Preliminary Results

RNS Number : 1684K

Leeds Group PLC

16 December 2008

 



Issued on behalf of Leeds Group plc                                                                          Embargoed: 7.00am

Date: 16 December 2008

LEEDS GROUP plc

Preliminary Results for the year ended 30 September 2008

• First annual report to be prepared under IFRS

• Group profit before tax was £522,000 (2007: £830,000).

• Hemmers-Itex sales were £21,974,000 (2007: £17,523,000) and pre-tax profit was £586,000 (2007: £732,000).

• Investment in people and infrastructure completed at Hemmers-Itex to exploit growth opportunities. 

• 1,633,643 shares were bought back in the year at a cost of £300,000 and 1,800,000 shares were cancelled.

• Net asset value per share increased by 16.1% to 40.3 pence.

• Earnings per share were 1.4 pence (2007:1.7 pence).

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

'2008 has been a challenging year for the Group, with management being kept busy by both the planned growth at Hemmers-Itex and the difficult economic climate within the European countries that Hemmers-Itex sells into.'

Ewen Wigley

Chairman,  

FULL STATEMENTS ATTACHED

Enquiries:
Leeds Group plc	Citigate Dewe Rogerson	Seymour Pierce Limited
Malcolm Wilson, Company Secretary	Fiona Tooley	Sarah Jacobs
Tel: [phone] or 07801 224618	Tel: [phone] or 07785 703523	Tel: [phone]
Ewen Wigley, Chairman
Tel: [phone]

Leeds Group plc

Preliminary Results

STATEMENT BY THE CHAIRMAN, EWEN WIGLEY

2008 has been a challenging year for the Group, with management being kept busy by both the planned growth at Hemmers-Itex and the difficult economic climate within the European countries that Hemmers-Itex sells into. Profit after tax for the Group was £449,000 compared with £585,000 in the previous year, resulting in earnings per share of 1.4 pence (2007: 1.7 pence).

Accounting

This is the first set of audited results prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. The transition to IFRS represents an accounting change only and the underlying performance of the Group and its cash flows are unaffected. 

Hemmers-Itex

I explained, both in my Chairman's statement last year and in the 2008 Interim Results, that the Group had invested in both people and infrastructure at Hemmers-Itex following the demise of a competitor. Revenue at Hemmers-Itex during the year was €28.7 million, a 14.3% increase from the previous year of €25.1million. However the anticipated growth in the business developed at a slower rate than management had wished, and consequently the increased gross profit was insufficient to offset the higher overhead and interest charge arising from the investment we had made. Profit before tax at Hemmers-Itex was €766,000 compared with €1,050,000 in the previous year. During the current year, the business will seek to build on the growth that it achieved last year, whilst always being aware of any opportunities that might arise in the current difficult economic climate.  

Investments

The Board has said over the last two years that it was seeking appropriate investments for the Group. Having considered many opportunities, the Group announced on 22 May 2008 that it had acquired approximately 29% of Dawson International Plc ('Dawson'), a world leading cashmere business whose shares are listed on AIM. In addition, the Group also acquired 1 million shares in European Equity Tranche Income Limited ('EETI'), a company whose shares are also listed on AIM. Although Leeds Group has no power to participate in the operating and financial policies of any of the entities in which it has invested, the directors will manage the portfolio of Group investments in a proactive manner that will encourage the respective management teams to focus on realising the perceived incremental shareholder value that was at the root of the investment decisions.

Strategic Developments

The Group has continued to take advantage of the authority, renewed at the last Annual General Meeting, to purchase its own shares into Treasury and during the year bought a total of 1,633,643 shares.  

Following the cancellation of 1,800,000 Treasury shares during the year, the Group now has 33,100,000 shares in issue of which 3,300,658 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. 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 Leeds 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.

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 further change.

Outlook

Trading in the first two months of the new financial year has been steady.

Ewen Wigley

Chairman,  

15 December 2008

Leeds Group plc

Preliminary Results

OPERATING AND FINANCIAL REVIEW

The Group is required to adopt as its accounting basis for the year ended 30 September 2008 International Financial Reporting Standards, incorporating International Accounting Standards (IAS) and Interpretations (collectively IFRS) as endorsed by the European Union. This is therefore the first time the financial statements have been produced under IFRS.

The adoption of IFRS has required the Group to restate its results for the year ended 30 September 2007 and to restate the balance sheets as at 30 September 2007 and at 1 October 2006, which was the date of transition. Details of the transition to IFRS and the necessary restatements were shown in the announcement to the London Stock Exchange dated 30 May 2008, and this announcement can be found on the Group's website at www.leedsgroup.plc.uk.

Group Result

Group revenue increased in the year by 25.4% to £21,974,000 (2007: £17,523,000). Of this increase, £1,697,000 is caused by translating 2008 revenue at a weaker Sterling exchange rate and £2,754,000 reflects increased revenue of 14.3% in Euro terms.

Profit before tax was £522,000 (2007: £830,000). The principal cause of the profit reduction is the impairment provision of £231,000 that has been made against available-for-sale investments, while pre-tax profit in Hemmers-Itex fell by 19.9% to £586,000 (2007: £732,000).

