Final Results

RNS Number : 8506I

Leeds Group PLC

31 July 2012

 



LEEDS GROUP plc

Preliminary Results for the year to 31 May 2012

Financial Highlights

q The Group's accounting reference date was changed from 30 September to 31 May with effect from 31 May 2011. Financial information presented relates to the year ended 31 May 2012, with comparative figures covering the eight months ended 31 May 2011 unless otherwise stated.

q Group profit before tax was £818,000 (2011: £809,000) after charging £236,000 in respect of impairment of available-for-sale investment.

q Hemmers-Itex sales were £28,364,000 (2011: £19,019,000) and pre-tax profit was £895,000 (2011: £589,000).

q Net bank debt reduced to £1,300,000 (2011: £1,774,000).

q 865,000 shares were bought back in the year at a cost of £148,000.

q Despite profitable trading and further shares bought into treasury, net asset value per share (excluding treasury shares) fell slightly to 45.4 pence (2011: 46.1 pence) as the negative effect of currency translation was equivalent to 2.9 pence per share.

q Earnings per share were 1.8 pence (2011:  1.7 pence).

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

Enquiries:
Leeds Group plc		Cairn Financial Advisers LLP
Kathryn Davenport, Chairman		Tony Rawlinson/Avi Robinson
Malcolm Wilson, Company Secretary		Tel: [phone]
Tel: [phone]

Chairman's Statement

I am pleased to present the results of the year ended 31 May 2012.

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 covers the year ended 31 May 2012 and unless otherwise stated, comparative figures are taken from the audited accounts for the eight month period ended 31 May 2011.

Results

In the year ended 31 May 2012 the Group made a profit after tax of £503,000, compared with £483,000 in the eight months ended 31 May 2011. Net asset value per share at 31 May 2012 was 45.4 pence ( 2011: 46.1 pence), and earnings per share for the year were 1.8 pence (2011:1.7 pence).

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

Total fabric sales in the year by Hemmers Europe were 11.2 million linear metres, which compares with 8.2 million metres achieved in the eight months ended 31 May 2011. Demand remained depressed in the face of continuing unfavourable economic conditions, and our objective remained to maintain margins. This, together with strict control of overheads, led to profit before tax of £807,000 (2011: £520,000) and enabled bank debt to be reduced by €529,000 (£451,000). 

ChinohTex, the Hemmers subsidiary based in Shanghai, continues to make good progress and achieved by far its highest sales revenue in its short history. It contributed pre-tax profit of £93,000 (2011: £68,000) as well as valuable assistance to its European parent in terms of purchasing, inspection and shipping of material.

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 £5m, but where there is a significant potential liability in two defined benefit pension schemes.  For several months now the market value of this investment has been significantly below its cost, and for this reason we have marked the investment to market, taking an impairment charge of £236,000 against pre-tax profit. On 20 July 2012 Dawson issued a statement regarding its inability to reach agreement with regulators in relation to the pension schemes which has resulted in a further significant fall in the Dawson share price.

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 the year 865,000 shares were acquired at a cost of £148,000. Group shares held in treasury at 31 May 2012 totalled 3,805,658, representing 12% of the 31,600,000 total shares in issue.

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.

Employees

On behalf of shareholders, I thank the management and staff of Hemmers for their continued hard work and commitment that has resulted in a satisfactory result in difficult economic conditions.

Sales in the first two months of the current financial year have been in line with the expectations of the Board.

Kathryn Davenport

Chairman

30 July 2012

Operating and financial review

 

Change of accounting reference date

Following the change to the Group's accounting reference date announced in June 2011, this review covers the year ended 31 May 2012, and unless otherwise stated, comparative figures are taken from the audited accounts for the eight month period ended 31 May 2011.

Group result

Group revenue in the year ended 31 May 2012 amounted to £28,364,000 (2011: £19,019,000) and Group profit before tax was £818,000 (2011: £809,000).

The tax charge in the year was £315,000 of which £66,000 was deferred tax relating to temporary timing differences on goodwill and financial derivatives. Earnings per share were 1.8 pence (2011: 1.7 pence).

Hemmers Europe

This German-based business is engaged in the import, warehousing and wholesaling of fabrics.

During 2011, already difficult market conditions became even more challenging following very large increases in the cost of cotton items. In the year ended 31 May 2011, average monthly cotton prices were more than twice the level of the previous year. During the year ended 31 May 2012, average prices fell back by 30% but were still 50% higher than two years previously and the effect of this welcome cost reduction was lagged by the stockholding period. At the same time, the well-documented debt crisis in Europe led to the value of the Euro against the US dollar falling sharply.

