Last checked at 5 Jan 2017 07:00
LEEDS GROUP PLC
Interim Results for the six months ended 30 November 2016
STATEMENT BY THE GROUP CHAIRMAN, JAN G HOLMSTROM
I am pleased to present the interim report of Leeds Group plc ("the Group") for the six months ended 30 November 2016.
The business of Leeds Group is that of a wholesaler of fabrics and haberdashery, and is conducted by its German trading subsidiary Hemmers/Itex Textil Import Export GmbH ("Hemmers") and by Chinoh-Tex Limited, a subsidiary of Hemmers based in Shanghai. These trading companies sell both basic commodity fabrics and also fabrics from their own fashion collections. Approximately 55% of sales are to retailers, with remaining sales activities divided between the wholesale and garment manufacturing sectors.
The Group achieved sales in the period of £21,057,000 (2015: £18,489,000) and made a profit after tax of £848,000 (2015: £692,000). Earnings per share were 3.1 pence (2015: 2.5 pence). The weakness of sterling in recent months has had a material impact upon the Group's results. Sales growth of 13.9% over the first half of the previous financial year comprises a fall of 2.7% in sales at constant exchange rates, disguised by the translation effect of weaker sterling, which increased reported sales by 16.6%. Similarly, the translation effect on the balance sheet has increased net assets by £1,269,000 since the Group's year end on 31 May 2016. There has been a gain of some £300,000 in the value of the Euro denominated parent company loan to Hemmers, and this has been locked in by the use of derivatives. The Group's major transactional currency exposure relates to the value of the Euro against the US Dollar which, in contrast, has enjoyed a period of relative stability.
In Euro terms, revenue at Hemmers fell by 2.9% to €22,521,000 (2015: €23,203,000). Growth was achieved in the retail and garment manufacturing sectors but this was offset by reduced sales into the wholesale sector, caused in part by an inability to keep up with demand for double folded items, a problem now addressed with the expansion of facilities in Nordhorn and the acquisition of additional folding machines. The reduction in sales and an increased cost base led to a fall on pre-tax profit to €734,000 (€1,227,000).
The KMR joint venture opened new shops in Berlin, Leipzig and Chemnitz in the period, to bring the total number of stores to 19, and also relocated shops in two other cities to more suitable premises. A project is underway to implement common business software across all shops and the costs associated with this project and with the opening of new shops amounted to some €150,000, leading to a pre-tax loss in the period, albeit a little lower than had been budgeted. The business continues to trade in line with the expectations of the Directors, with sales 25% greater than the equivalent period of last year.
External sales revenues and pre-tax profits at Chinoh-Tex were little changed from last year. As well as its contribution to Group pre-tax profit, ChinohTex continues to perform invaluable work in support of its European parent operation through its purchasing strengths, its ability to inspect locally purchased product for quality issues and the consolidation of freight shipments that minimises the cost of shipping stock to Europe.
The expansion of our facilities in Nordhorn is beginning to deliver the expected operational benefits including: increased double folding capacity as noted above; elimination of external warehousing rental costs; creation of a suitable showroom and bringing the KMR administration and warehousing in-house.
Group net debt, which has increased substantially because of the recent property investments, was £5,549,000 at 30 November 2015 (30 November 2015: £579,000; 31 May 2016: £2,646,000). Net cash outflow in the 6 months ended 30 November 2016 reflected the seasonal increase in working capital and capital expenditure as the Nordhorn factory extension was completed. Working capital is expected to fall from its seasonally high level during the second half-year.
In order to maximise funds available for future investments and the investment in the Hemmers facility during the current year, the Board does not propose an interim dividend. Given the global economy with its uncertainties, the board is cautiously optimistic for further growth in the second half of the year. As ever, I offer thanks to our employees throughout the Group who have worked so hard in the period.
Jan G Holmstrom, Chairman.
