Half-year Report

RNS Number : 3670T
Leeds Group PLC
05 January 2017
 

 

LEEDS GROUP PLC

Interim Results for the six months ended 30 November 2016

 

STATEMENT BY THE GROUP CHAIRMAN, JAN G HOLMSTROM

 

I am pleased to present the interim report of Leeds Group plc ("the Group") for the six months ended 30 November 2016.

 

The business of Leeds Group is that of a wholesaler of fabrics and haberdashery, and is conducted by its German trading subsidiary Hemmers/Itex Textil Import Export GmbH ("Hemmers") and by Chinoh-Tex Limited, a subsidiary of Hemmers based in Shanghai. These trading companies sell both basic commodity fabrics and also fabrics from their own fashion collections. Approximately 55% of sales are to retailers, with remaining sales activities divided between the wholesale and garment manufacturing sectors.

 

The Group achieved sales in the period of £21,057,000 (2015: £18,489,000) and made a profit after tax of £848,000 (2015:  £692,000).  Earnings per share were 3.1 pence (2015: 2.5 pence). The weakness of sterling in recent months has had a material impact upon the Group's results.  Sales growth of 13.9% over the first half of the previous financial year comprises a fall of 2.7% in sales at constant exchange rates, disguised by the translation effect of weaker sterling, which increased reported sales by 16.6%. Similarly, the translation effect on the balance sheet has increased net assets by £1,269,000 since the Group's year end on 31 May 2016. There has been a gain of some £300,000 in the value of the Euro denominated parent company loan to Hemmers, and this has been locked in by the use of derivatives. The Group's major transactional currency exposure relates to the value of the Euro against the US Dollar which, in contrast, has enjoyed a period of relative stability.

 

In Euro terms, revenue at Hemmers fell by 2.9% to €22,521,000 (2015: €23,203,000). Growth was achieved in the retail and garment manufacturing sectors but this was offset by reduced sales into the wholesale sector, caused in part by an inability to keep up with demand for double folded items, a problem now addressed with the expansion of facilities in Nordhorn and the acquisition of additional folding machines. The reduction in sales and an increased cost base led to a fall on pre-tax profit to €734,000 (€1,227,000).

 

The KMR joint venture opened new shops in Berlin, Leipzig and Chemnitz in the period, to bring the total number of stores to 19, and also relocated shops in two other cities to more suitable premises. A project is underway to implement common business software across all shops and the costs associated with this project and with the opening of new shops amounted to some €150,000, leading to a pre-tax loss in the period, albeit a little lower than had been budgeted. The business continues to trade in line with the expectations of the Directors, with sales 25% greater than the equivalent period of last year.

 

External sales revenues and pre-tax profits at Chinoh-Tex were little changed from last year. As well as its contribution to Group pre-tax profit, ChinohTex continues to perform invaluable work in support of its European parent operation through its purchasing strengths, its ability to inspect locally purchased product for quality issues and the consolidation of freight shipments that minimises the cost of shipping stock to Europe.

 

The expansion of our facilities in Nordhorn is beginning to deliver the expected operational benefits including: increased double folding capacity as noted above; elimination of external warehousing rental costs; creation of a suitable showroom and bringing the KMR administration and warehousing in-house. 

 

Group net debt, which has increased substantially because of the recent property investments, was £5,549,000 at 30 November 2015 (30 November 2015: £579,000; 31 May 2016: £2,646,000). Net cash outflow in the 6 months ended 30 November 2016 reflected the seasonal increase in working capital and capital expenditure as the Nordhorn factory extension was completed. Working capital is expected to fall from its seasonally high level during the second half-year.

 

In order to maximise funds available for future investments and the investment in the Hemmers facility during the current year, the Board does not propose an interim dividend. Given the global economy with its uncertainties, the board is cautiously optimistic for further growth in the second half of the year. As ever, I offer thanks to our employees throughout the Group who have worked so hard in the period.

 

Jan G Holmstrom, Chairman.   

