Preliminary Results

RNS Number : 7744D

Leeds Group PLC

09 December 2009

 



Issued on behalf of Leeds Group plc                                                                                         Embargoed: 7.00am

Date: 9 December 2009

LEEDS GROUP plc

Preliminary Results for the year ended 30 September 2009

Financial Highlights

• Group loss before tax was £24,000 (2008: profit £522,000).

• Hemmers-Itex sales were £25,685,000 (2008: £21,974,000) and pre-tax profit was £38,000 (2008: £586,000). 

• Focus on working capital management in difficult trading conditions saw Hemmers-Itex bank debt fall by Euro 1,463,000 (19%).

• 550,000 shares were bought back in the year at a cost of £78,000 and 625,000 shares were cancelled.

• Net asset value per share (excluding treasury shares) increased by 12% to 45.2 pence.

• Loss per share was 0.5 pence (2008: earnings of 1.4 pence).

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

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

Chairman's Statement

Results

The difficult economic climate in the European countries that Hemmers-Itex sells into, which I wrote about in last year's Chairman's statement, has continued during 2009. The Group made a loss after tax of £144,000 during the year compared with a profit of £449,000 in 2008, resulting in loss per share of 0.5 pence (2008 1.4 pence profit). Net Asset Value per share (excluding shares held in treasury) was 45.2 pence at the year end, compared with 40.3 pence at the end of the previous financial year, the increase arising primarily from sterling's depreciation against the Euro and the Group's share buy-back programme.

Hemmers-Itex

Material sales at Hemmers-Itex increased by 3.3% to 13.1million linear metres whilst revenue in the local currency of this German-based subsidiary increased by 2.8% to EUR 29.5 million (2008: EUR 28.7 million). The difficult economic climate referred to above has kept all margins under pressure, and Hemmers-Itex made a pre-tax profit in the year of just EUR 44,000 (2008: EUR 766,000). As I noted in the trading statement issued in November 2009, management at Hemmers-Itex have already taken a number of steps to reduce costs and improve margins, and will continue to seek changes so that their costs are more aligned to the current sales levels.

During these challenging times, Hemmers-Itex has also focused on reducing its working capital needs and during the year its bank debt decreased by EUR 1,463,000, a fall of 19%. This bank debt is secured solely against the assets of Hemmers-Itex.

Investments

Leeds Group continues to hold approximately 29% of Dawson International Plc ("Dawson"). During the last year, Dawson has announced the disposal of its Todd & Duncan business, reductions in bank debt and changes in management, all of which the Directors believe are positive and will, in time, feed through to an improved valuation of the Dawson business. At the start of the financial year, the Group also had an investment in European Equity Tranche Income Limited ("EETI"). Despite a capital restructuring by EETI, which relieved that company of its potential bank debt refinancing risk, the share price of EETI failed to reflect the improved position and the entire holding was sold.

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 is at the root of the investment decisions.

Share Buy-back Programme

The Group has continued to use the authority granted by shareholders to purchase its own shares, and during a year when share trading volumes were low, 550,000 shares were acquired. Following the cancellation of 625,000 shares the company now has 32,475,000 shares in issue, of which 3,225,628 are held in treasury.

The 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.

Directors and Employees

On behalf of shareholders in what has continued to be a challenging environment to operate in, I would like to thank the management and staff of Hemmers-Itex for their continued efforts.

Outlook

Sales for the first two months of the year have been steady.

Ewen Wigley

Chairman,  

8 December 2009

  Operating and financial review 

Group Result

Group revenue increased in the year by 16.9% to £25,685,000 (2008: £21,974,000), partly as a result of increased sales by the Group's trading subsidiaries, but chiefly as a result of translating 2009 revenue at a Sterling exchange rate considerably weaker than last year.

The Group loss before tax was £24,000 (2008: profit £522,000) as a consequence of difficult trading conditions in which pre-tax profit in Hemmers-Itex fell to £38,000 (2008: £586,000).

