Final Results
Leeds Group PLC
19 December 2007
Issued on behalf of Leeds Group plc
Date: Wednesday, 19 December 2007
Embargoed: 7.00am
LEEDS GROUP plc
Preliminary Results for the year ended 30 September 2007
• Group profit before tax was £760,000 (2006: £743,000 before exceptional
costs of £838,000).
• Hemmers-Itex sales were 7.4% higher at £17,523,000 (2006: £16,320,000)
and profit before tax was £662,000 (2006: £712,000).
• Investment in people and infrastructure taking place at Hemmers-Itex to
exploit growth opportunities.
• Further reductions of £42,000 in Central Costs.
• 3,325,618 shares bought back in the year at a cost of £735,000, of which
1,698,603 shares were cancelled.
• Net asset value per share increased by 10% to 34.4 pence.
• Earnings per share from Continuing Operations were 1.5 pence (2006:1.0 pence).
• No dividend proposed while Board continues search for suitable investment
opportunities.
'The Board continues to look for other acquisitions or investments that will
strengthen the Group and benefit shareholders. In the meantime, Hemmers-Itex
continues to perform in line with the expectations of both its management and
the Board.'
Ewen Wigley, Chairman
FULL STATEMENTS ATTACHED
Enquiries:
Leeds Group plc Citigate Dewe Rogerson
Malcolm Wilson, Company Secretary Fiona Tooley
Tel: 0113 391 9000 or 07801 224618 Tel: 0121 455 8370 or 07785 703523
Ewen Wigley, Chairman
Tel: 07815 134466
Seymour Pierce Limited
Sarah Jacobs
Tel: 020 7107 8000
-2-
Leeds Group plc
Preliminary Results
STATEMENT BY THE CHAIRMAN, EWEN WIGLEY
Results
2007 was a year of continued satisfactory trading performance for the Group.
Profit before tax for the Group was £760,000, compared with £743,000 in the
previous year before exceptional costs of £838,000. Continuing operations made
an operating profit of £643,000 (2006: £645,000). The beneficial effect of the
share buy-back programme discussed below and a lower effective tax rate mean
that the earnings per share from continuing operations were 1.5 pence (2006: 1.0
pence)
Hemmers-Itex increased their sales by 7.4% to £17,523,000 (2006: £16,320,000).
Profit before tax was £662,000 (2006: £712,000) with an improved underlying
performance by the business held back by some costs incurred at the end of the
financial year in anticipation of growth in 2008.
When Leeds Leasing was sold in October 2005, £500,000 of the sale price was held
in escrow. That amount, together with accrued interest, was released in April
2007 as no claims had been made against the Group under the general warranties
given in the terms of the sale agreement.
Strategic Developments
We continue to identify opportunities to grow the Hemmers-Itex business in a
profitable manner. The demise of a competitor during 2007 has provided such an
opportunity, and Hemmers-Itex is investing in both staff and infrastructure in
order to take advantage of the potential for growth.
The Group has continued to take advantage of the authority, granted at the last
Annual General Meeting, to purchase its own shares into Treasury. During the
year, Leeds Group purchased a total of 3,325,618 shares for a cost, including
expenses, of £735,000. The acquisition of these shares increased the net asset
value per share for the remaining shareholders by 3.5% to 34.4 pence per share.
Following the cancellation of 1,698,603 Treasury shares during the year, the
Group now has 34,900,000 shares in issue, of which 3,467,015 are held in
Treasury. Subject to shareholder approval of the necessary resolution at the
forthcoming Annual General Meeting, the Board intends to continue to buy back
shares whenever the opportunity arises. The maximum number of shares which the
Board currently seeks to buy back in the coming year is 4,825,000 and the
maximum price to be paid for an ordinary share is an amount equal to not more
than 105 per cent of the average middle market quotations for an ordinary share
taken from The London Stock Exchange Daily Official List for the five business
days immediately preceding the date of purchase. In buying back the Company's
shares, the Board is returning capital to those shareholders who wish to sell
their shares whilst improving the net asset value per share of the remaining
shareholders.
Dividend
It is currently the intention of the Board to seek opportunities to maximise the
long-term value of the Group by identifying appropriate investments. In the
light of such a policy, the Directors do not propose a dividend.
Directors and Employees
On behalf of shareholders, I would like to thank the management and staff of
Hemmers-Itex for their efforts during a year which saw continued growth in their
business.
Outlook
The Board continues to look for other acquisitions or investments that will
strengthen the Group and benefit shareholders. In the meantime, Hemmers-Itex
continues to perform in line with the expectations of both its management and
the Board.