4 January 2017

 

 

 

 

Unaudited Consolidated Statement of Comprehensive Income

for the 6 months ended 30 November 2016

 

6 months to

30 November

2016

£000

6 months to

30 November

2015

£000

Year to

31 May

2016

£000

 

Revenue

 

21,057

 

18,489

 

36,272

 

Cost of sales

 

(16,492)

 

(14,373)

 

(28,563)

 

Gross profit

 

4,565

 

4,116

 

7,709

 

Distribution costs

 

(1,308)

 

(1,169)

 

(2,216)

 

Administrative expenses

 

(2,036)

 

(1,916)

 

(3,949)

 

Profit from operations

 

1,221

 

1,031

 

1,544

 

Finance expense

 

(83)

 

(39)

 

(92)

 

Finance income

 

1

 

2

 

4

 

Share of post-tax (loss)/profit of joint venture

 

(65)

 

20

 

51

 

Profit before tax

 

1,074

 

1,014

 

1,507

 

Tax expense

 

(226)

 

(322)

 

(468)

 

Profit for the period attributable to the equity holders of the Parent Company

 

 

848

 

 

692

 

 

1,039

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Translation differences on foreign operations

 

1,269

 

(257)

 

693

 

 

 

 

Other comprehensive income for the period

1,269

(257)

693

 

 

 

 

 

Total comprehensive income for the period attributable to the equity holders of the Company

 

2,117

 

435

 

1,732

 

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

 

There is no tax effect relating to other comprehensive income.

 

 

 

 

Earnings per share for profit attributable

to the equity holders of the Company

 

6 months to

30 November

2016

6 months to

30 November

2015

Year to

31 May

2016

 

 

 

 

Basic and diluted (pence)

3.1p

2.5p

3.8p

 

 

Unaudited Consolidated Statement of Financial Position

at 30 November 2016

 

As at

30 November

2016

£000

As at

30 November

2015

£000

As at

31 May

2016

£000

Assets

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

7,444

2,271

5,864

Intangible assets

946

784

855

Investment in joint venture

642

559

640

 

 

 

 

Total non-current assets

9,032

3,614

7,359

 

 

 

 

Current assets

 

 

 

Inventories

10,030

8,142

7,765

Trade and other receivables

7,633

6,255

5,779

Corporation tax recoverable

82

-

-

Derivative financial asset

102

112

-

Cash and cash equivalents

1,681

2,875

1,612

 

 

 

 

Total current assets

19,528

17,384

15,156

 

 

 

 

Total assets

28,560

20,998

22,515

 

 

 

 

Liabilities

 

 

 

Non-current liabilities

 

 

 

Loans and borrowings

(4,205)

(2,380)

(3,843)

Deferred tax

(256)

(254)

(230)

 

 

 

 

Total non-current liabilities

(4,461)

(2,634)

(4,073)

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

(3,445)

(2,847)

(2,283)

Loans and borrowings

(3,025)

(1,074)

(415)

Derivative financial liability

-

-

(40)

Corporation tax liability

-

(204)

(192)

 

 

 

 

Total current liabilities

(6,470)

(4,125)

(2,930)

 

 

 

 

Total liabilities

(10,931)

(6,759)

(7,003)

 

 

 

 

TOTAL NET ASSETS

17,629

14,239

15,512

 

 

 

 

 

Capital and reserves attributable to

equity holders of the company

 

 

 

Share capital

3,792

3,792

3,792

Capital redemption reserve

600

600

600

Treasury share reserve

(767)

(743)

(767)

Foreign exchange reserve

1,911

(308)

642

Retained earnings

12,093

10,898

11,245

 

 

 

 

TOTAL EQUITY

17,629

14,239

15,512

 

 

 

Unaudited Consolidated Cash Flow Statement

for the 6 months ended 30 November 2016

 

6 months to

30 November

2016

£000

6 months to

30 November

2015

£000

Year  to

31 May

2016

£000

Cash flows from operating activities

 

