Leeds Group Regulatory News (LDSG)

31 Jan 2007 14:33

Leeds Group PLC31 January 2007 Issued on behalf of Leeds Group plcDate Wednesday, 31 January 2007 IMMEDIATE RELEASE LEEDS GROUP plc Preliminary Results for the year ended 30 September 2006 - Group profit before tax and exceptional items was £743,000 (2005: £800,000). - After an exceptional loss of £838,000 on the sale of Leeds Leasing, Group loss before tax was £95,000 (2005: profit £935,000). - Hemmers-Itex generated sales of £16.3 million and profit before tax of £712,000 - increases over 2005 of 16% and 24% respectively. - Further reductions of £104,000 in unallocated Central Costs. - Share buy-back programme continued, with additional purchases of 1,390,000 shares at a cost of £289,000. - Earnings per share from Continuing Operations were 1.0 pence (2005: 0.3 pence). - No dividend proposed while Board continues search for suitable investment opportunities. "Hemmers-Itex has widened its customer base to include manufacturers ofready-made items as well as fabric retailers. Sales grew by 16%, and thisadditional volume contributed to pre-tax profit of £712,000 which was 24% higherthan in 2005" "...the Board continues to work to identify suitable acquisitions that canstrengthen the Group while creating and enhancing shareholder value." Vin Murria, 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, DirectorTel: 07815 134466 Leeds Group plc Preliminary Results STATEMENT BY THE CHAIRMAN, VIN MURRIA ResultsThe Group's trading performance in 2006 was satisfactory. Group profit beforetax and exceptional items was £743,000 (2005: £800,000) with improvedprofitability in our continuing operations and further reductions in CentralCosts just failing to offset the reduction of £441,000 in profit from LeedsLeasing following its sale on October 31 2005. Hemmers-Itex has widened its customer base to include manufacturers ofready-made items as well as fabric retailers. Sales grew by 16%, and thisadditional volume contributed to pre-tax profit of £712,000 which was 24% higherthan in 2005. After the exceptional loss of £838,000 on disposal of Leeds Leasing, Group lossbefore tax was £95,000 (2005: profit £935,000). Strategic DevelopmentsFollowing shareholder approval at the Extraordinary General Meeting on 31October 2005, the Group completed the sale of Leeds Leasing to Bibby AssetFinance Limited for a consideration of £3,700,000 plus the repayment of Grouploans of £1,350,000. This transaction has substantially strengthened the Group'sBalance Sheet: net proceeds and debt sold with the business amounted to£19,572,000, which had the effect of transforming the Group from a position ofindebtedness to one of having net cash resources. We have applied £289,000 during the year to continued purchases of Group shares,bringing to 1,840,000 the total shares held in treasury, equal to 5% of theissued share capital. Subject to shareholder approval at the forthcoming AGM,the Company intends to continue this programme whenever opportunities arise tomake purchases for the benefit of shareholders at a price below net asset value. DividendIn view of the post-tax loss of £447,000 in the year, the Directors do notpropose a dividend. Future dividend policy will be determined in the light ofprofitability and, in the short-term, the cost of investment opportunities thatwe are working to identify. Directors and EmployeesDuring the year, Carol Roberts and Malcolm Wilson resigned from the Board. Thedisposal programme that had begun when I joined the Board in 2002 is nowcomplete, and the Group's activities have been redirected from manufacturing totrading. With increasing commitments elsewhere, I have judged it right to step down andleave the Company at the conclusion of the forthcoming AGM. At that time, EwenWigley will succeed me as Chairman and it is the intention of the Board toappoint Peter Gyllenhammar, a major shareholder in the Group, as a Director. On behalf of shareholders I should like to thank the management and staff ofHemmers-Itex for their efforts during the year, in which the volume of fabricsales grew by 16% to almost 11 million metres. OutlookThe new financial year has begun with strong sales at Hemmers-Itex. The GroupBalance Sheet contains cash of nearly £5 million, and the Board continues towork to identify suitable acquisitions that can strengthen the Group whilecreating and enhancing shareholder value. Vin MurriaChairman31 January 2007 Leeds Group plc Preliminary Results OPERATING AND FINANCIAL REVIEW Group ResultGroup turnover in the year was £16,575,000 (2005: £17,188,000). The reduction of£613,000 from the previous year is the net of turnover reduced by £2,820,000 inLeeds Leasing, which was sold in October 2005, and increased sales of £2,207,000(16%) generated by the Group's continuing business, Hemmers-Itex. Group