Ewen Wigley
Chairman
19 December 2007
-3-
Leeds Group plc
Preliminary Results
OPERATING AND FINANCIAL REVIEW
Group Result
Group turnover in continuing operations increased in the year by 7.4% to
£17,523,000 (2006: £16,320,000).
Profit before tax was £760,000 (2006: loss £95,000 after exceptional costs of
£838,000). Profits in Hemmers-Itex, the Group's principal trading operation,
were 7% lower than in the previous year and the small improvement in the Group's
overall profit before exceptional items is attributable to further reductions in
central costs and increased interest income in the parent company.
The tax charge in the year was £245,000 (2006: £352,000 including £75,000 UK
deferred tax charge).
Earnings per share from continuing operations items were 1.5 pence (2006: 1.0
pence).
Hemmers-Itex
This German-based subsidiary is engaged in the import, warehousing and
wholesaling of fabrics. In another successful year, fabric sales grew by 4.5% to
11.5 million linear metres. Although market conditions remained difficult in the
year for our retail customers, Hemmers-Itex obtained further increases in sales
to the ready-made manufacturing sector and overall turnover increased by 4.4% to
€25.1million (2006: €24.1 million). With Sterling having depreciated during the
year, reported sales in Sterling show an increase of 7.4%.
Gross margin was 23.6%, fractionally ahead of the 23.1% achieved last year, and
our German management team once again demonstrated their commitment to strict
control of overheads. Profit before tax was £662,000 (2006: £712,000) and there
would undoubtedly have been profit growth but for costs incurred in preparing to
exploit the growth opportunities described below.
During the year the lease expired on the property in Cologne occupied by KMT
Stoffe, the Hemmers-Itex subsidiary acquired in 2004, and the management took
this opportunity to achieve operational economies by relocating the business to
the principal facility at Nordhorn.
We face the future with confidence. In the fourth quarter of the year a
competitor company ceased operations and Hemmers-Itex moved quickly to recruit
several senior salespeople and to appoint several former sales agents of that
competitor. In total, the headcount at Hemmers-Itex grew in the year by 21 to 93
people. To handle the increased volumes now anticipated for 2008 and beyond, the
Directors have approved an increase in the size of the Nordhorn facility, a
project that we expect to be completed in 2008 at a cost of approximately £1.85
million.
Head Office costs
The table below illustrates the continuing downward trend in head office costs.
2007 2006 2005 2004 2003
£000 £000 £000 £000 £000
Head office expenses 242 262 373 545 556
Exchange loss/(gain) (13) 9 2 56 (112)
----------------------------------------
Administrative expenses 229 271 375 601 444
Interest income (327) (281) (140) (179) (369)
----------------------------------------
Net head office (income)/costs before
exceptional (98) (10) 235 422 75
items and tax
Exceptional items - - (135) 1,431 77
----------------------------------------
Net head office (income)/costs before
tax (note 2) (98) (10) 100 1,853 152
----------------------------------------
-4-
Leeds Group plc
Preliminary Results
OPERATING AND FINANCIAL REVIEW (continued)
Textile Manufacturing
The withdrawal from textile manufacture is now complete, with very few issues
remaining outstanding. The Langholm Dyeing business was sold to its management
in February 2002, and the Group remains entitled to participate to a maximum of
£375,000 in the proceeds of any onward sale completed before December 2008. The
Group owns the freehold title to a plot of land of approximately 5 acres
adjacent to the site of the former Scott & Rhodes factory in Yeadon, and during
the year Leeds City Council resolved to register this land as a town or village
green. The Directors are seeking a judicial review of that decision, and
meanwhile are of the opinion that, in its current use, the value of the land is
negligible.
Fixed Assets
Capital additions in the year amounted to £155,000 (2006: £42,000). Tangible
fixed assets in the Balance Sheet amount to £308,000 (2006: £245,000). A project
to enlarge the Hemmers-Itex facility was approved in September 2007, and this is
expected to be completed during 2008 at a cost of approximately £1,850,000.
Working Capital
At constant exchange rates, working capital increased during the year by
£652,000 of which £490,000 reflects higher stockholding in Hemmers-Itex made
necessary by increased sales volumes in 2007 and the further increases expected
in 2008.
Debt Profile
The funding policy of the Group continues to be to match its funding requirement
in trading subsidiaries in a cost-effective fashion with an appropriate
combination of short and longer-term debt. The Group's net cash balances at 30
September 2007 can be analysed as follows:
Holding Hemmers- Total
Companies Itex Group
£000 £000 £000
Cash 4,002 762 4,764
Overdrafts - (70) (70)
------------------------------
Total on demand 4,002 692 4,694
Fixed rate loans due within one year - (1,465) (1,465)
Fixed rate loans due after more than one year - (1,569) (1,569)
------------------------------
Net cash balances 4,002 (2,342) 1,660
------------------------------
Bank debt in the subsidiaries is unsecured and without recourse to the Parent
Company.