The combination of high cotton prices and a weak Euro led to an increase of 9% in 2012 in our average cost of sales for fabric. Just as we did when cotton prices first began to rise, we focused successfully on maintaining margins. Average monthly sales volumes were 9% down in the year, but at prices some 9% higher than in 2011. By prioritising margin above volume and by aggressively controlling overhead expense Hemmers earned pre-tax profits of £807,000 which is by some way the best performance since we acquired the business in 1999. The divisional management and staff are to be congratulated for having achieved this in such difficult conditions.

Continued excellent control of working capital meant that debt was reduced by €529,000 (£451,000) in the year, an amount almost exactly equal to post tax profit less capital expenditure for the year.

Hemmers China

Chinoh-Tex is a textile trading company based in Shanghai and has been trading for four years. It purchases fabric from Chinese suppliers and in 2012 sold to customers in 17 countries.

2012 was another year of growth for Chinoh-Tex with record external sales of £1,758,000 which represented a monthly average 33% higher than in 2011. Gross margin improved modestly to 16.8% (2011: 15.7%) as intercompany sales to Hemmers Europe fell to 29% of total revenue (2011: 39%).

Distribution costs increased as a result of the additional volumes shipped which also necessitated further staff recruitment. Profit before tax of £93,000 is the best achieved in the subsidiary's brief history and, importantly, Chinoh-Tex continues to give valuable assistance to its European parent with the purchasing, inspection and shipping of material.

Available-for-sale investments

The value of the Group's investment in Dawson International PLC ("Dawson") exceeded its cost by £152,000 at 31 May 2011 and this unrealised gain was taken to the available-for-sale reserve. However, at 31 May 2012 the bid price of Dawson's shares was 1.15 pence which meant that the fair value of the Leeds Group holding had fallen to £745,000, or £236,000 below its cost. Since September 2011 the bid price of Dawson shares has been below the price we paid for them, and thus the decline in the value of this investment is, in the opinion of the directors, both significant and prolonged. Accordingly, the unrealised loss in the year is reflected by utilisation of the available-for-sale reserve and an impairment charge of £236,000 to the consolidated statement of comprehensive income.

On 20 July 2012 Dawson issued a statement detailing its inability to reach agreement with regulators regarding the deficit on its pension schemes which has caused the bid price of Dawson shares on 30 July 2012 to fall still further, opening at 0.25 pence at which level the fair value of the Leeds Group holding is £162,000.

Holding Companies' Costs

Costs of the holding companies in the year, net of interest receivable, amounted to £311,000            (2011: £143,000) as follows:

	Year ended 31 May 2012   £000	Eight months ended 31 May 2011 £000
Holding companies' costs net of interest receivable	32	25
Impairment of available-for-sale investment	236	-
Exchange loss/(gain)	43	(7)
Haw Lane legal expenses	-	125
Net holding companies costs	311	143

Fixed Assets

Capital additions in the year amounted to £112,000. Tangible fixed assets in the Consolidated Statement of Financial Position amount to £1,890,000 (2011: £2,171,000).

Working Capital

Working capital comprises inventories, trade and other receivables, and trade and other payables and increased in the year by £534,000. The directors anticipate that working capital will continue to rise to its annual peak over the next few months.

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. The Group was unsuccessful in an appeal in the High Court, and, by a two-to-one majority, in a subsequent hearing in the Court of Appeal. In the past few weeks the Group has been refused permission to appeal to the Supreme Court. It is the opinion of the Directors that the value of the land 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 1.67%) and the other is at a fixed interest rate of 4.07%.  Working capital finance is via short term loans of three months currently attracting interest at approximately 2%.

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

30 July 2012

Consolidated Statement of Comprehensive Income

for the year ended 31 May 2012

	Notes	Year ended 31 May 2012   £000	Eight months ended 31 May 2011 £000
Revenue	6	28,364	19,019
Cost of sales		(22,080)	(14,430)
Gross profit		6,284	4,589
Distribution costs		(2,005)	(1,408)
Administrative expenses		(3,103)	(2,277)
Impairment of available-for-sale investment		(236)	-
Profit from operations		940	904
Finance expense		(140)	(104)
Finance income		18	9
Profit before tax		818	809
Tax expense		(315)	(326)
Profit for the year, attributable to the equity holders of the Parent Company		503	483
Other comprehensive income
Translation differences on foreign operations		(805)	134
Unrealised loss recognised in available-for-sale reserve		(152)	162
Other comprehensive income for the year		(957)	296
Total comprehensive income for the year, attributable to the equity holders of the Parent Company		(454)	779