profit before tax and exceptional items was £743,000 (2005: £800,000) asthe absence of profit from Leeds Leasing for 11 months of the year was not quiteoffset by the increased profitability of Hemmers-Itex, further reductions inCentral Costs, and interest income on the proceeds of the divestment. There was an exceptional loss on the disposal of Leeds Leasing of £838,000 andthis was approximately equal to the deferred tax asset recognised in thecompletion accounts. After charging this exceptional loss, the loss before taxfor the year was £95,000 (2005: profit £935,000). The tax charge in the year was £352,000 (2005: £236,000) and included UKdeferred tax of £75,000 that no longer appears recoverable in the near future.The German tax charge of £273,000 included a prior year charge of £32,000following a tax audit covering the years from 2000 to 2003. Earnings per share from continuing operations before exceptional items were 1.0pence (2005: 0.3 pence). Hemmers-ItexThis German-based subsidiary is engaged in the import, warehousing andwholesaling of fabrics. This business enjoyed a year of impressive growth inboth volumes and profits. Sales grew by 16% to almost 11 million linear metresof fabric, and by a similar percentage to £16,320,000. This was achieved despitedepressed market conditions, which have been affecting our traditional customerbase of fabric retailers. A feature of the year was a further increase in salesto manufacturers of ready-made items of apparel and household goods, a marketthat we identified a few years ago as important to future growth. The changing nature of our customer base requires changes to our salesstructure. During the year we strengthened our sales force, as well as the teamof agents generating sales on our behalf throughout Europe. During the currentyear we shall discontinue our sales lorries that have served our German retailercustomer base for many years, switching to a highly mobile sales force that willbe able to display the entire collection and offer guaranteed delivery in 24hours. Gross profit grew by 4% to £3,774,000. The rate of gross margin declined alittle from 25.7% in 2005 to 23.1% in 2006 reflecting the increasingsignificance of the ready-made sector in our sales. Despite the sales growth,overheads fell by £31,000 from the level of 2005, when approximately £200,000had been spent on restructuring our team of agents in France and certain EasternEuropean markets. In the current year we shall achieve operational efficienciesby consolidating onto our principal facility at Nordhorn the warehousing anddistribution activities of our KMT operation currently located in Cologne. In view of the increased exposure to newer market sectors, where customerdelivery and quality expectations are higher, the Directors have implemented amore robust stock provisioning methodology whose impact on profits in the yearwas approximately £130,000. The net result of increased gross profit and reduced overhead was an increase inpre-tax profit of 24% to £712,000. The current financial year has begun well,with sales after three months in line with last year. Leeds LeasingThe sale of Leeds Leasing to Bibby Asset Finance Limited was completed on 31October 2005, and accordingly only the pre-tax profit of £21,000 earned inOctober 2005 is included in the Group profit and loss account for the year ended30 September 2006. There was a loss on disposal, after transaction costs, of £838,000 but apositive impact on the Group's cash position of £19,572,000 as follows: £000Consideration for sale 3,700Repayment of parent company loan 1,350Bank overdraft disposed of 155Bank debt and HP commitments disposed of 14,571Transaction costs (204) ------- 19,572 ------- Head office costsThe table below illustrates the continuing downward trend in Head office costs. 2006 2005 2004 2003 £000 £000 £000 £000 Head office expenses 262 373 545 556Exchange loss/(gain) 9 2 56 (112) ----------------------------------Administrative expenses 271 375 601 444Interest income (281) (140) (179) (369) ----------------------------------Net Head office (income)/costs beforeexceptional items and tax (10) 235 422 75Exceptional items (note 2) - (135) 1,431 77 ----------------------------------Net head office (income)/costs before tax (10) 100 1,853 152 ---------------------------------- Further reductions can be expected in the current year which will feel the fullyear benefit of cost savings achieved in 2006 as well as further economies madesince the year-end. 