Last checked at 16 Dec 2008 07:00
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: 0113 391 9000 or 07801 224618 | Tel: 0121 455 8370 or 07785 703523 | Tel: 020 7107 8000 |
| Ewen Wigley, Chairman |
|
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| Tel: 07815 134466 |
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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.