Final Results

RNS Number : 3868K

Leeds Group PLC

30 July 2013

 



30 July 2013

Leeds Group plc

("the Group")

Final Results

Financial Highlights

q Profit before tax (excluding impairment charges) was £1,440,000 (2012:  £1,054,000).

q An impairment charge of £745,000 (2012: £236,000) against available-for-sale investments reduced the Group profit before tax to £695,000 (2012:  £818,000).

q Sales volumes were 13.2 million metres (2012: 12.2 million metres).

q Hemmers Europe sales were £28,209,000 (2012: £26,606,000) and pre-tax profit was £1,056,000 (2012: £807,000).

q ChinohTex increased external sales by 67% to £2,931,000 (2012: £1,758,000) and earned pre-tax profit of £261,000 (2012: £93,000).

q Net bank debt reduced to £390,000 (2012: £1,300,000).

q 120,000 shares were bought back in the year at a cost of £23,000.

q Net asset value per share (excluding treasury shares) increased to 49.1 pence (2012: 45.4 pence).

q Earnings per share were 1.0 pence (2012:  1.8 pence).

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

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

Chairman's Statement

I am pleased to present the results of the year ended 31 May 2013.

Results

In the year ended 31 May 2013 the Group made a profit after tax of £283,000 ( 2012: £503,000).

Pre-tax profit from trading operations (excluding impairment charges) grew impressively to £1,440,000 (2012: £1,054,000) but the overall result was severely influenced by the need to write off the Group's investment in Dawson International PLC ("Dawson") following that company's appointment of administrators in August 2012 because of its pension schemes' deficit. The Group's investment in Dawson was carried in the balance sheet at 31 May 2012 at £745,000, and the write-off is not deductible for tax purposes.

Net asset value per share at 31 May 2013 was 49.1 pence ( 2012: 45.4 pence), and earnings per share for the year were 1.0 pence (2012:1.8 pence). 

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

Total fabric sales in the year by Hemmers Europe were 11.7 million linear metres, which compares with 11.2 million metres achieved in the year ended 31 May 2012. This growth of 4.5% is impressive at a time when demand remained depressed in the face of continuing unfavourable economic conditions and was achieved while preserving the rate of gross margin of the previous year. Overhead expenditure was strictly controlled so that profit before tax grew by 31% to £1,056,000 (2012: £807,000).  This excellent trading performance, coupled with continuing focus on working capital control, enabled bank debt to be reduced by €1,478,000 (£1,213,000) to €2,134,000 (£1,825,000).

ChinohTex, the Hemmers subsidiary based in Shanghai, made great progress in the year and once again achieved by far its highest sales revenue in its short history. Fabric sales of 1.5 million metres represent an increase of 50% over last year and  pre-tax profit grew to £261,000 (2012: £93,000). In just five years this subsidiary has grown from nothing to become an authentic profit centre, and continues to provide valuable assistance to its European parent in terms of purchasing, inspection and shipping of material.

Share Buy-back

The Group has continued to use the authority granted by shareholders to purchase its own shares, and during the year 120,000 shares were acquired at a cost of £23,000. Group shares held in treasury at 31 May 2013 totalled 3,925,658, representing 12.4% of the 31,600,000 total shares in issue.

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 for their continued hard work and commitment that has resulted in a highly satisfactory result in difficult economic conditions.

Outlook

In the current year we have identified potential growth opportunities for Hemmers in certain territories and intend to invest in additional sales people to realise that potential for the long term. It is possible, however, that the cost of recruiting and employing these people may, in the short term, hold back profit growth.

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

Kathryn Davenport

Chairman

29 July 2013

 

Operating and Financial Review

 

Group result

Group revenue in the year ended 31 May 2013 amounted to £31,140,000 (2012: £28,364,000) and Group profit before tax was £695,000 (2012: £818,000) after an impairment charge of £745,000 (2012: £236,000) relating to the Group's investment in Dawson International Limited. The impairment charge of £745,000 is not tax-deductible and is equal to 2.7p per share.

The tax charge in the year was £412,000 of which £31,000 was deferred tax relating to temporary timing differences on goodwill. Earnings per share were 1.0 pence (2012: 1.8 pence).

Hemmers Europe

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

Sales volumes increased in the year by 4.5% to 11.7 million linear metres, and this increase owed much to a welcome increase in demand from the retail sector, and to the success of the recently launched "Kid's Collection" of fabrics. In Euro terms, pre-tax profit in the year increased by 35% to €1,287,000 (£1,056,000) and the increased volume was the major cause of this impressive result.