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 an attempt to include this land within the green belt was successfullyresisted. More recently, a public enquiry was held to deal with an attempt tohave the land registered as a town or village green, the outcome of which isexpected in the Spring of 2007. The Directors are of the opinion that, in itscurrent use, the value of the land is negligible. Fixed assetsCapital additions in the year amounted to £42,000 (2005: £134,000). Tangiblefixed assets in the Balance Sheet amount to £245,000 (2005: £449,000). Therewere no capital commitments at the year-end, and no material capital projectsare contemplated for the current financial year. Working capitalAt constant exchange rates, working capital increased during the year by£587,000 of which £407,000 reflects higher stockholding in Hemmers-Itex madenecessary by increased sales volumes and the need to offer to customersguaranteed 24-hour delivery of samples and sales goods. Leeds Group plc Preliminary Results 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 medium-term debt. The Group's net cash balances at 30September 2006 can be analysed as follows: Holding Hemmers- Total Companies Itex Group £000 £000 £000 Cash (4,682) (24) (4,706)Overdrafts - 228 228 -----------------------------------Total on demand (4,682) 204 (4,478)Fixed rate loans due within one year - 1,695 1,695 -----------------------------------Net cash balances (4,682) 1,899 (2,783) ----------------------------------- Bank debt in the subsidiaries is unsecured and without recourse to the ParentCompany. Ewen WigleyDirector31 January 2007 Leeds Group plc Preliminary Results Consolidated Profit and Loss Accountfor the year ended 30 September 2006 Continuing 2006 Total Continuing 2005 Total operations Discontinued £000 operations Discontinued £000 £000 operations £000 operations £000 £000 Turnover 16,320 255 16,575 14,113 3,075 17,188 Cost of sales (12,546) (24) (12,570) (10,483) (287) (10,770) -----------------------------------------------------------------------Gross profit 3,774 231 4,005 3,630 2,788 6,418 Distributioncosts (874) - (874) (937) - (937) Administrativeexpenses (2,255) (125) (2,380) (2,327) (1,402) (3,729) -----------------------------------------------------------------------Operatingprofit 645 106 751 366 1,386 1,752 Exceptional(loss)/profiton sale of abusinessoperation - (838) (838) 135 - 135 -----------------------------------------------------------------------Profit/(Loss)beforeinterest 645 (732) (87) 501 1,386 1,887 ----------------------- ----------------------- Interestreceivable andsimilar income 207 32 Interestpayable andsimilarcharges (215) (984) ------- ------(Loss)/profiton ordinaryactivitiesbeforetaxation (95) 935 Taxation on(loss)/profiton ordinaryactivities (352) (236) ------- ------(Loss)/profitfor thefinancial year (447) 699 ------- ------ Basic and diluted earnings/(loss) per share: From continuing and discontinued activities before exceptional items 1.1p 1.5p exceptional items (2.4)p 0.4p ------- ------ after exceptional items (1.3)p 1.9p ------- ------ From continuing activities before exceptional items 1.0p 0.3p exceptional items - 0.4p ------- ------ after exceptional items 1.0p 0.7p ------- ------ Consolidated Statement of Recognised Gains and Lossesfor the year ended 30 September 2006 2006 2005 £000 £000(Loss)/profitfor thefinancial year (447) 699 Foreigncurrencytranslationdifferences (33) (25) ------- ------Totalrecognised(loss)/profitrelating tothe financialyear (480) 674 ------- ------ Leeds Group plc Preliminary Results Balance Sheetsat 30 September 2006 Group Company 2006 2005 2006 2005Fixed assetsIntangible assets 757 853 - -Tangible assets 245 449 2 -Investments - - 3,681 3,731 --------------------------------------- 1,002 1,302 3,683 3,731 ---------------------------------------Current assetsStocks 4,552 4,170 - - ---------------------------------------Debtors 3,990 5,062 883 1,857Deferred taxation - 875 - 75Finance lease debtors - 20,606 - - ---------------------------------------Total debtors 3,990 26,543 883 1,932Cash at bank and in hand 4,706 756 4,682 730 --------------------------------------- 13,248 31,469 5,565 2,662 Creditors: amounts falling due (3,375) (13,676) (1,136) (1,289)within one year ---------------------------------------Net current assets 9,873 17,793 4,429 1,373 ---------------------------------------Of which: --------------------------------------- due within one year 9,873 4,708 4,429 1,298 due after more than one year - 13,085 - 75 --------------------------------------- ---------------------------------------Total assets less current liabilities 10,875 19,095 8,112 5,104 Creditors: amounts falling due - (7,451) - - after more than one year ---------------------------------------Net assets 10,875 11,644 8,112 5,104 --------------------------------------- Capital and reservesCalled up equity share capital 4,392 4,392 4,392 4,392Profit & loss account 6,483 7,252 3,720 712 ---------------------------------------Equity shareholders' funds 10,875 11,644 8,112 5,104 --------------------------------------- Reconciliation of movements in equity