Interim Results

Leeds Group PLC 14 May 2003 Issued on behalf of Leeds Group plc Date: Wednesday, 14th May 2003 Embargoed: 7.00am Leeds Group plc Interim Results for the six months ended 31st March 2003 Profit before tax and exceptional items: £874,000 (2002: £195,000) Earnings per share, before exceptional items: 2.2 pence (2002: 0.7 pence) Sale of Nemesis SpA in March 2003 completes the withdrawal from textile manufacturing. Exceptional loss on disposal of £4.9m plus £7.9m of recycled goodwill. The divestment programme has transformed textile division net debt of £13.9m in March 2001 into a net cash surplus of £4.9m. Board will shortly be seeking shareholder and court approval for a reduction in the nominal value of the ordinary shares and a repayment of capital to shareholders. Positive outlook for the remainder of the year now that all seasonal businesses have been divested. 'After three of the most difficult years in the Group's history, I am pleased to report that the six months to 31st March 2003 were successful with significant progress being achieved in our plans to re-focus the Group's activities.' 'The continuing businesses do not have the pronounced seasonality associated with textile manufacture and although we do not anticipate that trading conditions will improve dramatically in the short term, we do believe our businesses can maintain their first half performance into the second half and beyond. ' Bill Cran, Chairman FULL STATEMENTS ATTACHED Enquiries: Leeds Group plc Citigate Dewe Rogerson Ltd Malcolm Wilson, Group Managing Director Fiona Tooley Today: 07801 224618 Today: 020 7282 8000 Thereafter: 0113 391 9000 Thereafter: 0121 455 8370 Mobile: 07785 703523 Dawn Bowler, Group Finance Director Tel: 0113 391 9000 -2- Leeds Group plc Interim Results STATEMENT BY THE CHAIRMAN, BILL CRAN After three of the most difficult years in the Group's history, I am pleased to report that the six months to 31st March 2003 were successful with significant progress being achieved in our plans to re-focus the Group's activities. Profit before tax and exceptional items increased substantially to £874,000 (2002: £195,000). The sale in March 2003 of Nemesis, our Italian fabric printing business, marked the Group's final withdrawal from textile manufacture. As a consequence, the Group has now been reclassified under the Speciality and Other Finance sector on the Alternative Investment Market ('AIM'). Continuing Businesses Profit before tax from continuing businesses was £560,000, almost four times the £148,000 for 2002. The Group's continuing businesses comprise Leeds Leasing and Hemmers-Itex, the fabric import and distribution business based in Germany. Both businesses performed satisfactorily and profitability was boosted by a significant reduction in unallocated central costs. Leeds Leasing As was indicated in the last Annual Report and Accounts, the transfer of certain costs previously borne centrally has affected profits in Leeds Leasing, but it is also true to say that the level of new business was short of our earlier expectations. Pre-tax profit was £320,000 (2002: £451,000). Our customer base faces many uncertainties at the present time, and in retrospect it is perhaps unsurprising that new business was no greater than was achieved in the second half of last year. Although the current high level of underwritten deals awaiting completion suggests we could be more active in the second half, we shall only write business that meets our requirements in terms of yield and our strict underwriting criteria. During the period, the Group completed the process of ring fencing Leeds Leasing's debt which is now entirely without recourse to the parent Company. We have also made good progress in our project to upgrade Leeds Leasing's computer software and migrate to a more modern platform. The upgrade, which is on course to be completed by the end of this financial year, will provide management information of enhanced quality that will enable us to process all aspects of lease administration much more efficiently. Hemmers-Itex Pre-tax profits in the first half of this year at Hemmers-Itex increased from £117,000 in 2002 to £277,000. I am pleased to report that despite the closure of the Itex operation in Holland, which was completed in November 2002, we have successfully retained and are now servicing the vast majority of its customers from our German facility. The integrated management information systems installed in 2001 have played an important role in enabling us to handle a 50% increase in throughput in Germany; even more important has been the willingness and ability of our staff to rise to the challenge that this entailed. Although consumer spending in Germany remains depressed, we are pleased to see that our sales volumes are holding up. We have an excellent Winter Collection, much of which is sourced from China, and which is attracting strong interest not just from existing customers