The tax charge in the year was £73,000 (2007: £245,000), and earnings per share were 1.4 pence (2007: 1.7 pence).

Hemmers-Itex

This German-based subsidiary is engaged in the import, warehousing and wholesaling of fabrics. In the year, fabric sales grew by 10% to 12.6 million linear metres. Although market conditions remained difficult in the year for our retail customers, Hemmers obtained further increases in sales to the ready-made manufacturing sector and overall revenue increased by 14.3% to €28.7 million (2007: €25.1 million). 

Gross margin was 23.5%, fractionally ahead of the 23.4% achieved last year. Profit before tax was £586,000 (2007: £732,000) and this reduction reflected difficult trading conditions in the retail sector together with the costs of creating a larger infrastructure, including the establishment of a subsidiary in China, to support further sales growth in future years. 

Holding Companies' Costs

The table below illustrates the continuing downward trend in holding companies' costs:

	2008	2007	2006	2005	2004
	£000	£000	£000	£000	£000
Holding companies' costs	225	242	262	373	545
Exchange (gain)/loss	(64)	(13)	9	2	56
Net operating expense	161	229	271	375	601
Finance income	(328)	(327)	(281)	(140)	(179)
	(167)	(98)	(10)	235	422
Impairment of available-for-sale investments	231	-	-	-	-
Exceptional items	-	-	-	(135)	1,431
Net costs/(income) before tax of holding companies	64	(98)	(10)	100	1,853

Available-for-sale investments.

During the year the Group acquired approximately 1% of European Equity Tranche Income Limited ('EETI'), and approximately 29% of Dawson International ('Dawson'), both of which are companies listed on AIM. EETI has been severely affected by the recent turmoil in financial markets, and a provision of £231,000 has been made against the cost of this investment on the grounds that the directors consider there has been a significant and prolonged decline in its fair value. The directors believe that the current share price of Dawson does not reflect its long-term value.

Textile Manufacturing

The withdrawal from textile manufacture is now complete, with very few issues remaining outstanding. The Langholm Dyeing business (Langholm) 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. However, administrators were appointed at Langholm in July 2008, and the directors have discounted any possibility of further receipts. 

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 in February 2007 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 expect the case to be heard early in 2009. Meanwhile, the directors 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 £1,812,000 (2007: £155,000). Tangible fixed assets in the Balance Sheet amount to £2,053,000 (2007: £308,000). 

A project to enlarge the Hemmers facility was approved in September 2007, and was substantially completed in April 2008 to time and within budget. There remain final amounts to be paid in the current year of approximately £240,000 relating to the completion of this project.

Working Capital

Working capital increased during the year by £2,261,000 (2007: £652,000). This increase comprises growth in inventories of £684,000 and growth in trade and other receivables of £1,701,000, both attributable to sales growth, and was mitigated by an increase in trade and other payables of £124,000.

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. As part of this strategy, the new warehouse in Germany has been financed by a 20-year loan at fixed interest of 5.1%. The Group's net indebtedness at 30 September 2008 can be analysed as follows:

	Holding	Hemmers-	Total
	Companies	Itex	Group
	£000	£000	£000
Cash	2,366	120	2,486
Overdrafts	(19)	(100)	(119)
Total on demand	2,347	20	2,367
Fixed rate loans due within one year	-	(4,125)	(4,125)
Fixed rate loans due after more than one year	-	(1,977)	(1,977)
Net cash balances/(indebtedness)	2,347	(6,082)	(3,735)

Bank debt in the subsidiaries is secured by charges on inventories, receivables and property and is without recourse to the parent company. 

Ewen Wigley

Chairman,  

15 December 2008

Leeds Group plc

Preliminary Results

Consolidated Income Statement

for the year ended 30 September 2008

	2008 £000	2007   £000
Revenue	21,974	17,523
Cost of sales	(16,819)	(13,418)
Gross profit	5,155	4,105
Distribution costs	(1,615)	(1,096)
Administrative expenses	(3,015)	(2,296)
Profit from operations	525	713
Finance expense	(219)	(121)
Finance income	216	238
Profit before tax	522	830
Tax expense	(73)	(245)
Profit for the year, attributable to  the equity holders of the parent	449	585

Earnings per share for profit attributable

to the equity holders of the company

	2008	2007
Basic and diluted (pence)	1.4p	1.7p

Consolidated Statement of Recognised Income and Expense

for the year ended 30 September 2008

	2008 £000	2007   £000
Translation differences on foreign operations	898	167
Unrealised gains taken to available-for-sale reserve	74	-
Net income recognised directly in equity	972	167
Profit for the financial year	449	585
Total recognised income and expense for the year	1,421	752