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 per share for profit attributable to the equity holders of the Company

	Notes	Year ended 31 May 2012   £000	Eight months ended 31 May 2011 £000
Basic and diluted (pence)	3	1.8p	1.7p

Consolidated Statement of Financial Position

at 31 May 2012

	Notes	31 May 2012 £000	31 May 2011 £000
Assets
Non-current assets
Property, plant and equipment		1,890	2,171
Goodwill		896	974
Available-for-sale investments		745	1,133
Total non-current assets		3,531	4,278
Current assets
Inventories		6,416	7,219
Trade and other receivables		6,689	6,424
Cash and cash equivalents		1,967	2,264
Total current assets		15,072	15,907
Total assets		18,603	20,185
Liabilities
Non-current liabilities
Loans and borrowings		(1,836)	(2,122)
Deferred tax		(175)	(123)
Total non-current liabilities		(2,011)	(2,245)
Current liabilities
Trade and other payables		(2,339)	(2,547)
Loans and borrowings		(1,431)	(1,916)
Corporation tax liability		(200)	(133)
Derivative financial liabilities		-	(120)
Total current liabilities		(3,970)	(4,716)
Total liabilities		(5,981)	(6,961)
TOTAL NET ASSETS	6	12,622	13,224

Capital and reserves attributable to equity holders of the Company
Share capital		3,792	3,792
Capital redemption reserve		600	600
Treasury share reserve		(658)	(510)
Available-for-sale reserve		-	152
Foreign exchange reserve		1,097	1,902
Retained earnings		7,791	7,288
TOTAL EQUITY		12,622	13,224

Consolidated Cash Flow Statement

for the year ended 31 May 2012

		Year ended 31 May 2012   £000	Eight months ended 31 May 2011 £000
Cash flows from operating activities
Profit for the year		503	483
Adjustments for:
Depreciation		229	139
Impairment of available-for-sale investment		236	-
Movement in derivative financial liabilities		(118)	(284)
Translation (loss)/gain on cash and cash equivalents		(24)	5
Finance expense		140	104
Finance income		(18)	(9)
Loss on sale of property, plant and equipment		1	17
Income tax expense		315	326
Cash flows from operating activities before changes in working capital and provisions		1,264	781
Decrease in inventories		261	258
(Increase)/decrease  in trade and other receivables		(748)	901
(Decrease)/increase in trade and other payables		(47)	1,051
Cash generated from operating activities		730	2,991
Income taxes paid		(169)	(101)
Net cash flows from operating activities		561	2,890
Investing activities
Purchase of property, plant and equipment		(112)	(124)
Sale of property, plant and equipment		3	23
Bank interest received		18	9
Net cash used in investing activities		(91)	(92)
Financing activities
Purchase of treasury shares		(148)	(47)
Repayment of bank borrowings		(479)	(2,575)
Bank interest paid		(140)	(104)
Net cash (used)/generated in financing activities		(767)	(2,726)
Net (decrease)/increase in cash and cash equivalents		(297)	72
Cash and cash equivalents at beginning of the year		2,264	2,192
Cash and cash equivalents at end of the year		1,967	2,264

Analysis of Net Debt
Cash and cash equivalents		1,967	2,264
Non-current loans and borrowings		(1,836)	(2,122)
Current loans and borrowings		(1,431)	(1,916)
Net debt at 31 May		(1,300)	(1,774)

Consolidated Statement of Changes in Equity

for the year ended 31 May 2012

	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 2010		540	(572)	(10)	1,768	6,914	12,492
Profit for the period	-	-	-	-	-	483	483
Other comprehensive income*	-	-	-	162	134	-	296
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
Profit for the year	-	-	-	-	-	503	503
Other comprehensive income*	-	-	-	(152)	(805)	-	(957)
Purchase of treasury shares	-	-	(148)	-	-	-	(148)
At 31 May 2012	3,792	600	(658)	-	1,097	7,791	12,622

* The components of other comprehensive income are disclosed as part of the consolidated statement of comprehensive income.

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

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

	Year ended 31 May 2012	Eight months ended 31 May 2011
Numerator
Profit for the year from continuing operations, being the earnings used in basic and diluted earnings per share	£503,000	£483,000
Denominator
Weighted average number of shares used in basic and diluted earnings per share (excluding treasury shares)	28,365,763	28,847,819
Basic and diluted earnings per share	1.8p	1.7p

4.                 The financial information set out above does not constitute the company's statutory accounts for 2012 or 2011.

