7 Jan 2016 07:00
LEEDS GROUP PLC
Interim Results for the six months ended 30 November 2015
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 2015.
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 half of sales are to retailers, with remaining sales activities divided between wholesalers and the garment manufacturing sector.
The Group achieved sales in the period of £18,489,000 (2014: £18,581,000) and made a profit after tax of £692,000 (2014: £701,000). Earnings per share were 2.5 pence (2014: 2.5 pence). In the first half of the current financial year, the Euro was, on average, some 10% weaker than it was during the first half of the Group's previous financial year. Given that the Group's purchases are predominantly made in US Dollars while the vast majority of its sales are in Euros, our management team has done well to preserve historic rates of gross margin, and to deliver Group sales and pre-tax profit which, if translated to sterling at constant 2014 exchange rates, would show growth of 8.8% and 8.3% respectively.
In Euro terms, revenue at Hemmers increased by 11.7% to €23,203,000 (2014: €20,775,000) reflecting higher selling prices and volume growth into the retailer customer base. This volume growth was chiefly as a result of increasing the Hemmers share of the purchase requirements of Stoff-Ideen-KMR (KMR), the retail chain in which Hemmers acquired a 50% joint venture interest a year ago. Hemmers pre-tax profit increased by 15.1% to €1,227,000 (2014: €1,066,000).
The KMR joint venture opened new shops in Saarbrücken and in Bamberg in the period, to bring the total number of stores to 16, and the business continues to trade in line with the expectations of the Directors.
External sales revenues at ChinohTex were 9.8% down on last year at £1,881,000 (2014: £2,086,000) leading to a reduced pre-tax profit of £155,000 (2014: £193,000). Despite this setback, 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.
In the twelve month period since 30 November 2014 earnings per share has been 3.8 pence but the adverse translation differences on foreign operations have been £1,303,000, or 4.7 pence per share. Consequently net asset value per share (inclusive of goodwill and excluding shares held in treasury) at 30 November 2015 fell to 51.8 pence (2014: 52.7 pence).
Group net debt was £579,000 at 30 November 2015 (30 November 2014: £881,000; 31 May 2015: net cash £596,000). Net cash outflow in the 6 months ended 30 November 2015 reflected the seasonal increase in working capital and capital expenditure. Although working capital is expected to fall from its seasonally high level during the second half-year, net debt will continue to rise as the project to expand the Hemmers facility in Nordhorn is brought to completion at a total cost of €3.5 million.
The Directors are currently of the view that shareholder value is best promoted by investing in the current business and by seeking new investment opportunities which increase earnings per share. In order to maximise funds available for this purpose and to reflect the investment in the Hemmers facility during the current year, the Board does not propose an interim dividend.
As ever, I offer thanks to our employees throughout the Group who have worked so hard in the period.
Jan G Holmstrom
Chairman
7 January 2016
Unaudited Consolidated Statement of Comprehensive Income
for the 6 months ended 30 November 2015
| 6 months to 30 November 2015 £000 | 6 months to 30 November 2014 £000 | Year to 31 May 2015 £000 |
Revenue |
18,489 |
18,581 |
34,859 |
Cost of sales |
(14,373) |
(14,424) |
(27,066) |
Gross profit |
4,116 |
4,157 |
7,793 |
Distribution costs |
(1,169) |
(1,196) |
(2,316) |
Administrative expenses |
(1,916) |
(1,902) |
(3,855) |
Profit from operations |
1,031 |
1,059 |
1,622 |
Finance expense |
(39) |
(35) |
(71) |
Finance income |
2 |
5 |
7 |
Share of post-tax profit of joint venture |
20 |
- |
13 |
Profit before tax |
1,014 |
1,029 |
1,571 |
Tax expense |
(322) |
(328) |
(518) |
Profit for the period attributable to the equity holders of the Company |
692 |
701 |
1,053 |
Other comprehensive income: |
|
|
|
Translation differences on foreign operations |
(257) |
(169) |
(1,215) |
|
|
|
|
Other comprehensive income for the period | (257) | (169) | (1,215) |
|
|
|
|
Total comprehensive income for the period attributable to the equity holders of the Company |
435 |
532 |
(162) |
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 2015 | 6 months to 30 November 2014 | Year to 31 May 2015 |
|
|
|
|
Basic and diluted (pence) | 2.5p | 2.5p | 3.8p |
Unaudited Consolidated Statement of Financial Position