The tax charge in the year was £120,000 (2008: £73,000), of which £48,000 related to under-provisions in previous years. The loss per share was 0.5 pence (2008: earnings 1.4 pence).

Hemmers-Itex

This German-based subsidiary is engaged in the import, warehousing and wholesaling of fabrics. This year was the first full year of operations for its Chinese subsidiary, Chinoh-Tex, and an encouraging performance there contributed to growth of 3.3% in total fabric sales to 13.1 million linear metres. Sales revenue increased by £3,711,000 (16.9%) to £25,685,000 (2008: £21,974,000). Of this increase, 2.8% represented real growth in terms of local currencies, and 14.1% is the result of translating overseas results at Sterling's weaker exchange rate. 

In broad terms, reduced gross margin and increased overhead contributed equally to the reduction in profit. Gross margin was 21.7% (2008: 23.5%). For the first seven months of the financial year the Euro was considerably weaker against the US dollar than it was at our 2008 year end. This pushed up the cost of imported fabric and market conditions were such that this could not be passed on to customers fully. The full year of Chino-Tex trading, higher volumes and modest inflationary increases saw overheads increase by 5% in local currency terms. 

Although it cannot be denied that the results for the year are disappointing, there have nevertheless been some positive achievements. To have recorded modest growth in a year of depressed aggregate demand for fabric means we have increased market share, and are well positioned for when consumption increases. The strength of the Euro against the US dollar in the last five months has increased beyond its September 2008 level, and has led to recent rates of gross margin that more closely compare with our historic levels. The financial position of Hemmers-Itex was improved considerably in the year by focusing on reducing working capital levels and our success in this respect led to a reduction of €1,463,000 (19%) in the bank debt of Hemmers/Itex and its subsidiaries.

Holding Companies' Costs

The following table indicates that holding companies' costs continue to be tightly controlled, but also shows the impact of falling interest rates which has led to finance income falling to half the level of the previous year. 

	2009	2008
	£000	£000
Holding companies' recurring costs	(228)	(225)
Legal costs associated with property at Haw Lane	(53)	-
Exchange gain	91	64
Net operating expense	(190)	(161)
Finance income	166	328
	(24)	167
Impairment of available-for-sale investments	231	(231)
Realised loss on sale of available-for-sale investments	(269)	-
Net costs before tax of holding companies	(62)	(64)

Available-for-sale investments.

In February 2009 the Group acquired further shares in European Equity Tranche Income Limited ("EETI"), before selling the entire investment in May of that year. There was a loss on disposal of £269,000 of which £231,000 had been provided last year. The Group's investment in Dawson International plc increased in value by £240,000, which has been taken directly to the available-for-sale reserve. Despite this appreciation, the directors continue to believe that the current share price of Dawson does not fully reflect its long-term value.

Property at Haw Lane, Yeadon.

The Group owns the freehold title to a plot of land of approximately 5 acres in Haw Lane, Yeadon, adjacent to the site of the former Scott & Rhodes factory, 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 the case is scheduled to be heard in March or April 2010. 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 £200,000 (2008: £1,812,000). Tangible fixed assets in the Balance Sheet amount to £2,350,000 (2008: £2,053,000). 

Working Capital

Working capital decreased during the year by £884,000 (2008: increase £2,261,000). 

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 warehouse constructed in 2008 in Germany was financed by a 20-year loan at fixed interest of 5.1%. The Group's net indebtedness at 30 September 2009 can be analysed as follows:

	Holding	Hemmers-	Total
	Companies	Itex	Group
	£000	£000	£000
Cash	2,140	434	2,574
Overdrafts	-	(4)	(4)
Total on demand	2,140	430	2,570
Fixed rate loans due within one year	-	(3,819)	(3,819)
Fixed rate loans due after more than one year	-	(2,273)	(2,273)
Net cash balances/(indebtedness)	2,140	(5,662)	(3,522)