 

 

Profit for the period

848

692

1,039

Adjustments for:

 

 

 

Depreciation

294

124

300

Finance expense

83

39

92

Finance income

(1)

(2)

(4)

Movement in derivative financial assets

(145)

(55)

99

Loss on sale of property, plant and equipment

-

-

1

Share of post-tax loss/(profit) of joint venture

65

(20)

(51)

Income tax expense

226

322

468

 

 

 

 

Cash flows from operating activities before

changes in working capital and provisions

 

1,370

 

1,100

 

1,944

 

 

 

 

Increase in inventories

(1,434)

(1,070)

(44)

(Increase)/decrease  in trade and other receivables

(1,234)

(382)

538

Increase/(decrease)  in trade and other payables

668

277

(621)

 

 

 

 

Cash (absorbed)/generated by operating activities

(630)

(75)

1,817

Income taxes paid

(517)

(390)

(613)

 

 

 

 

Net cash flows from operating activities

(1,147)

(465)

1,204

 

 

 

 

Investing activities

 

 

 

Purchase of property, plant and equipment

(1,248)

(686)

(4,156)

Purchase of intangible assets

(84)

-

-

Bank interest received

1

2

4

 

 

 

 

Net cash used in investing activities

(1,331)

(684)

(4,152)

 

 

 

 

Financing activities

 

 

 

Purchase of treasury shares

-

(18)

(42)

Net drawdown of bank borrowings

2,511

2,098

2,640

Bank interest paid

(83)

(39)

(92)

 

 

 

 

Net cash generated by financing activities

2,428

2,041

2,506

 

 

 

 

 

Net (decrease)/ increase in cash and cash equivalents

 

(50)

 

892

 

(442)

 

 

 

 

Translation gain/(loss) on cash and cash equivalents

119

(44)

27

 

 

 

 

Cash and cash equivalents at beginning of the period

1,612

2,027

2,027

 

 

 

 

Cash and cash equivalents at end of the period

1,681

2,875

1,612

 

 

 

 

 

Unaudited Consolidated Statement of Changes in Equity

for the six months ended 30 November 2016

 

 

 

Share capital

   

£000

Capital redemption reserve

£000

Treasury share reserve

£000

Foreign exchange reserve

        £000

Retained earnings

 

£000

Total equity

 

£000

 

 

 

 

 

 

 

At 1 June 2016

3,792

600

(767)

642

11,245

15,512

Profit for the period

-

-

-

-

848

848

Other comprehensive income

-

-

-

1,269

-

1,269

 

 

 

 

 

 

 

At 30 November 2016

3,792

600

(767)

1,911

12,093

17,629

 

 

 

Share capital

   

£000

Capital redemption reserve

£000

Treasury share reserve

£000

Foreign exchange reserve

        £000

Retained earnings

 

£000

Total equity

 

£000

 

 

 

 

 

 

 

At 1 June 2015

3,792

600

(725)

(51)

10,206

13,822

Profit for the period

-

-

-

-

692

692

Other comprehensive income

-

-

-

(257)

-

(257)

Transaction with shareholders:

 

 

 

 

 

 

Purchase of treasury shares

-

-

(18)

-

-

(18)

 

 

 

 

 

 

 

At 30 November 2015

3,792

600

(743)

(308)

10,898

14,239

 

 

 

Share capital

   

£000

Capital redemption reserve

£000

Treasury share reserve

£000

Foreign exchange reserve

        £000

Retained earnings

 

£000

Total equity

 

£000

 

 

 

 

 

 

 

At 1 June 2015

3,792

600

(725)

(51)

10,206

13,822

Profit for the year

-

-

-

-

1,039

1,039

Other comprehensive income

-

-

-

693

-

693

Transaction with shareholders:

 

 

 

 

 

 

Purchase of treasury shares

-

-

(42)

-

-

(42)

 

 

 

 

 

 

 

At 31 May 2016

3,792

600

(767)

642

11,245

15,512

 

 

 

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

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

 

 

 

 

 

Interim results

for the 6 months ended 30 November 2016

Notes to the accounts

 

 

1.   The financial information in this report does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

The interim results for the six months ended 30 November 2016 and 30 November 2015 are unaudited. The interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as endorsed by the European Union. The same accounting policies, presentation and methods of computation have been followed in the preparation of these results as were applied in the Company's latest annual audited financial statements.