at 30 November 2015
| As at 30 November 2015 £000 | As at 30 November 2014 £000 | As at 31 May 2015 £000 |
Assets |
|
|
|
Non-current assets |
|
|
|
Property, plant and equipment | 2,271 | 1,868 | 1,760 |
Intangible assets | 784 | 888 | 802 |
Investment in joint venture | 559 | - | 553 |
|
|
|
|
Total non-current assets | 3,614 | 2,756 | 3,115 |
|
|
|
|
Current assets |
|
|
|
Inventories | 8,142 | 8,649 | 7,258 |
Trade and other receivables | 6,255 | 7,440 | 6,000 |
Derivative financial asset | 112 | 17 | 59 |
Cash and cash equivalents | 2,875 | 1,726 | 2,027 |
|
|
|
|
Total current assets | 17,384 | 17,832 | 15,344 |
|
|
|
|
Total assets | 20,998 | 20,588 | 18,459 |
|
|
|
|
Liabilities |
|
|
|
Non-current liabilities |
|
|
|
Loans and borrowings | (2,380) | (766) | (665) |
Deferred tax | (254) | (254) | (244) |
|
|
|
|
Total non-current liabilities | (2,634) | (1,020) | (909) |
|
|
|
|
Current liabilities |
|
|
|
Trade and other payables | (2,847) | (2,871) | (2,666) |
Loans and borrowings | (1,074) | (1,841) | (766) |
Corporation tax liability | (204) | (341) | (296) |
|
|
|
|
Total current liabilities | (4,125) | (5,053) | (3,728) |
|
|
|
|
Total liabilities | (6,759) | (6,073) | (4,637) |
|
|
|
|
TOTAL NET ASSETS | 14,239 | 14,515 | 13,822 |
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 | (743) | (726) | (725) |
Foreign exchange reserve | (308) | 995 | (51) |
Retained earnings | 10,898 | 9,854 | 10,206 |
|
|
|
|
TOTAL EQUITY | 14,239 | 14,515 | 13,822 |
Unaudited Consolidated Cash Flow Statement
for the 6 months ended 30 November 2015
| 6 months to 30 November 2015 £000 | 6 months to 30 November 2014 £000 | Year to 31 May 2015 £000 |
Cash flows from operating activities |
|
|
|
Profit for the period | 692 | 701 | 1,053 |
Adjustments for: |
|
|
|
Depreciation | 124 | 125 | 226 |
Finance expense | 39 | 35 | 71 |
Finance income | (2) | (5) | (7) |
Movement in derivative financial assets | (55) | (17) | (63) |
Loss on sale of property, plant and equipment | - | - | 2 |
Share of post-tax profit of joint venture | (20) |
| (13) |
Income tax expense | 322 | 328 | 518 |
|
|
|
|
Cash flows from operating activities before changes in working capital and provisions |
1,100 |
1,167 |
1,787 |
|
|
|
|
Increase in inventories | (1,070) | (1,736) | (1,063) |
Increase in trade and other receivables | (382) | (1,381) | (495) |
Increase in trade and other payables | 277 | 827 | 1,003 |
|
|
|
|
Cash (absorbed)/generated by operating activities | (75) | (1,123) | 1,232 |
Income taxes paid | (390) | (498) | (679) |
|
|
|
|
Net cash flows from operating activities | (465) | (1,621) | 553 |
|
|
|
|
Investing activities |
|
|
|
Purchase of property, plant and equipment | (686) | (125) | (298) |
Investment in joint venture | - | - | (575) |
Bank interest received | 2 | 5 | 7 |
|
|
|
|
Net cash used in investing activities | (684) | (120) | (866) |
|
|
|
|
Financing activities |
|
|
|
Purchase of treasury shares | (18) | (45) | (44) |
Net drawdown of bank borrowings | 2,098 | 1,765 | 717 |
Bank interest paid | (39) | (35) | (71) |
|
|
|
|
Net cash generated by financing activities | 2,041 | 1,685 | 602 |
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
892 |
(56) |
289 |
|
|
|
|
Translation (loss)/gain on cash and cash equivalents | (44) | 10 | (34) |
|
|
|
|
Cash and cash equivalents at beginning of the period | 2,027 | 1,772 | 1,772 |
|
|
|
|
Cash and cash equivalents at end of the period | 2,875 | 1,726 | 2,027 |
Unaudited Consolidated Statement of Changes in Equity
for the six months ended 30 November 2015
| 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 2014 | 3,792 | 600 | (681) | 1,164 | 9,153 | 14,028 |
Profit for the period | - | - | - | - | 701 | 701 |
Other comprehensive income* | - | - | - | (169) | - | (169) |
Transaction with shareholders: |
|
|
|
|
|
|
Purchase of treasury shares | - | - | (45) | - | - | (45) |
|
|
|
|
|
|
|
At 30 November 2014 | 3,792 | 600 | (726) | 995 | 9,854 | 14,515 |
| Share capital
£000 | Capital redemption reserve £000 | Treasury share reserve £000 | Foreign exchange reserve £000 | Retained earnings
£000 | Total equity
£000 |
|
|
|
|
|
|
|
At 1 June 2014 | 3,792 | 600 | (681) | 1,164 | 9,153 | 14,028 |
Profit for the year | - | - | - | - | 1,053 | 1,053 |
Other comprehensive income* | - | - | - | (1,215) | - | (1,215) |
Transaction with shareholders: |
|
|
|
|
|
|
Purchase of treasury shares | - | - | (44) | - | - | (44) |
|
|
|
|
|
|
|
At 31 May 2015 | 3,792 | 600 | (725) | (51) | 10,206 | 13,822 |
* The components of other comprehensive income are disclosed as part of the consolidated statement of comprehensive income.