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

8 December 2009

  Consolidated Income Statement

for the year ended 30 September 2009

	2009 £000	2008 £000
Revenue	25,685	21,974
Cost of sales	(20,114)	(16,819)
Gross profit	5,571	5,155
Distribution costs	(2,000)	(1,615)
Administrative expenses	(3,365)	(3,015)
Profit from operations	206	525
Finance expense	(270)	(219)
Finance income	40	216
(Loss)/profit before tax	(24)	522
Tax expense	(120)	(73)
(Loss)/profit for the year, attributable  to the equity holders of the Parent Company	(144)	449

(Loss)/earnings per share for profit attributable

to the equity holders of the Company

	2009	2008
Basic and diluted (pence)	(0.5)p	1.4p

Consolidated Statement of Recognised Income and Expense

for the year ended 30 September 2009

	2009 £000	2008 £000
Translation differences on foreign operations	1,201	898
Unrealised gains taken to available-for-sale reserve	240	74
Net income recognised directly in equity	1,441	972
(Loss)/profit for the financial year	(144)	449
Total recognised income and expense for the year	1,297	1,421

  Consolidated Balance Sheet

at 30 September 2009

Company number 00067863	2009 £000	2008 £000
Assets
Non-current assets
Property, plant and equipment	2,350	2,053
Goodwill	1,014	883
Available-for-sale investments	1,295	1,100
Total non-current assets	4,659	4,036
Current assets
Inventories	6,660	6,573
Trade and other receivables	6,973	6,662
Corporation tax recoverable	52	125
Derivative financial assets	-	28
Cash available on demand	2,574	2,486
Total current assets	16,259	15,874
Total assets	20,918	19,910
Liabilities
Non-current liabilities
Loans and borrowings	(2,273)	(1,977)
Total non-current liabilities	(2,273)	(1,977)
Current liabilities
Trade and other payables	(1,350)	(1,676)
Loans and borrowings	(3,823)	(4,244)
Corporation tax liability	(54)	-
Derivative financial liabilities	(186)	-
Total current liabilities	(5,413)	(5,920)
Total liabilities	(7,686)	(7,897)
TOTAL NET ASSETS	13,232	12,013

Capital and reserves attributable to equity holders of the Company
Share capital	3,897	3,972
Capital redemption reserve	495	420
Treasury share reserve	(605)	(667)
Available-for-sale reserve	314	74
Foreign exchange reserve	2,266	1,065
Retained earnings	6,865	7,149
TOTAL EQUITY	13,232	12,013

  Consolidated Cash Flow Statement

for the year ended 30 September 2009

	2009 £000	2008 £000
Cash flows from operating activities
(Loss)/profit for the period	(144)	449
Adjustments for:
Depreciation	198	161
(Reversal of impairment)/impairment of available-for-sale investments	(231)	231
Loss on sale of available-for-sale investment	269	-
Foreign exchange differences	214	(54)
Translation gain on cash and cash equivalents	18	67
Finance expense	270	219
Finance income	(40)	(216)
Loss/(gain) on sale of property, plant and equipment	7	(2)
Income tax expense	120	73
Cash flows from operating activities before changes in working capital and provisions	681	928
Decrease/(increase) in inventories	859	(684)
Decrease/(increase) in trade and other receivables	649	(1,701)
(Decrease)/increase in trade and other payables	(624)	124
Cash generated from operating activities	1,565	(1,333)
Income taxes recovered/(paid)	20	(222)
Net cash flows from operating activities	1,585	(1,555)
Investing activities
Purchase of property, plant and equipment	(200)	(1,812)
Sale of property, plant and equipment	3	5
Purchase of available-for-sale investments	(200)	(1,257)
Dividend from available-for-sale investment	-	21
Sale of available-for-sale investments	207	-
Bank interest received	40	195
Net cash used in investing activities	(150)	(2,848)
Financing activities
Purchase of treasury shares	(78)	(300)
Proceeds from bank borrowings	-	4,201
Repayment of bank borrowings	(884)	(1,606)
Bank interest paid	(270)	(219)
Net cash used in financing activities	(1,232)	2,076
Net increase/(decrease) in cash and cash equivalents	203	(2,327)
Cash and cash equivalents at beginning of the period	2,367	4,694
Cash and cash equivalents at end of the period	2,570	2,367

Leeds Group plc

Preliminary Results

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.    The tables below set out a segmental analysis of the Group's operations.