shareholders' funds (Loss)/profit for the financial year (447) 699 3,297 (163)Purchase of own shares (289) (61) (289) (61)Foreign currency translationdifferences (33) (25) - - ---------------------------------------Net transfer (from)/to equityshareholders' funds (769) 613 3,008 (224) Opening equity shareholders' funds 11,644 11,031 5,104 5,328 ---------------------------------------Closing equity shareholders' funds 10,875 11,644 8,112 5,104 --------------------------------------- Leeds Group plc Preliminary Results Consolidated Cash Flow Statementfor the year ended 30 September 2006 2006 2005 £000 £000 Cash inflow/(outflow) from operating activities 324 (626)Return on investments and servicing of finance (8) (952)Taxation (431) (266)Capital expenditure and financial investment (18) (129)Acquisitions and disposals 5,001 135 ---------------------Cash inflow/(outflow) before financing 4,868 (1,838)Financing (435) 1,279 ---------------------Increase/(decrease) in cash in the year 4,433 (559) --------------------- Reconciliation of Net Cash Flow to Movement in Net Debt 2006 2005 £000 £000 Increase/(decrease) in cash in the year 4,433 (559)Net decrease/(increase) in loans and hire purchasecommitments 146 (1,340) ---------------------Change in net debt resulting from cash flows 4,579 (1,899)Net debt disposed of with subsidiary 14,571 -Foreign currency translation difference 15 11 ---------------------Movement in net debt 19,165 (1,888)Net debt at beginning of the year (16,382) (14,494) ---------------------Net cash/(net debt) at end of the year 2,783 (16,382) --------------------- Reconciliation of Operating Profit to Operating Cash Flows 2006 2005 £000 £000 Operating profit 751 1,752Depreciation of fixed assets 103 235Amortisation of goodwill 91 93(Profit)/loss on sale of tangible fixed assets (4) 4Increase in stocks (407) (321)Decrease/(increase) in debtors 136 (215)(Decrease)/increase in creditors (316) 104Increase in finance lease debtors (30) (2,278) --------------------Net cash inflow/(outflow) from operating activities 324 (626) -------------------- Leeds Group plc Preliminary Results Notes 1. The Directors do not recommend the payment of a dividend. 2. Exceptional items 2006Sale of Leeds LeasingOn 31 October 2005 Leeds Leasing was sold to Bibby Asset Finance Limited. Thebook value of the assets and liabilities disposed of are summarised in thefollowing table: £000 Tangible fixed assets 121Current assets: Finance lease debtors 20,636 Other debtors 911 Deferred tax 800 Creditors (2,058) Hire purchase commitments (11) Bank overdrafts (155) Bank loans (14,560) Parent company loan (1,350) ---------Net assets 4,334Consideration (3,700) ---------Loss on sale before disposal costs 634Disposal costs 204 ---------Exceptional loss on sale of a business operation 838 --------- Analysis of net cash flow £000 Consideration 3,700 Repayment of parent company loan 1,350 Bank overdrafts disposed of 155 Disposal costs (204) --------- 5,001 Bank loans disposed of 14,560 Hire purchase commitments disposed of 11 --------- 19,572 --------- 2005Langholm Dyeing Co. LimitedIn 2002, the Group sold its UK Dyeing Division to Langholm Dyeing Co. Ltd("Langholm"), a company established and owned by the Division's management. Theconsideration consisted of £4,450,000 in cash and deferred consideration of£1,550,000 in the form of a loan note. Subsequently, under the terms on whichthe Group sold the loan note to the Directors of Langholm in December 2004,further payments of £50,000 remained due from the Directors of Langholm on eachof the first three anniversaries of the sale. On grounds of prudence, the Groupretained a full provision against this debt, which was discharged in full in May2005 by a single payment of £135,000. This receipt was included in the profit &loss account for that year as an exceptional profit on sale of a businessoperation. The Group remains entitled to participate to a maximum of £375,000 inthe proceeds of any sale of Langholm or its business before December 2008. 3. The financial information set out on pages 6 to 8 does not constitute theCompany's statutory accounts for the year ended 30 September 2006 or the yearended 30 September 2005 but is derived from those accounts. 4. Statutory accounts for the year ended 30 September 2005 have been deliveredto the Registrar of Companies, and those for the year ended 30 September 2006will be delivered following the Company's Annual General Meeting. KPMG Audit Plcreported on the 2005 accounts while BDO Stoy Hayward LLP have reported on the2006 accounts: their respective reports were unqualified, did not includereferences to any matters to which the auditors drew attention by way ofemphasis without qualifying their report, and did not contain statements undersection 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