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 2015
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 2015 and 30 November 2014 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 2015 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 May 2015 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 2015 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 2015 | 6 months to 30 November 2014 | Year to 31 May 2015 |
|
|
|
|
| 27,532,496 | 27,617,479 | 27,583,006 |
3. Reconciliation of movements in net bank debt
| 6 months to 30 November 2015 £000 | 6 months to 30 November 2014 £000 | Year to 31 May 2015 £000 |
|
|
|
|
Increase/(decrease) in cash & cash equivalents | 892 | (56) | 289 |
Translation (loss)/gain on cash and cash equivalents | (44) | 10 | (34) |
Increase in loans | (2,098) | (1,765) | (717) |
Translation gain on loans | 75 | 15 | 143 |
|
|
|
|
Net cash outflow | (1,175) | (1,796) | (319) |
Net cash at beginning of period | 596 | 915 | 915 |
|
|
|
|
Net (bank debt)/cash at end of period | (579) | (881) | 596 |
4. Analysis of net bank debt
| 6 months to 30 November 2015 £000 | 6 months to 30 November 2014 £000 | Year to 31 May 2015 £000 |
|
|
|
|
Cash | 2,875 | 1,726 | 2,027 |
Loans repayable in less than one year | (1,074) | (1,841) | (766) |
Loans repayable in more than one year | (2,380) | (766) | (665) |
|
|
|
|
Net (bank debt)/cash at end of period | (579) | (881) | 596 |
5. Segmental information
| 6 months to 30 November 2015 £000 | 6 months to 30 November 2014 £000 | Year to 31 May 2015 £000 |
External revenue |
|
|
|
Hemmers Europe | 16,608 | 16,495 | 31,151 |
Hemmers China | 1,881 | 2,086 | 3,708 |
|
|
|
|
Total Group external revenue | 18,489 | 18,581 | 34,859 |
| 6 months to 30 November 2015 £000 | 6 months to 30 November 2014 £000 | Year to 31 May 2015 £000 |
Profit before tax |
|
|
|
Hemmers Europe (local GAAP) | 875 | 842 | 1,430 |
Share of post-tax profit of JV | 20 | - | 13 |
IFRS adjustment - financial derivatives | 55 | 17 | 63 |
IFRS adjustment - goodwill amortisation | - | 54 | 58 |
|
|
|
|
Hemmers Europe (IFRS) | 950 | 913 | 1,564 |
Hemmers China | 155 | 193 | 305 |
Unrealised profit in stock | (9) | (6) | (3) |
Holding companies | (82) | (71) | (295) |
|
|
|
|
Group profit before tax | 1,014 | 1,029 | 1,571 |
| 6 months to 30 November 2015 £000 | 6 months to 30 November 2014 £000 | Year to 31 May 2015 £000 |
Net assets |
|
|
|
Hemmers Europe (local GAAP) | 10,024 | 10,088 | 9,558 |
IFRS adjustment - financial derivatives | 80 | 13 | 42 |
IFRS adjustment - goodwill amortisation | 562 | 633 | 575 |
|
|
|
|
Hemmers Europe (IFRS) | 10,666 | 10,734 | 10,175 |
Hemmers China | 915 | 728 | 810 |
Unrealised profit in stock | (41) | (40) | (33) |
Holding companies | 2,699 | 3,093 | 2,870 |
|
|
|
|
Group net assets | 14,239 | 14,515 | 13,822 |
Enquiries: |
|
|
|
Leeds Group Plc | Cairn Financial Advisers LLP |
Malcolm Wilson, Company Secretary | Tony Rawlinson / Avi Robinson |
T: 077801 224 618 | T: 020 7148 7900 |
Leeds Group (LDSG)