In Euro terms, average sales and cost prices rose by 5.4% and 7.4% respectively as a result of a trend towards higher quality fabrics rather than increases in the list prices of either Hemmers or its suppliers. Gross margin was 21.66%, little changed from 21.63% achieved in 2012.

As ever, our German management team maintained close control of overhead expenditure that, in Euro terms, increased by 7.4% as a result of the sales volume increases and modest cost inflation. Interest expense fell in the year partly because interest rates remain low, but also as a result of reduced borrowings. Bank debt was reduced in the year by €1,478,000 (£1,213,000) and has fallen in the past two years by more than €2 million (1.7 million).

Hemmers China

Chinoh-Tex is a textile trading company based in Shanghai and has been trading for five years. It purchases fabric from Chinese suppliers and in 2013 sold to customers in 23 countries.

2013 was a year of exceptional growth for Chinoh-Tex, with record external sales of £2,931,000 which represented an increase of 67% over 2012. Almost half of the sales growth was achieved in USA, and this important market accounted for 24% of 2013 sales. Significant growth was also achieved in Australia, Bulgaria, France, Russia, Germany and Spain.

Gross margin improved to 19.0% (2012: 16.8%) as intercompany sales to Hemmers Europe fell to 18% of total revenue (2012: 29%). Overhead costs increased by 30% as a result of the additional volumes shipped which also necessitated further staff recruitment. Profit before tax of £261,000 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

Available-for-sale investments at 31 May 2012 comprised a holding of 64,750,000 ordinary shares in Dawson International PLC ("Dawson"), an AIM listed company, representing approximately 28.8% of the total issued ordinary share capital of that company. At that date the investment was carried at £745,000.

On 20 July 2012 Dawson issued a statement detailing its inability to reach agreement with regulators regarding the deficit on its pension schemes. Subsequently, on 8 August 2012, the directors of Dawson announced that the actuary to those pension schemes had served Notices of Determination on both Dawson and its UK trading subsidiary, Dawson International Trading Limited.

On 15 August the directors of Dawson announced that they had appointed KPMG as administrators. In these circumstances, the Board of Leeds Group felt it necessary to provide in full against its investment in Dawson.

Holding Companies' Costs

Costs of the holding companies in the year, net of interest receivable, amounted to £733,000            (2012: £311,000) as follows:

	Year ended 31 May 2013   £000	Year ended 31 May 2012 £000
Holding companies' costs net of interest receivable	20	32
Impairment of available-for-sale investment	745	236
Exchange (gain)/loss	(32)	43
Net holding companies costs	733	311

Fixed Assets

Capital additions in the year amounted to £209,000. Tangible fixed assets in the Consolidated Statement of Financial Position amount to £2,004,000 (2012: £1,890,000).

Working Capital

Working capital comprises inventories, trade and other receivables, and trade and other payables and increased marginally in the year by £53,000. The directors anticipate that working capital will now rise to its annual peak over the next few months.

Net asset value

Net assets increased in the year by £958,000 as follows

	Net assets £000	Per share pence
At 31 May 2012	12,622	45.4
Post tax profit from trading operations	1,028	3.7
Impairment of available-for-sale  investment	(745)	(2.7)
Translation differences	698	2.5
At 31 May 2013	13,603	48.9

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 1.11%) 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 1.5%.

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

29 July 2013

 

 

Consolidated Statement of Comprehensive Income

for the year ended 31 May 2013

		Audited Year ended 31 May 2013   £000	Audited Year ended 31 May 2012   £000
Revenue		31,140	28,364
Cost of sales		(24,350)	(22,080)
Gross profit		6,790	6,284
Distribution costs		(2,043)	(2,005)
Administrative expenses		(3,224)	(3,103)
Impairment of available-for-sale investment		(745)	(236)
Profit from operations		778	940
Finance expense		(95)	(140)
Finance income		12	18
Profit before tax		695	818
Tax expense		(412)	(315)
Profit for the year attributable to the equity holders of the Parent Company		283	503
Other comprehensive income
Translation differences on foreign operations		698	(805)
Unrealised loss recognised in available-for-sale reserve		-	(152)
Other comprehensive income for the year		698	(957)
Total comprehensive income for the year attributable to the equity holders of the Parent Company		981	(454)