4 January 2017
Unaudited Consolidated Statement of Comprehensive Income
for the 6 months ended 30 November 2016
| 6 months to 30 November 2016 £000 | 6 months to 30 November 2015 £000 | Year to 31 May 2016 £000 |
Revenue |
21,057 |
18,489 |
36,272 |
Cost of sales |
(16,492) |
(14,373) |
(28,563) |
Gross profit |
4,565 |
4,116 |
7,709 |
Distribution costs |
(1,308) |
(1,169) |
(2,216) |
Administrative expenses |
(2,036) |
(1,916) |
(3,949) |
Profit from operations |
1,221 |
1,031 |
1,544 |
Finance expense |
(83) |
(39) |
(92) |
Finance income |
1 |
2 |
4 |
Share of post-tax (loss)/profit of joint venture |
(65) |
20 |
51 |
Profit before tax |
1,074 |
1,014 |
1,507 |
Tax expense |
(226) |
(322) |
(468) |
Profit for the period attributable to the equity holders of the Parent Company |
848 |
692 |
1,039 |
Other comprehensive income: |
|
|
|
Translation differences on foreign operations |
1,269 |
(257) |
693 |
|
|
|
|
Other comprehensive income for the period | 1,269 | (257) | 693 |
|
|
|
|
Total comprehensive income for the period attributable to the equity holders of the Company |
2,117 |
435 |
1,732 |
The results shown in the income statement derive wholly from continuing operations.
There is no tax effect relating to other comprehensive income.
Earnings per share for profit attributable
to the equity holders of the Company
| 6 months to 30 November 2016 | 6 months to 30 November 2015 | Year to 31 May 2016 |
|
|
|
|
Basic and diluted (pence) | 3.1p | 2.5p | 3.8p |
Unaudited Consolidated Statement of Financial Position
at 30 November 2016
| As at 30 November 2016 £000 | As at 30 November 2015 £000 | As at 31 May 2016 £000 |
Assets |
|
|
|
Non-current assets |
|
|
|
Property, plant and equipment | 7,444 | 2,271 | 5,864 |
Intangible assets | 946 | 784 | 855 |
Investment in joint venture | 642 | 559 | 640 |
|
|
|
|
Total non-current assets | 9,032 | 3,614 | 7,359 |
|
|
|
|
Current assets |
|
|
|
Inventories | 10,030 | 8,142 | 7,765 |
Trade and other receivables | 7,633 | 6,255 | 5,779 |
Corporation tax recoverable | 82 | - | - |
Derivative financial asset | 102 | 112 | - |
Cash and cash equivalents | 1,681 | 2,875 | 1,612 |
|
|
|
|
Total current assets | 19,528 | 17,384 | 15,156 |
|
|
|
|
Total assets | 28,560 | 20,998 | 22,515 |
|
|
|
|
Liabilities |
|
|
|
Non-current liabilities |
|
|
|
Loans and borrowings | (4,205) | (2,380) | (3,843) |
Deferred tax | (256) | (254) | (230) |
|
|
|
|
Total non-current liabilities | (4,461) | (2,634) | (4,073) |
|
|
|
|
Current liabilities |
|
|
|
Trade and other payables | (3,445) | (2,847) | (2,283) |
Loans and borrowings | (3,025) | (1,074) | (415) |
Derivative financial liability | - | - | (40) |
Corporation tax liability | - | (204) | (192) |
|
|
|
|
Total current liabilities | (6,470) | (4,125) | (2,930) |
|
|
|
|
Total liabilities | (10,931) | (6,759) | (7,003) |
|
|
|
|
TOTAL NET ASSETS | 17,629 | 14,239 | 15,512 |
Capital and reserves attributable to equity holders of the company |
|
|
|
Share capital | 3,792 | 3,792 | 3,792 |
Capital redemption reserve | 600 | 600 | 600 |
Treasury share reserve | (767) | (743) | (767) |
Foreign exchange reserve | 1,911 | (308) | 642 |
Retained earnings | 12,093 | 10,898 | 11,245 |
|
|
|
|
TOTAL EQUITY | 17,629 | 14,239 | 15,512 |
Unaudited Consolidated Cash Flow Statement
for the 6 months ended 30 November 2016
| 6 months to 30 November 2016 £000 | 6 months to 30 November 2015 £000 | Year to 31 May 2016 £000 |
Cash flows from operating activities |
|
|
|
Profit for the period | 848 | 692 | 1,039 |
Adjustments for: |
|
|
|
Depreciation | 294 | 124 | 300 |
Finance expense | 83 | 39 | 92 |
Finance income | (1) | (2) | (4) |
Movement in derivative financial assets | (145) | (55) | 99 |
Loss on sale of property, plant and equipment | - | - | 1 |
Share of post-tax loss/(profit) of joint venture | 65 | (20) | (51) |
Income tax expense | 226 | 322 | 468 |
|
|
|
|
Cash flows from operating activities before changes in working capital and provisions |
1,370 |
1,100 |
1,944 |
|
|
|
|