but also from large potential new customers. Since the collection had been assembled by last Christmas, we do not believe the recent outbreak of Severe Acute Respiratory Syndrome in the Far East will affect our ability to meet our second half sales targets. -3- Leeds Group plc Interim Results STATEMENT BY THE CHAIRMAN, BILL CRAN continued Discontinued Businesses Nemesis recorded higher sales than the comparable period last year and benefited from favourable exchange rates that served to reduce the landed cost of cotton cloth. Pre-tax profit up to the date of disposal totalled £314,000. This represented a substantial improvement on the loss of £145,000 in 2002, but nevertheless fell short of the levels of previous years, and the level required to justify our continued ownership of Nemesis. We have charged an exceptional loss on disposal of £12.8 million, but since this includes recycled goodwill of £7.9 million, the reduction to shareholders funds is restricted to £4.9 million, which, by coincidence, is also the value of the reduction in the Group's debt that has been achieved through the Nemesis divestment. Trading Outlook The continuing businesses do not have the pronounced seasonality associated with textile manufacture and although we do not anticipate that trading conditions will improve dramatically in the short term, we do believe our businesses can maintain their first half performance into the second half and beyond. Capital Reconstruction We expect to write to shareholders shortly setting out the Board's proposals to reduce the Group's capital. We intend to seek shareholder and court approval for a reduction in the nominal value of the ordinary shares and a repayment of capital to shareholders. At the same time, we would seek approval to use the balance on the share premium account to offset the deficit on reserves, thereby creating distributable reserves, so that, with the Group restored to profit, we can introduce a progressive dividend policy in the future. -4- Leeds Group plc Interim Results Consolidated Profit and Loss Account Restated Six months to Six months to Twelve months to 31st March 31st March 30th September 2003 2002 2002 £000 £000 £000 Turnover ---------- ---------- ----------- Continuing operations 8,358 7,722 16,368 Discontinued operations 8,194 11,823 17,105 ---------- ---------- ----------- 16,552 19,545 33,473 Cost of sales (11,791) (14,304) (24,938) ---------- ---------- ----------- Gross profit 4,761 5,241 8,535 Distribution costs (653) (645) (1,158) Administrative expenses (2,720) (3,640) (7,692) Operating profit/(loss) ---------- ---------- ----------- Continuing operations 944 736 1,536 Discontinued operations 444 220 (531) ------ ----- ------ 1,388 956 1,005 Exceptional items - - (1,320) ---------- ---------- ----------- 1,388 956 (315) Profit on sale of land and - - 295 buildings ---------- ---------- ----------- Loss on sale or termination of a business operation (12,832) (4,731) (5,275) ---------- ---------- ----------- Loss on ordinary activities before (11,444) (3,775) (5,295) interest Net interest payable (514) (761) (1,318) ---------- ---------- ----------- Loss on ordinary activities before (11,958) (4,536) (6,613) taxation Taxation (73) 77 710 ---------- ---------- ----------- Unrecovered loss (12,031) (4,459) (5,903) Earnings/(loss) per share before exceptional items 2.2 p 0.7 p (0.7)p exceptional items (35.1)p (12.9)p (15.5)p ---------- ---------- ----------- after exceptional items (32.9)p (12.2)p (16.2)p ========== ========== =========== Consolidated statement of total recognised gains and losses Loss for the period (12,031) (4,459) (5,903) Foreign currency translation 427 (96) 91 differences ---------- ---------- ----------- Total recognised gains and losses (11,604) (4,555) (5,812) for the period ========== ========== =========== -5- Leeds Group plc Interim Results Consolidated Balance Sheet Restated As at As at As at 31st March 31st March 30th September 2003 2002 2002 £000 £000 £000 Fixed assets Intangible assets 1,091 1,069 1,053 Tangible assets 437 11,494 5,894 ---------- --------- ----------- 1,528 12,563 6,947 Current assets Stocks 3,746 7,394 7,235 ---------- --------- ----------- Debtors 6,448 12,516 11,169 Deferred taxation 1,130 842 1,050 Finance lease debtors 18,196 18,471 18,335 ---------- --------- ----------- Total debtors 25,774 31,829 30,554 Cash at bank and in hand 8,359 3,312 8,535 ---------- --------- ----------- 37,879 42,535 46,324 Creditors: amounts falling due within (15,981) (21,957) (24,844) one year ---------- --------- ----------- Net current assets 21,898 20,578 21,480 Of which: ---------- --------- ----------- due within one year 9,597 9,406 8,820 due after more than one year 12,301 11,172 12,660 ---------- --------- ----------- ---------- --------- ----------- Total assets less current 23,426 33,141 28,427 liabilities Creditors: amounts falling due after more than one year (5,217) (9,946) (6,489) ---------- --------- ----------- Net assets 18,209 23,195 21,938 ========== ========= =========== Share capital and reserves: Called up equity share capital 9,150 9,150 9,150 Share premium account 15,832 15,832 15,832 Profit and loss account (6,773) (1,787) (3,044) ---------- --------- ----------- Equity shareholders' funds 18,209 23,195 21,938 ========== ========= =========== Reconciliation of movements in shareholders' funds Loss for the period (12,031) (4,459) (5,908) Goodwill written back 7,875 3,888 3,888 Exchange differences 427 (96) 91 ---------- --------- ----------- Net transfer from shareholders' (3,729) (667) (1,924) funds Shareholders' funds at beginning of 21,938 23,862 23,862 the period ---------- --------- ----------- Shareholders' funds at end of the 18,209 23,195 21,938 period ========== ========= =========== -6- Leeds Group plc Interim Results Consolidated Cash Flow Statement Six months to Six months to Twelve months to 31st March 31st March 30th September 2003 2002 2002 £000 £000 £000 Net cash inflow from operating 1,358 1,289 3,148 activities Returns on investments and servicing (514) (761) (1,318) of finance Taxation 765 (173) (385) Capital expenditure and financial 455 (52) 4,604 investment Acquisitions and disposals 5,408 4,089 4,625 ---------- ---------- ------------ Net cash inflow before financing 7,472 4,392 10,674 Financing (1,721) 66 (2,635) ---------- ---------- ------------ Increase in cash in the period 5,751 4,458 8,039 ========== ========== ============ Reconciliation of net cash flow to movement in net debt Increase in cash in the period 5,751 4,458 8,039 Cash inflow/(outflow) from debt and 1,721 (66) 2,635 lease financing ---------- ---------- ------------ Change in net debt resulting from 7,472 4,392 10,674 cash flows Translation difference (648) 153 (173) ---------- ---------- ------------ Movement in net debt in the period 6,824 4,545 10,501 Net debt at the beginning of the (15,195) (25,696) (25,696) period ---------- ---------- ------------ Net debt at the end of the period (8,371) (21,151) (15,195) ========== ========== ============ Reconciliation of operating profit to operating cash flows Operating profit/(loss) 1,388 956 (315) Depreciation and amortisation of 236 539 856 fixed assets Impairment of tangible fixed assets - - 294 and goodwill Amortisation of goodwill 57 40 86 (Profit)/loss on sale of tangible (3) 36 86 fixed assets Decrease in stocks 1,395 1,489 1,822 (Increase)/decrease in debtors (1,492) 1,462 3,062 (Decrease) in creditors (362) (1,464) (1,110) Decrease/(increase) in finance lease 139 (1,769) (1,633) debtors ---------- ---------- ------------ Net cash inflow from operating 1,358 1,289 3,148 activities ========== ========== ============ -7- Leeds Group plc Interim Results Notes to the accounts 1. The interim results, which are not audited, have been prepared on the basis of the accounting policies set out in the 2002 Annual Report. The figures for the year ended 30th September 2002 have been abridged from the Group's full accounts, which have been filed with the Registrar of Companies and on which the Company's auditors gave an unqualified report. 2. Earnings per share have been calculated on an average of 36,598,603 (2002: 36,598,603) ordinary shares of 25p in issue during the period. 3. Nemesis SpA was sold on the 12th March 2003 and the results for this company have been shown as discontinued activities within the accounts. The loss on termination of this business can be analysed as follows: £000 Loss on sale 4,957 Goodwill written back 7,875 ------ 12,832 ====== 4. The comparative figures for March 2002 have been restated to reflect the adoption of FRS 19 on deferred taxation. 5. The table below sets out a segmental analysis of the Group's operations. Turnover Profit/(loss) before taxation and exceptional items Six Six Twelve Six Six Twelve months to months to months to months to months to months to 31st 31st 30th 31st 31st 30th March March September March March September 2003 2002 2002 2003 2002 2002 £000 £000 £000 £000 £000 £000 Leeds Leasing 1,696 1,713 3,634 740 912 1,891 Hemmers-Itex 6,662 6,009 12,734 461 310 570 Central costs - - - (257) (486) (925) -------- -------- ---------- -------- -------- ---------- Continuing 8,358 7,722 16,368 944 736 1,536 operations Discontinued operations in 2003 8,194 7,921 12,961 444 28 (696) in 2002 - 3,902 4,144 - 192 165 -------- -------- ---------- -------- -------- ---------- 8,194 11,823 17,105 444 220 (531) -------- -------- ---------- -------- -------- ---------- 16,552 19,545 33,473 1,388 956 1,005 ======== ======== ========== Interest -------- -------- ---------- Leasing (420) (461) (872) Textiles (94) (300) (446) -------- -------- ---------- (514) (761) (1,318) -------- -------- ---------- 874 195 (313) ======== ======== ========== This information is provided by RNS The company news service from the London Stock Exchange

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