Leeds Group Regulatory News (LDSG)

19 Dec 2007 07:01

Leeds Group PLC19 December 2007 Issued on behalf of Leeds Group plcDate: 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 willstrengthen the Group and benefit shareholders. In the meantime, Hemmers-Itexcontinues to perform in line with the expectations of both its management andthe Board." Ewen Wigley, Chairman FULL STATEMENTS ATTACHED Enquiries:Leeds Group plc Citigate Dewe RogersonMalcolm Wilson, Company Secretary Fiona TooleyTel: 0113 391 9000 or 07801 224618 Tel: 0121 455 8370 or 07785 703523Ewen Wigley, ChairmanTel: 07815 134466 Seymour Pierce LimitedSarah JacobsTel: 020 7107 8000 -2- Leeds Group plc Preliminary Results STATEMENT BY THE CHAIRMAN, EWEN WIGLEY Results2007 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 theprevious year before exceptional costs of £838,000. Continuing operations madean operating profit of £643,000 (2006: £645,000). The beneficial effect of theshare buy-back programme discussed below and a lower effective tax rate meanthat the earnings per share from continuing operations were 1.5 pence (2006: 1.0pence) 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 underlyingperformance by the business held back by some costs incurred at the end of thefinancial year in anticipation of growth in 2008. When Leeds Leasing was sold in October 2005, £500,000 of the sale price was heldin escrow. That amount, together with accrued interest, was released in April2007 as no claims had been made against the Group under the general warrantiesgiven in the terms of the sale agreement. Strategic DevelopmentsWe continue to identify opportunities to grow the Hemmers-Itex business in aprofitable manner. The demise of a competitor during 2007 has provided such anopportunity, and Hemmers-Itex is investing in both staff and infrastructure inorder to take advantage of the potential for growth. The Group has continued to take advantage of the authority, granted at the lastAnnual General Meeting, to purchase its own shares into Treasury. During theyear, Leeds Group purchased a total of 3,325,618 shares for a cost, includingexpenses, of £735,000. The acquisition of these shares increased the net assetvalue 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, theGroup now has 34,900,000 shares in issue, of which 3,467,015 are held inTreasury. Subject to shareholder approval of the necessary resolution at theforthcoming Annual General Meeting, the Board intends to continue to buy backshares whenever the opportunity arises. The maximum number of shares which theBoard currently seeks to buy back in the coming year is 4,825,000 and themaximum price to be paid for an ordinary share is an amount equal to not morethan 105 per cent of the average middle market quotations for an ordinary sharetaken from The London Stock Exchange Daily Official List for the five businessdays immediately preceding the date of purchase. In buying back the Company'sshares, the Board is returning capital to those shareholders who wish to selltheir shares whilst improving the net asset value per share of the remainingshareholders. DividendIt is currently the intention of the Board to seek opportunities to maximise thelong-term value of the Group by identifying appropriate investments. In thelight of such a policy, the Directors do not propose a dividend. Directors and EmployeesOn behalf of shareholders, I would like to thank the management and staff ofHemmers-Itex for their efforts during a year which saw continued growth in theirbusiness. OutlookThe Board continues to look for other acquisitions or investments that willstrengthen the Group and benefit shareholders. In the meantime, Hemmers-Itexcontinues to perform in line with the expectations of both its management andthe Board. Ewen WigleyChairman19 December 2007 -3- Leeds Group plc Preliminary Results OPERATING AND FINANCIAL REVIEW Group ResultGroup 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'soverall profit before exceptional items is attributable to further reductions incentral costs and increased interest income in the parent company. The tax charge in the year was £245,000 (2006: £352,000 including £75,000 UKdeferred tax charge). Earnings per share from continuing operations items were 1.5 pence (2006: 1.0pence). Hemmers-ItexThis German-based subsidiary is engaged in the import, warehousing andwholesaling of fabrics. In another successful year, fabric sales grew by 4.5% to11.5 million linear metres. Although market conditions remained difficult in theyear for our retail customers, Hemmers-Itex obtained further increases in salesto the ready-made manufacturing sector and overall turnover increased by 4.4% to€25.1million (2006: €24.1 million). With Sterling having depreciated during theyear, reported sales in Sterling show an increase of 7.4%. Gross margin was 23.6%, fractionally ahead of the 23.1% achieved last year, andour German management team once again demonstrated their commitment to strictcontrol of overheads. Profit before tax was £662,000 (2006: £712,000) and therewould undoubtedly have been profit growth but for costs incurred in preparing toexploit the growth opportunities described below. During the year the lease expired on the property in Cologne occupied by KMTStoffe, the Hemmers-Itex subsidiary acquired in 2004, and the management tookthis opportunity to achieve operational economies by relocating the business tothe principal facility at Nordhorn. We face the future with confidence. In the fourth quarter of the year acompetitor company ceased operations and Hemmers-Itex moved quickly to recruitseveral senior salespeople and to appoint several former sales agents of thatcompetitor. In total, the headcount at Hemmers-Itex grew in the year by 21 to 93people. To handle the increased volumes now anticipated for 2008 and beyond, theDirectors have approved an increase in the size of the Nordhorn facility, aproject that we expect to be completed in 2008 at a cost of approximately £1.85million. Head Office costsThe 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 beforeexceptional (98) (10) 235 422 75items and tax Exceptional items - - (135) 1,431 77 ---------------------------------------- Net head office (income)/costs beforetax (note 2) (98) (10) 100 1,853 152 ---------------------------------------- -4- Leeds Group plc Preliminary Results OPERATING AND FINANCIAL REVIEW (continued) Textile ManufacturingThe withdrawal from textile manufacture is now complete, with very few issuesremaining outstanding. The Langholm Dyeing business was sold to its managementin 