Increase in inventories | (1,434) | (1,070) | (44) |
(Increase)/decrease in trade and other receivables | (1,234) | (382) | 538 |
Increase/(decrease) in trade and other payables | 668 | 277 | (621) |
|
|
|
|
Cash (absorbed)/generated by operating activities | (630) | (75) | 1,817 |
Income taxes paid | (517) | (390) | (613) |
|
|
|
|
Net cash flows from operating activities | (1,147) | (465) | 1,204 |
|
|
|
|
Investing activities |
|
|
|
Purchase of property, plant and equipment | (1,248) | (686) | (4,156) |
Purchase of intangible assets | (84) | - | - |
Bank interest received | 1 | 2 | 4 |
|
|
|
|
Net cash used in investing activities | (1,331) | (684) | (4,152) |
|
|
|
|
Financing activities |
|
|
|
Purchase of treasury shares | - | (18) | (42) |
Net drawdown of bank borrowings | 2,511 | 2,098 | 2,640 |
Bank interest paid | (83) | (39) | (92) |
|
|
|
|
Net cash generated by financing activities | 2,428 | 2,041 | 2,506 |
|
|
|
|
Net (decrease)/ increase in cash and cash equivalents |
(50) |
892 |
(442) |
|
|
|
|
Translation gain/(loss) on cash and cash equivalents | 119 | (44) | 27 |
|
|
|
|
Cash and cash equivalents at beginning of the period | 1,612 | 2,027 | 2,027 |
|
|
|
|
Cash and cash equivalents at end of the period | 1,681 | 2,875 | 1,612 |
Unaudited Consolidated Statement of Changes in Equity
for the six months ended 30 November 2016
| Share capital
£000 | Capital redemption reserve £000 | Treasury share reserve £000 | Foreign exchange reserve £000 | Retained earnings
£000 | Total equity
£000 |
|
|
|
|
|
|
|
At 1 June 2016 | 3,792 | 600 | (767) | 642 | 11,245 | 15,512 |
Profit for the period | - | - | - | - | 848 | 848 |
Other comprehensive income | - | - | - | 1,269 | - | 1,269 |
|
|
|
|
|
|
|
At 30 November 2016 | 3,792 | 600 | (767) | 1,911 | 12,093 | 17,629 |
| Share capital
£000 | Capital redemption reserve £000 | Treasury share reserve £000 | Foreign exchange reserve £000 | Retained earnings
£000 | Total equity
£000 |
|
|
|
|
|
|
|
At 1 June 2015 | 3,792 | 600 | (725) | (51) | 10,206 | 13,822 |
Profit for the period | - | - | - | - | 692 | 692 |
Other comprehensive income | - | - | - | (257) | - | (257) |
Transaction with shareholders: |
|
|
|
|
|
|
Purchase of treasury shares | - | - | (18) | - | - | (18) |
|
|
|
|
|
|
|
At 30 November 2015 | 3,792 | 600 | (743) | (308) | 10,898 | 14,239 |
| Share capital
£000 | Capital redemption reserve £000 | Treasury share reserve £000 | Foreign exchange reserve £000 | Retained earnings
£000 | Total equity
£000 |
|
|
|
|
|
|
|
At 1 June 2015 | 3,792 | 600 | (725) | (51) | 10,206 | 13,822 |
Profit for the year | - | - | - | - | 1,039 | 1,039 |
Other comprehensive income | - | - | - | 693 | - | 693 |
Transaction with shareholders: |
|
|
|
|
|
|
Purchase of treasury shares | - | - | (42) | - | - | (42) |
|
|
|
|
|
|
|
At 31 May 2016 | 3,792 | 600 | (767) | 642 | 11,245 | 15,512 |
The following describes the nature and purpose of each reserve within equity:
Reserve | Description and purpose |
|
|
Capital redemption reserve | Amounts transferred from share capital on redemption of issued shares |
Treasury share reserve | Cost of own shares held in treasury |
Foreign exchange reserve | Gains/(losses) arising on retranslation of the net assets of overseas operations into sterling |
Retained earnings | Cumulative net gains/(losses) recognised in the consolidated statement of comprehensive income after deducting the cost of cancelled treasury shares |
|
|
Interim results
for the 6 months ended 30 November 2016
Notes to the accounts
1. The financial information in this report does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.
The interim results for the six months ended 30 November 2016 and 30 November 2015 are unaudited. The interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as endorsed by the European Union. The same accounting policies, presentation and methods of computation have been followed in the preparation of these results as were applied in the Company's latest annual audited financial statements.