International Financial Reporting Standards (IFRS)
Action is in hand to ensure that the Group is able to meet the requirement to
report in future under IFRS, commencing with the next Interim Report that will
cover the six months ending 31 March 2008.
Ewen Wigley
Director
19 December 2007
-5-
Leeds Group plc
Preliminary Results
Consolidated Profit and Loss Account
for the year ended 30 September 2007
2007 2006 2006 2006
Continuing Continuing Discontinued Total
operations operations operations £000
£000 £000 £000
Turnover 17,523 16,320 255 16,575
Cost of sales (13,392) (12,546) (24) (12,570)
-------- -----------------------------------
Gross profit 4,131 3,774 231 4,005
Distribution costs (1,096) (874) - (874)
Administrative expenses (2,392) (2,255) (125) (2,380)
-------- -----------------------------------
Operating profit 643 645 106 751
Exceptional loss on sale of a
business operation - - (838) (838)
-------- -----------------------------------
Profit/(loss) before interest 643 645 (732) (87)
-------------------------
Interest receivable and
similar income 238 207
Interest payable and similar
charges (121) (215)
-------- --------
Profit/(loss) on ordinary
activities before taxation 760 (95)
Taxation on profit/(loss) on
ordinary activities (245) (352)
-------- --------
Profit/(loss) for the
financial year 515 (447)
-------- --------
Basic and diluted earnings/
(loss) per share 2007 2006
From continuing and discontinued
activities:
before exceptional items 1.5p 1.1p
exceptional items in discontinued
activities - (2.4)p
-------- --------
after exceptional items 1.5p (1.3)p
-------- --------
-------- --------
From continuing activities 1.5p 1.0p
-------- --------
Consolidated Statement of
Recognised Gains and Losses
for the year ended
30 September 2007 2007 2006
£000 £000
Profit/(loss) for the financial
year 515 (447)
Foreign currency translation
differences 167 (33)
-------- --------
Total recognised gains and
losses relating to the
financial year 682 (480)
-------- --------
-6-
Leeds Group plc
Preliminary Results
Balance Sheets
at 30 September 2007
Group Company
2007 2006 2007 2006
Fixed assets
Intangible assets 683 757 - -
Tangible assets 308 245 1 2
Investments - - 4,300 3,681
------------------------------------
991 1,002 4,301 3,683
------------------------------------
Current assets
Stock 5,172 4,552 - -
Debtors 4,344 3,990 918 883
Cash at bank and in hand 4,764 4,706 4,002 4,682
------------------------------------
14,280 13,248 4,920 5,565
Creditors: amounts falling due (2,880) (3,375) (580) (1,136)
within one year
------------------------------------
Net current assets (all due within one
year) 11,400 9,873 4,340 4,429
------------------------------------
Total assets less current liabilities 12,391 10,875 8,641 8,112
Creditors: amounts falling due (1,569) - - -
after more than one year
------------------------------------
Net assets 10,822 10,875 8,641 8,112
------------------------------------
Capital and reserves
Called up equity share capital 4,188 4,392 4,188 4,392
Capital redemption reserve 204 - 204 -
Profit & loss account 6,430 6,483 4,249 3,720
------------------------------------
Equity shareholders' funds 10,822 10,875 8,641 8,112
------------------------------------
Reconciliation of movements in equity shareholders' funds
Profit/(loss) for the financial year 515 (447) 1,264 3,297
Purchase of own shares for treasury (735) (289) (735) (289)
Foreign currency translation differences 167 (33) - -
------------------------------------
Net transfer (from)/to equity
shareholders' funds (53) (769) 529 3,008
Opening equity shareholders' funds 10,875 11,644 8,112 5,104
------------------------------------
Closing equity shareholders' funds 10,822 10,875 8,641 8,112
------------------------------------
-7-
Leeds Group plc
Preliminary Results
Consolidated Cash Flow Statement
for the year ended 30 September 2007 2007 2006
£000 £000
Cash inflow from operating activities 174 324
Return on investments and servicing of finance 117 (8)
Taxation (482) (431)
Capital expenditure and financial investment (143) (18)
Acquisitions and disposals - 5,001
---------------------
Cash (outflow)/inflow before financing (334) 4,868
Financing 652 (435)
---------------------
Increase in cash in the year 318 4,433
---------------------
Reconciliation of Net Cash Flow to Movement in Net Debt
2007 2006
£000 £000
Increase in cash in the year 318 4,433
Net (increase)/decrease in loans (1,387) 146
-----------------------
Change in net cash resulting from cash flows (1,069) 4,579
Net debt disposed of with subsidiary - 14,571
Foreign currency translation difference (54) 15
-----------------------
Movement in net cash (1,123) 19,165
Net cash/(net debt) at beginning of the year 2,783 (16,382)
-----------------------
Net cash at end of the year 1,660 2,783
-----------------------
Reconciliation of Operating Profit to Operating Cash Flows
2007 2006
£000 £000
Operating profit 643 751
Depreciation of fixed assets 94 103
Amortisation of goodwill 96 91
Profit on sale of tangible fixed assets (7) (4)
Increase in stocks (490) (407)
(Increase)/decrease in debtors (241) 136
Increase/(decrease) in creditors 79 (316)
Increase in finance lease debtors - (30)