Statutory accounts for the year ended 31 May 2012 and the eight months ended 31 May 2011 have been reported on by the Independent Auditors. 

The Independent Auditors' Report on the Annual Report and Financial Statements for both 2012 and 2011 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 eight months ended 31 May 2011 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 May 2012 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.

6.                 Segmental information

Year ended 31 May 2012	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	26,606	1,758	-	28,364	-	-	-	28,364
Inter-segmental revenue	-	711	(711)	-	-	-	-	-
Cost of sales	(20,850)	(2,054)	706	(22,198)	-	118	-	(22,080)
Gross profit	5,756	415	(5)	6,166	-	118	-	6,284
Distribution costs	(1,856)	(149)	-	(2,005)	-	-	-	(2,005)
Admin expenses	(2,796)	(173)	-	(2,969)	(250)	-	116	(3,103)
Impairment of a-f-s investment	-	-	-	-	(236)	-	-	(236)
Profit from operations	1,104	93	(5)	1,192	(486)	118	116	940
Finance expense	(140)	-	-	(140)	-	-	-	(140)
Finance income	-	-	-	-	18	-	-	18
Internal interest	(157)	-	-	(157)	157	-	-	-
Profit before tax	807	93	(5)	895	(311)	118	116	818

						IFRS adjustments
At 31 May 2012	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	1,873	17	-	1,890	-	-	-	1,890
Goodwill	277	-	-	277	-	-	619	896
A-f-s investments	-	-	-	-	745	-	-	745
Inventories	6,395	49	(28)	6,416	-	-	-	6,416
Trade receivables	5,177	290	-	5,467	-	-	-	5,467
Other receivables	1,070	135	-	1,205	17	-	-	1,222
Cash & equivalents	366	131	-	497	1,470	-	-	1,967
Total assets	15,158	622	(28)	15,752	2,232	-	619	18,603
Group loans & current accounts	(1,805)	(166)	-	(1,971)	1,971	-	-	-
Derivative financial liabilities	-	-	-	-	-	-	-	-
Non-current liabilities	(1,836)	-	-	(1,836)	-	-	(175)	(2,011)
Trade payables	(1,428)	(137)	-	(1,565)	-	-	-	(1,565)
Other payables	(577)	(38)	-	(615)	(159)	-	-	(774)
Corporation tax	(192)	(8)	-	(200)	-	-	-	(200)
Loans & borrowings	(1,431)	-	-	(1,431)	-	-	-	(1,431)
Total liabilities	(7,269)	(349)	-	(7,618)	1,812	-	(175)	(5,981)
Net assets	7,889	273	(28)	8,134	4,044	-	444	12,622

						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

	Year ended 31 May 2012			Eight months ended 31 May 2011
	Hemmers Europe £000	Hemmers China £000	Group total £000	Hemmers Europe £000	Hemmers China £000	Group total £000
Germany	14,697	349	15,046	10,637	73	10,710
Netherlands	2,088	-	2,088	1,339	-	1,339
France	1,269	-	1,269	1,109	-	1,109
Spain	881	239	1,120	535	64	599
Austria	935	121	1,056	655	-	655
Sweden	608	-	608	291	-	291
Serbia	525	-	525	166	-	166
Switzerland	519	-	519	268	-	268
Denmark	486	-	486	376	-	376
Croatia	408	-	408	290	-	290
Portugal	336	-	336	225	-	225
Belgium	309	-	309	208	-	208
Greece	306	-	306	256	-	256
USA	95	180	275	113	135	248
Finland	263	-	263	178	-	178
Canada	134	92	226	42	25	67
Czech Republic	167	-	167	150	7	157
Russia	31	118	149	47	-	47
42 other countries	1,095	471	1,566	758	359	1,117
	25,152	1,570	26,722	17,643	663	18,306
UK	1,454	188	1,642	495	218	713
Total revenue	26,606	1,758	28,364	18,138	881	19,019

Other information

	Year ended 31 May 2012			Eight months ended 31 May 2011
	Hemmers Europe £000	Hemmers China £000	Group total £000	Hemmers Europe £000	Hemmers China £000	Group total £000
Additions to property, plant & equipment	109	3	112	124	-	124
Depreciation	220	9	229	133	6	139

 

END

 

 

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