Total liabilities	(9,328)	(128)	-	(9,456)	1,956	(186)	-	(7,686)
Net assets	7,575	89	(33)	7,631	5,416	(186)	371	13,232

Other information	Hemmers Europe  2010 £000	Hemmers China  2010 £000	Group Total 2010 £000	Hemmers Europe  2009 £000	Hemmers China  2009 £000	Group Total 2009 £000
Additions to property, plant & equipment	220	4	224	198	2	200
Depreciation	213	8	221	194	4	198

5.                 The financial information set out above does not constitute the company's statutory accounts for 2010 or 2009.

Statutory accounts for the years ended 30 September 2010 and 30 September 2009 have been reported on by the Independent Auditors. 

The Independent Auditors' Report on the Annual Report and Financial Statements for both 2010 and 2009 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 2009 have been filed with the Registrar of Companies. The statutory accounts for the year ended 30 September 2010 will be delivered to the Registrar in due course.

6.                 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.

 

END

 

 

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