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. TheGroup owns the freehold title to a plot of land of approximately 5 acresadjacent to the site of the former Scott & Rhodes factory in Yeadon, and duringthe year Leeds City Council resolved to register this land as a town or villagegreen. The Directors are seeking a judicial review of that decision, andmeanwhile are of the opinion that, in its current use, the value of the land isnegligible. Fixed AssetsCapital additions in the year amounted to £155,000 (2006: £42,000). Tangiblefixed assets in the Balance Sheet amount to £308,000 (2006: £245,000). A projectto enlarge the Hemmers-Itex facility was approved in September 2007, and this isexpected to be completed during 2008 at a cost of approximately £1,850,000. Working CapitalAt constant exchange rates, working capital increased during the year by£652,000 of which £490,000 reflects higher stockholding in Hemmers-Itex madenecessary by increased sales volumes in 2007 and the further increases expectedin 2008. Debt ProfileThe funding policy of the Group continues to be to match its funding requirementin trading subsidiaries in a cost-effective fashion with an appropriatecombination of short and longer-term debt. The Group's net cash balances at 30September 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 ParentCompany. International Financial Reporting Standards (IFRS) Action is in hand to ensure that the Group is able to meet the requirement toreport in future under IFRS, commencing with the next Interim Report that willcover the six months ending 31 March 2008. Ewen WigleyDirector19 December 2007 -5- Leeds Group plc Preliminary Results Consolidated Profit and Loss Accountfor 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 abusiness operation - - (838) (838) -------- -----------------------------------Profit/(loss) before interest 643 645 (732) (87) -------------------------Interest receivable andsimilar income 238 207 Interest payable and similarcharges (121) (215) -------- --------Profit/(loss) on ordinaryactivities before taxation 760 (95) Taxation on profit/(loss) onordinary activities (245) (352) -------- --------Profit/(loss) for thefinancial year 515 (447) -------- -------- Basic and diluted earnings/(loss) per share 2007 2006From continuing and discontinuedactivities: 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 ofRecognised Gains and Lossesfor the year ended30 September 2007 2007 2006 £000 £000 Profit/(loss) for the financialyear 515 (447) Foreign currency translationdifferences 167 (33) -------- -------- Total recognised gains andlosses relating to thefinancial year 682 (480) -------- -------- -6- Leeds Group plc Preliminary Results Balance Sheetsat 30 September 2007 Group Company 2007 2006 2007 2006Fixed assetsIntangible assets 683 757 - -Tangible assets 308 245 1 2Investments - - 4,300 3,681 ------------------------------------ 991 1,002 4,301 3,683 ------------------------------------Current assetsStock 5,172 4,552 - -Debtors 4,344 3,990 918 883Cash 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 oneyear) 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 reservesCalled up equity share capital 4,188 4,392 4,188 4,392Capital 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 3,297Purchase of own shares for treasury (735) (289) (735) (289)Foreign currency translation differences 167 (33) - - ------------------------------------Net transfer (from)/to equityshareholders' funds (53) (769) 529 3,008Opening 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 Statementfor the year ended 30 September 2007 2007 2006 £000 £000 Cash inflow from operating activities 174 324Return 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) 4,868Financing 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 4,433Net (increase)/decrease in loans (1,387) 146 -----------------------Change in net cash resulting from cash flows (1,069) 4,579Net debt disposed of with subsidiary - 14,571Foreign currency translation difference (54) 15 -----------------------Movement in net cash (1,123) 19,165Net 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 751Depreciation of fixed assets 94 103Amortisation of goodwill 96 91Profit on sale of tangible fixed assets (7) (4)Increase in stocks (490) (407)(Increase)/decrease in debtors (241) 136Increase/(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 - 17,523Cost of sales (13,392) - (13,392) -------------------------------------------Gross profit 4,131 - 4,131Distribution costs (1,096) - (1,096)Administrative expenses (2,163) (229) (2,392) -------------------------------------------Operating profit/(loss) 872 (229) 643Net 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 - 16,575Cost of sales (24) (12,546) - (12,570) ---------------------------------------------Gross profit 231 3,774 - 4,005Distribution costs - (874) - (874)Administrative expenses (125) (1,984) (271) (2,380) ---------------------------------------------Operating profit/(loss) 106 916 (271) 751Profit on sale of a businessoperation (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 - 683Tangible fixed assets 307 1 308Working capital 8,387 (191) 8,196 -------------------------------------Trading capital employed 9,377 (190) 9,187Current tax (25) - (25)(Net external debt)/net cash (2,342) 4,002 1,660Net 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 - 757Tangible fixed assets 243 2 245Working capital 7,495 (150) 7,345 -------------------------------------Trading capital employed 8,495 (148) 8,347Current tax (255) - (255)(Net external debt)/net cash (1,899) 4,682 2,783Net 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 theCompany's statutory accounts for the year ended 30 September 2007 or the yearended 30 September 2006 but is derived from those accounts. 4. Statutory accounts for the year ended 30 September 2006 have been deliveredto the Registrar of Companies, and those for the year ended 30 September 2007will be delivered following the Company's Annual General Meeting. BDO StoyHayward LLP have reported on the accounts of both years: their reports wereunqualified, did not include references to any matters to which the auditorsdrew attention by way of emphasis without qualifying their report, and did notcontain 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 sentto shareholders shortly. Further copies will be available from the Company'sRegistered Office, Schofield House, Gateway Drive, Yeadon, Leeds, LS19 7XY, orfrom the Group's website, www.leedsgroup.plc.uk. This information is provided by RNS The company news service from the London Stock Exchange