The financial information for the year ended 31 May 2016 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 May 2016 have been filed with the Registrar of Companies.  The Independent Auditor's Report on the Annual Report and Financial Statements for the year ended 31 May 2016 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.

 

2.  Ordinary shares of 12 pence each used in the calculation of earnings per share:

 

 

6 months to

30 November

2016

6 months to

30 November

2015

Year to

31 May

2016

 

 

 

 

 

27,435,843

27,532,496

27,506,459

 

 

3.  Reconciliation of movements in net bank debt

 

 

6 months to

30 November

2016

£000

6 months to

30 November

2015

£000

Year to

31 May

2016

£000

 

 

 

 

(Decrease)/increase in cash & cash equivalents

(50)

892

(442)

Translation gain/(loss) on cash and cash equivalents

119

(44)

27

Increase  in loans

(2,511)

(2,098)

(2,640)

Translation (loss)/gain on loans

(461)

75

(187)

 

 

 

 

Net cash outflow

(2,903)

(1,175)

(3,242)

Net (bank debt)/cash at beginning of period

(2,646)

596

596

 

 

 

 

Net bank debt at end of period

(5,549)

(579)

(2,646)

 

 

4.  Analysis of net bank debt

 

 

6 months to

30 November

2016

£000

6 months to

30 November

2015

£000

Year to

31 May

2016

£000

 

 

 

 

Cash

1,681

2,875

1,612

Loans repayable in less than one year

(3,025)

(1,074)

(415)

Loans repayable in more than one year

(4,205)

(2,380)

(3,843)

 

 

 

 

Net bank debt at end of period

(5,549)

(579)

(2,646)

 

  

5.  Segmental information

 

 

6 months to

30 November

2016

£000

6 months to

30 November

2015

£000

Year to

31 May

2016

£000

External revenue

 

 

 

Hemmers Europe

19,008

16,608

32,775

Hemmers China

2,049

1,881

3,497

 

 

 

 

Total Group external revenue

21,057

18,489

36,272

 

 

 

 

6 months to

30 November

2016

£000

6 months to

30 November

2015

£000

Year to

31 May

2016

£000

Profit before tax

 

 

 

Hemmers Europe (local GAAP)

616

875

1,258

Share of post-tax (loss)/profit of JV

(65)

20

51

IFRS adjustment - financial derivatives

89

55

(99)

 

 

 

 

Hemmers Europe (IFRS)

640

950

1,210

Hemmers China

143

155

267

Unrealised profit in stock

(2)

(9)

3

Holding company

293

(82)

27

 

 

 

 

Group profit before tax

1,074

1,014

1,507

 

 

 

 

6 months to

30 November

2016

£000

6 months to

30 November

2015

£000

Year to

31 May

2016

£000

Net assets

 

 

 

Hemmers Europe (local GAAP)

12,660

10,024

11,117

IFRS adjustment - financial derivatives

33

80

(28)

IFRS adjustment - goodwill amortisation

618

562

613

 

 

 

 

Hemmers Europe (IFRS)

13,311

10,666

11,702

Hemmers China

1,223

915

1,003

Unrealised profit in stock

(37)

(41)

(32)

Holding company

3,132

2,699

2,839

 

 

 

 

Group net assets

17,629

14,239

15,512

 

 

 

Enquiries:

 

 

Leeds Group plc

Cairn Financial Advisers LLP

Malcolm Wilson

Tony Rawlinson / Liam Murray

07801 224618

020 7213 0880

 

 

                                   

                    

 

 


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