---------------------
Net cash inflow from operating activities 174 324
---------------------
-8-
Leeds Group plc
Preliminary Results
Notes
1. The Directors do not recommend the payment of a dividend.
2. The tables below set out a segmental analysis of the Group's operations.
2007 Hemmers Unallocated Group
-Itex central costs Total
£000 £000 £000
Turnover 17,523 - 17,523
Cost of sales (13,392) - (13,392)
-------------------------------------------
Gross profit 4,131 - 4,131
Distribution costs (1,096) - (1,096)
Administrative expenses (2,163) (229) (2,392)
-------------------------------------------
Operating profit/(loss) 872 (229) 643
Net interest (payable)/receivable (210) 327 117
-------------------------------------------
Profit before taxation 662 98 760
-------------------------------------------
2006 Leeds Hemmers Unallocated Group
Leasing -Itex central costs Total
£000 £000 £000 £000
Turnover 255 16,320 - 16,575
Cost of sales (24) (12,546) - (12,570)
---------------------------------------------
Gross profit 231 3,774 - 4,005
Distribution costs - (874) - (874)
Administrative expenses (125) (1,984) (271) (2,380)
---------------------------------------------
Operating profit/(loss) 106 916 (271) 751
Profit on sale of a business
operation (838) - - (838)
---------------------------------------------
(Loss)/profit before interest (732) 916 (271) (87)
Net interest (payable)/receivable (85) (204) 281 (8)
---------------------------------------------
(Loss)/profit before taxation (817) 712 10 (95)
---------------------------------------------
2007 Hemmers Holding Group
-Itex Companies Total
£000 £000 £000
Intangible fixed assets 683 - 683
Tangible fixed assets 307 1 308
Working capital 8,387 (191) 8,196
-------------------------------------
Trading capital employed 9,377 (190) 9,187
Current tax (25) - (25)
(Net external debt)/net cash (2,342) 4,002 1,660
Net internal debt (payable)/receivable (1,478) 1,478 -
-------------------------------------
Net assets 5,532 5,290 10,822
-------------------------------------
-9-
Leeds Group plc
Preliminary Results
Notes
2. Segmental analysis (continued)
2006 Hemmers Holding Group
-Itex Companies Total
£000 £000 £000
Intangible fixed assets 757 - 757
Tangible fixed assets 243 2 245
Working capital 7,495 (150) 7,345
-------------------------------------
Trading capital employed 8,495 (148) 8,347
Current tax (255) - (255)
(Net external debt)/net cash (1,899) 4,682 2,783
Net internal debt (payable)/receivable (1,371) 1,371 -
-------------------------------------
Net assets 4,970 5,905 10,875
-------------------------------------
3. The financial information set out on pages 5 to 8 does not constitute the
Company's statutory accounts for the year ended 30 September 2007 or the year
ended 30 September 2006 but is derived from those accounts.
4. Statutory accounts for the year ended 30 September 2006 have been delivered
to the Registrar of Companies, and those for the year ended 30 September 2007
will be delivered following the Company's Annual General Meeting. BDO Stoy
Hayward LLP have reported on the accounts of both years: their reports were
unqualified, did not include references to any matters to which the auditors
drew attention by way of emphasis without qualifying their report, and did not
contain statements under section 237(2) or (3) of the Companies Act 1985.
5. The Annual Report, giving notice of the Annual General Meeting, will be sent
to shareholders shortly. Further copies will be available from the Company's
Registered Office, Schofield House, Gateway Drive, Yeadon, Leeds, LS19 7XY, or
from the Group's website, www.leedsgroup.plc.uk.
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