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

	Note	Audited Year ended 31 May 2013   £000	Audited Year ended 31 May 2012   £000
Basic and diluted (pence)	3	1.0p	1.8p

 

 

Consolidated Statement of Financial Position

at 31 May 2013

	Note	Audited 31 May 2013 £000	Audited 31 May 2012 £000
Assets
Non-current assets
Property, plant and equipment		2,004	1,890
Goodwill		955	896
Available-for-sale investments		-	745
Total non-current assets		2,959	3,531
Current assets
Inventories		6,551	6,416
Trade and other receivables		6,920	6,689
Cash and cash equivalents		2,334	1,967
Total current assets		15,805	15,072
Total assets		18,764	18,603
Liabilities
Non-current liabilities
Loans and borrowings		(1,829)	(1,836)
Deferred tax		(219)	(175)
Total non-current liabilities		(2,048)	(2,011)
Current liabilities
Trade and other payables		(1,979)	(2,339)
Loans and borrowings		(895)	(1,431)
Corporation tax liability		(262)	(200)
Total current liabilities		(3,136)	(3,970)
Total liabilities		(5,184)	(5,981)
TOTAL NET ASSETS	6	13,580	12,622

Capital and reserves attributable to equity holders of the Company
Share capital		3,792	3,792
Capital redemption reserve		600	600
Treasury share reserve		(681)	(658)
Foreign exchange reserve		1,795	1,097
Retained earnings		8,074	7,791
TOTAL EQUITY		13,580	12,622

Consolidated Cash Flow Statement

for the year ended 31 May 2013

	Note	Audited Year ended 31 May 2013   £000	Audited Year ended 31 May 2012   £000
Cash flows from operating activities
Profit for the year		283	503
Adjustments for:
Depreciation		215	229
Impairment of available-for-sale investment		745	236
Movement in derivative financial liabilities		-	(118)
Finance expense		95	140
Finance income		(12)	(18)
(Profit)/loss on sale of property, plant and equipment		(1)	1
Income tax expense		412	315
Cash flows from operating activities before changes in working capital and provisions		1,737	1,288
Decrease in inventories		268	261
Decrease/(increase)  in trade and other receivables		190	(748)
Decrease in trade and other payables		(511)	(47)
Cash generated from operating activities		1,684	754
Income taxes paid		(334)	(169)
Net cash flows from operating activities		1,350	585
Investing activities
Purchase of property, plant and equipment		(209)	(112)
Sale of property, plant and equipment		2	3
Bank interest received		12	18
Net cash used in investing activities		(195)	(91)
Financing activities
Purchase of treasury shares		(23)	(148)
Repayment of bank borrowings		(724)	(479)
Bank interest paid		(95)	(140)
Net cash used in financing activities		(842)	(767)
Net increase/(decrease) in cash and cash equivalents	18	313	(273)
Translation gain/(loss) on cash and cash equivalents		54	(24)
Cash and cash equivalents at beginning of the year	18	1,967	2,264
Cash and cash equivalents at end of the year	18	2,334	1,967

Analysis of Net Debt
Cash and cash equivalents		2,334	1,967
Non-current loans and borrowings		(1,829)	(1,836)
Current loans and borrowings		(895)	(1,431)
Net debt at 31 May		(390)	(1,300)

Consolidated Statement of Changes in Equity

for the year ended 31 May 2013

	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 31 May 2011 - audited	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 - audited	3,792	600	(658)	-	1,097	7,791	12,622
Profit for the year	-	-	-	-	-	283	283
Other comprehensive income*	-	-	-		698	-	698
Purchase of treasury shares	-	-	(23)	-	-	-	(23)
At 31 May 2013 - audited	3,792	600	(681)	-	1,795	8,074	13,580

* 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 2013	Year ended 31 May 2012
Numerator
Profit for the year from continuing operations, being the earnings used in basic and diluted earnings per share	£283,000	£503,000
Denominator
Weighted average number of shares used in basic and diluted earnings per share (excluding treasury shares)	27,775,274	28,365,763
Basic and diluted earnings per share	1.0p	1.8p

4.                 The financial information set out above does not constitute the company's statutory accounts for 2013 or 2012.

Statutory accounts for the years ended 31 May 2013 and 31 May 2012 have been reported on by the Independent Auditors. 

The Independent Auditors' Report on the Annual Report and Financial Statements for both 2013 and 2012 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.