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

Leeds Group plc

Preliminary Results

Consolidated Balance Sheet

at 30 September 2008

	2008 £000	2007  £000
Assets
Non-current assets
Property, plant and equipment	2,053	308
Intangible assets	883	779
Available-for-sale investments	1,100	-
Total non-current assets	4,036	1,087
Current assets
Inventories	6,573	5,172
Trade and other receivables	6,662	4,344
Corporation tax recoverable	125	-
Derivative financial assets	28	-
Cash available on demand	2,486	4,764
Total current assets	15,874	14,280
Total assets	19,910	15,367
Liabilities
Non-current liabilities
Loans and borrowings	(1,977)	(1,569)
Total non-current liabilities	(1,977)	(1,569)
Current liabilities
Trade and other payables	(1,676)	(1,320)
Loans and borrowings	(4,244)	(1,535)
Corporation tax liability	-	(25)
Derivative financial liabilities	-	(26)
Total current liabilities	(5,920)	(2,906)
Total liabilities	(7,897)	(4,475)
TOTAL NET ASSETS	12,013	10,892

Capital and reserves attributable to equity holders of the company
Share capital	3,972	4,188
Capital redemption reserve	420	204
Treasury share reserve	(667)	(766)
Available-for-sale reserve	74	-
Foreign exchange reserve	1,065	167
Retained earnings	7,149	7,099
TOTAL EQUITY	12,013	10,892

Leeds Group plc

Preliminary Results

Consolidated Cash Flow Statement

for the year ended 30 September 2008

	2008 £000	2007   £000
Cash flows from operating activities
Profit for the period	449	585
Adjustments for:
Depreciation	161	94
Impairment of available-for-sale investment	231	-
Foreign exchange (gain)/loss	(54)	26
Translation gain/(loss) on cash and cash equivalents	67	(6)
Finance expense	219	121
Finance income	(216)	(238)
Gain on sale of property, plant and equipment	(2)	(7)
Income tax expense	73	245
Cash flows from operating activities before changes in working capital and provisions	928	820
Increase in inventories	(684)	(490)
Increase in trade and other receivables	(1,701)	(241)
Increase in trade and other payables	124	79
Cash generated from operating activities	(1,333)	168
Income taxes paid	(222)	(482)
Net cash flows from operating activities	(1,555)	(314)
Investing activities
Purchase of property, plant and equipment	(1,812)	(155)
Sale of property, plant and equipment	5	12
Purchase of available-for-sale investments	(1,257)	-
Dividend from available-for-sale investment	21	-
Bank interest received	195	238
Net cash used in investing activities	(2,848)	95
Financing activities
Purchase of treasury shares	(300)	(735)
Proceeds from bank borrowings	4,201	3,034
Repayment of bank borrowings	(1,606)	(1,743)
Bank interest paid	(219)	(121)
Net cash used in financing activities	2,076	435
Net (decrease)/increase in cash and cash equivalents	(2,327)	216
Cash and cash equivalents at beginning of the period	4,694	4,478
Cash and cash equivalents at end of the period	2,367	4,694

  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.

	Hemmers-Itex  2008 £000	Holding Companies 2008 £000	Group Total 2008 £000	Hemmers-Itex 2007 £000	Holding Companies 2007 £000	Group Total 2007 £000
Revenue	21,974	-	21,974	17,523	-	17,523
Cost of sales	(16,819)	-	(16,819)	(13,418)	-	(13,418)
Gross profit	5,155	-	5,155	4,105	-	4,105
Distribution expenses	(1,615)	-	(1,615)	(1,096)	-	(1,096)
Administrative expenses	(2,623)	(161)	(2,784)	(2,067)	(229)	(2,296)
Impairment of available -for-sale investment	-	(231)	(231)	-	-	-
Profit from operations	917	(392)	525	942	(229)	713
Finance expense	(219)	-	(219)	(121)	-	(121)
Finance income	-	216	216	-	238	238
Internal interest	(112)	112	-	(89)	89	-
Profit before taxation	586	(64)	522	732	98	830
Tax credit/(expense)	(77)	4	(73)	(242)	(3)	(245)
Profit for the year	509	(60)	449	490	95	585

	Hemmers-Itex  2008 £000	Holding Companies 2008 £000	Group Total 2008 £000	Hemmers-Itex 2007 £000	Holding Companies 2007 £000	Group Total 2007 £000
Property, plant & equip.	2,053	-	2,053	307	1	308
Intangible fixed assets	883	-	883	779	-	779
Available-for-sale investments	-	1,100	1,100	-	-	-
Current assets	13,476	2,398	15,874	10,256	4,024	14,280
Total assets	16,412	3,498	19,910	11,342	4,025	15,367
Non-current liabilities	(1,977)	-	(1,977)	(1,569)	-	(1,569)
Current liabilities	(5,804)	(116)	(5,920)	(2,693)	(213)	(2,906)
Total liabilities	(7,781)	(116)	(7,897)	(4,262)	(213)	(4,475)
Net assets	8,631	3,382	12,013	7,080	3,812	10,892
Internal (creditor)/debtor	(1,752)	1,752	-	(1,478)	1,478	-
Net assets	6,879	5,134	12,013	5,602	5,290	10,892

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 2008 or the year ended 30 September 2007 but is derived from those accounts.

4.       Statutory accounts for the year ended 30 September 2007 have been delivered to the Registrar of Companies, and 
          those for the year ended 30 September 2008 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.

 

END

 

 

FR ILFFRFILELIT