The financial information for the year ended 31 May 2016 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 May 2016 have been filed with the Registrar of Companies. The Independent Auditor's Report on the Annual Report and Financial Statements for the year ended 31 May 2016 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.
2. Ordinary shares of 12 pence each used in the calculation of earnings per share:
| 6 months to 30 November 2016 | 6 months to 30 November 2015 | Year to 31 May 2016 |
|
|
|
|
| 27,435,843 | 27,532,496 | 27,506,459 |
3. Reconciliation of movements in net bank debt
| 6 months to 30 November 2016 £000 | 6 months to 30 November 2015 £000 | Year to 31 May 2016 £000 |
|
|
|
|
(Decrease)/increase in cash & cash equivalents | (50) | 892 | (442) |
Translation gain/(loss) on cash and cash equivalents | 119 | (44) | 27 |
Increase in loans | (2,511) | (2,098) | (2,640) |
Translation (loss)/gain on loans | (461) | 75 | (187) |
|
|
|
|
Net cash outflow | (2,903) | (1,175) | (3,242) |
Net (bank debt)/cash at beginning of period | (2,646) | 596 | 596 |
|
|
|
|
Net bank debt at end of period | (5,549) | (579) | (2,646) |
4. Analysis of net bank debt
| 6 months to 30 November 2016 £000 | 6 months to 30 November 2015 £000 | Year to 31 May 2016 £000 |
|
|
|
|
Cash | 1,681 | 2,875 | 1,612 |
Loans repayable in less than one year | (3,025) | (1,074) | (415) |
Loans repayable in more than one year | (4,205) | (2,380) | (3,843) |
|
|
|
|
Net bank debt at end of period | (5,549) | (579) | (2,646) |
5. Segmental information
| 6 months to 30 November 2016 £000 | 6 months to 30 November 2015 £000 | Year to 31 May 2016 £000 |
External revenue |
|
|
|
Hemmers Europe | 19,008 | 16,608 | 32,775 |
Hemmers China | 2,049 | 1,881 | 3,497 |
|
|
|
|
Total Group external revenue | 21,057 | 18,489 | 36,272 |
| 6 months to 30 November 2016 £000 | 6 months to 30 November 2015 £000 | Year to 31 May 2016 £000 |
Profit before tax |
|
|
|
Hemmers Europe (local GAAP) | 616 | 875 | 1,258 |
Share of post-tax (loss)/profit of JV | (65) | 20 | 51 |
IFRS adjustment - financial derivatives | 89 | 55 | (99) |
|
|
|
|
Hemmers Europe (IFRS) | 640 | 950 | 1,210 |
Hemmers China | 143 | 155 | 267 |
Unrealised profit in stock | (2) | (9) | 3 |
Holding company | 293 | (82) | 27 |
|
|
|
|
Group profit before tax | 1,074 | 1,014 | 1,507 |
| 6 months to 30 November 2016 £000 | 6 months to 30 November 2015 £000 | Year to 31 May 2016 £000 |
Net assets |
|
|
|
Hemmers Europe (local GAAP) | 12,660 | 10,024 | 11,117 |
IFRS adjustment - financial derivatives | 33 | 80 | (28) |
IFRS adjustment - goodwill amortisation | 618 | 562 | 613 |
|
|
|
|
Hemmers Europe (IFRS) | 13,311 | 10,666 | 11,702 |
Hemmers China | 1,223 | 915 | 1,003 |
Unrealised profit in stock | (37) | (41) | (32) |
Holding company | 3,132 | 2,699 | 2,839 |
|
|
|
|
Group net assets | 17,629 | 14,239 | 15,512 |
Enquiries:
|
|
Leeds Group plc | Cairn Financial Advisers LLP |
Malcolm Wilson | Tony Rawlinson / Liam Murray |
07801 224618 | 020 7213 0880 |