5.                 Statutory accounts for the year ended 31 May 2012 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 May 2013 will be delivered to the Registrar in due course. 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

						IFRS adjustment
Year ended 31 May 2013	Hemmers Europe       £000	Hemmers China £000	Inter segmental £000	Total Hemmers £000	Holding companies £000	Goodwill amortisation         £000	Group total £000
External revenue	28,209	2,931	-	31,140	-	-	31,140
Inter-segmental revenue	-	638	(638)	-	-	-	-
Cost of sales	(22,100)	(2,890)	640	(24,350)	-	-	(24,350)
Gross profit	6,109	679	2	6,790	-	-	6,790
Distribution costs	(1,859)	(184)	-	(2,043)	-	-	(2,043)
Admin expenses	(2,949)	(234)	-	(3,183)	(150)	109	(3,224)
Impairment of a-f-s investment	-	-	-	-	(745)	-	(745)
Profit from operations	1,301	261	2	1,564	(895)	109	778
Finance expense	(95)	-	-	(95)	-	-	(95)
Finance income	-	-	-	-	12	-	12
Internal interest	(150)	-	-	(150)	150	-	-
Profit before tax	1,056	261	2	1,319	(733)	109	695

						IFRS adjustment
At 31 May 2013	Hemmers Europe       £000	Hemmers China £000	Inter segmental £000	Total Hemmers £000	Holding companies £000	Goodwill amortisation         £000	Group total £000
Property, plant & equipment	1,994	10	-	2,004	-	-	2,004
Goodwill	182	-	-	182	-	773	955
Inventories	6,491	87	(27)	6,551	-	-	6,551
Trade receivables	5,113	323	-	5,436	-	-	5,436
Other receivables	1,006	460	-	1,466	18	-	1,484
Cash & equivalents	899	173	-	1,072	1,262	-	2,334
Total assets	15,685	1,053	(27)	16,711	1,280	773	18,764
Group loans & current accounts	(2,046)	(124)	-	(2,170)	2,170	-	-
Non-current liabilities	(1,829)	-	-	(1,829)	-	(219)	(2,048)
Trade payables	(881)	(306)	-	(1,187)	-	-	(1,187)
Other payables	(618)	(121)	-	(739)	(53)	-	(792)
Corporation tax	(251)	(11)	-	(262)	-	-	(262)
Loans & borrowings	(895)	-	-	(895)	-	-	(895)
Total liabilities	(6,520)	(562)	-	(7,082)	2,117	(219)	(5,184)
Net assets	9,165	491	(27)	9,629	3,397	554	13,580

						IFRS adjustments
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

 Analysis of revenue by destination

	Year ended 31 May 2013			Year ended 31 May 2012
	Hemmers Europe £000	Hemmers China £000	Group total £000	Hemmers Europe £000	Hemmers China £000	Group total £000
Germany	16,788	459	17,247	14,697	349	15,046
Netherlands	1,735	-	1,735	2,088	-	2,088
France	1,283	133	1,416	1,269	-	1,269
Spain	923	321	1,244	881	239	1,120
Austria	730	91	821	935	121	1,056
USA	85	691	776	95	180	275
Sweden	644	2	646	608	-	608
Switzerland	581	6	587	519	-	519
Denmark	543	-	543	486	-	486
Serbia	482	-	482	525	-	525
Belgium	425	-	425	309	-	309
Croatia	323	-	323	408	-	408
Finland	322	-	322	263	-	263
Portugal	273	-	273	336	-	336
Bulgaria	25	235	260	12	113	125
Russia	-	228	228	31	118	149
Greece	208	-	208	306	-	306
Czech Republic	195	-	195	167	-	167
China	16	167	183	1	115	116
Australia	48	101	149	30	25	55
Colombia	107	35	142	75	-	75
34 other countries	1,127	229	1,356	1,111	310	1,421
	26,863	2,698	29,561	25,152	1,570	26,722
UK	1,346	233	1,579	1,454	188	1,642
Total revenue	28,209	2,931	31,140	26,606	1,758	28,364

Other information

	Year ended 31 May 2013			Year ended 31 May 2012
	Hemmers Europe £000	Hemmers China £000	Group total £000	Hemmers Europe £000	Hemmers China £000	Group total £000
Additions to property, plant & equipment	208	1	209	109	3	112
Depreciation	207	8	215	220	9	229

 

END

 

 

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