	Hemmers-Itex  2009 £000	Holding Companies 2009 £000	Group Total 2009 £000	Hemmers-Itex 2008 £000	Holding Companies 2008 £000	Group Total 2008 £000
Revenue	25,685	-	25,685	21,974	-	21,974
Cost of sales	(20,114)	-	(20,114)	(16,819)	-	(16,819)
Gross profit	5,571	-	5,571	5,155	-	5,155
Distribution expenses	(2,000)	-	(2,000)	(1,615)	-	(1,615)
Administrative expenses	(3,137)	(228)	(3,365)	(2,623)	(392)	(3,015)
Profit from operations	434	(228)	206	917	(392)	525
Finance expense	(270)	-	(270)	(219)	-	(219)
Finance income	-	40	40	-	216	216
Internal interest	(126)	126	-	(112)	112	-
Profit/(loss) before tax	38	(62)	(24)	586	(64)	522
Tax (expense)/credit	(123)	3	(120)	(77)	4	(73)
(Loss)/profit for year	(85)	(59)	(144)	509	(60)	449

	Hemmers-Itex  2009 £000	Holding Companies 2009 £000	Group Total 2009 £000	Hemmers-Itex 2008 £000	Holding Companies 2008 £000	Group Total 2008 £000
Property, plant & equip.	2,350	-	2,350	2,053	-	2,053
Goodwill	1,014	-	1,014	883	-	883
Available-for-sale investments	-	1,295	1,295	-	1,100	1,100
Current assets	14,058	2,165	16,223	13,476	2,398	15,874
Total assets	17,422	3,460	20,882	16,412	3,498	19,910
Non-current liabilities	(2,273)	-	(2,273)	(1,977)	-	(1,977)
Current liabilities	(5,275)	(102)	(5,377)	(5,804)	(116)	(5,920)
Total liabilities	(7,548)	(102)	(7,650)	(7,781)	(116)	(7,897)
Net assets	9,874	3,358	13,232	8,631	3,382	12,013
Internal (creditor)/debtor	(2,058)	2,058	-	(1,752)	1,752	-
Net assets	7,816	5,416	13,232	6,879	5,134	12,013

Capital expenditure	200	-	200	1,812	-	1,812
Depreciation	198	-	198	160	1	161

4.    Loss/earnings per share

	2009	2008
Numerator
(Loss)/profit for the year from continuing operations, being the (loss)/earnings used in basic and diluted loss or earnings per share	£(144,000)	£449,000
Denominator
Weighted average number of shares used in basic and diluted loss or earnings per share (excluding treasury shares)	29,514,410	31,050,281
Basic and diluted (loss)/earnings per share	(0.5) p	1.4 p

5.   The financial information set out above does not constitute the company's statutory accounts for 2009 or 2008. 

      Statutory accounts for the years ended 30 September 2009 and 30 September 2008 have been reported on by 
      the Independent Auditors.  

      The Independent Auditors' Report on the Annual Report and Financial Statements for 2008 was unqualified, did 
      not did not draw attention to any matters by way of emphasis, and did not contain a statement under 237(2) or 
      237(3) of the Companies Act 1985.

      The Independent Auditors' Report on the Annual Report and Financial Statements for 2009 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.

       Statutory accounts for the year ended 30 September 2008 have been filed with the Registrar of Companies. The 
       statutory accounts for the year ended 30 September 2009 will be delivered to the Registrar in due course.

   6. 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

 

 

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