LEEDS GROUP PLC

Earnings Release • Jan 22, 2018

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RNS Number : 4571C

Leeds Group PLC

22 January 2018

Leeds Group plc

("Leeds Group" or the "Company")

Interim Results for the six months ended 30 November 2017

Leeds Group is pleased to report the Company's interim results for the six months ended 30 November 2017.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 (MAR) and has been arranged for release by Jan G Holmstrom, Chairman.

Enquiries:

Leeds Group plc                                           Cairn Financial Advisers LLP

Dawn Henderson - 07747 777055                  Tony Rawlinson / Liam Murray - 020 7213 0880

Chairman's Statement

I am pleased to present the interim report of Leeds Group plc ("the Group") for the six months ended 30 November 2017.

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 £22,180,000 (2016: £21,057,000) and made a profit after tax of £404,000 (2016:  £848,000).  The result for the period to 30 November 2016 was boosted by currency gains of £392,000 as compared to currency losses for the period to 30 November 2017 of £34,000. Earnings per share were 1.5 pence (2016: 3.1 pence).

Fabric sales at Hemmers, increased to €23,087,000 (2016: €22,521,000). Growth was achieved in the retail and garment manufacturing sectors but this was offset by reduced sales in the wholesale sector.  Profit also increased to €722,000 (2016: €616,000).

The KMR joint venture in which we have a 50% share continues to trade in line with expectations.  Sales increased to €5,334,000 (2016: €5,083,000). The operating loss was reduced to €126,000 (2016: €165,000) in the seasonally weaker first half. The business is expected to deliver an increased full year profit despite the costs associated with its continued growth. This has a consequential pull-through benefit for Hemmers.

Chinoh-Tex, Hemmers subsidiary based in Shanghai, achieved external sales revenue of €2,134,000 (2016: €2,872,000). The reduced turnover resulted in a pre-tax loss of €32,000 (2016: profit of €170,000). Trading has been difficult and therefore infrastructure and administrative costs are being reduced to align to this reduced demand. Though relatively small Chinoh-Tex also provides valuable assistance to its European parent in terms of purchasing, quality inspection and bulk shipping of material bought in China.

Group net debt was £6,347,000 at 30 November 2017 (30 November 2016: £5,549,000; 31 May 2017: £5,520,000). The increased net debt is partly because of the additional property investment made in Nordhorn last spring. Net cash outflow in the six months ended 30 November 2017 reflects the seasonal increase in working capital and working capital is expected to fall from this seasonally high level during the second half-year.

The Board of Directors do not propose an interim dividend, given the recent property investments at Hemmers in Nordhorn.

The Board remains confident, despite the disappointing first half, that the underlying trading result for the full year will be better than last year, partly backed by a strong order book at Hemmers.

As ever, I offer thanks to our employees throughout the Group for their great commitments.

Jan G Holmstrom

Chairman

22 January 2018

Unaudited Consolidated Statement of Comprehensive Income

for the 6 months ended 30 November 2017

	6 months to 30 November 2017 £000	6 months to 30 November 2016 £000	Year to 31 May 2017 £000
Revenue	22,180	21,057	41,053
Cost of sales	(17,320)	(16,492)	(32,468)
Gross profit	4,860	4,565	8,585
Distribution costs	(1,413)	(1,308)	(2,610)
Administrative expenses	(2,684)	(2,036)	(4,398)
## Profit from operations	763	1,221	1,577
Finance expense	(88)	(83)	(163)
Finance income	-	1	1
Share of post-tax (loss)/profit of joint venture	(47)	(65)	33
Profit before tax	628	1,074	1,448
Tax expense	(224)	(226)	(334)
## Profit for the period attributable to the equity holders of the Parent Company	404	848	1,114
Other comprehensive income:
Translation differences on foreign operations	143	1,269	1,707
Other comprehensive income for the period	143	1,269	1,707
## Total comprehensive income for the period attributable to the equity holders of the Company	547	2,117	2,821

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 2017	6 months to 30 November 2016	Year to 31 May 2017
Basic and diluted (pence)	1.5p	3.1p	4.1p

Unaudited Consolidated Statement of Financial Position

at 30 November 2017

	As at 30 November 2017 £000	As at 30 November 2016 £000	As at 31 May 2017 £000
Assets
Non-current assets
Property, plant and equipment	8,470	7,444	8,452
Intangible assets	1,068	946	1,055
Investment in joint venture	795	642	832
Total non-current assets	10,333	9,032	10,339
Current assets
Inventories	10,948	10,030	10,123
Trade and other receivables	6,820	7,633	6,753
Corporation tax recoverable	245	82	313
Derivative financial asset	4	102	-
Cash and cash equivalents	1,286	1,681	1,567
Total current assets	19,303	19,528	18,756
Total assets	29,636	28,560	29,095
Liabilities
Non-current liabilities
Loans and borrowings	(3,885)	(4,205)	(3,984)
Deferred tax	(280)	(256)	(275)
Total non-current liabilities	(4,165)	(4,461)	(4,259)
Current liabilities
Trade and other payables	(2,874)	(3,445)	(3,383)
Loans and borrowings	(3,748)	(3,025)	(3,103)
Derivative financial liability	-	-	(48)
Total current liabilities	(6,622)	(6,470)	(6,534)
Total liabilities	(10,787)	(10,931)	(10,793)
TOTAL NET ASSETS	18,849	17,629	18,302

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	(798)	(767)	(798)
Foreign exchange reserve	2,492	1,911	2,349
Retained earnings	12,763	12,093	12,359
TOTAL EQUITY	18,849	17,629	18,302

Unaudited Consolidated Cash Flow Statement

for the 6 months ended 30 November 2017

	6 months to 30 November 2017 £000	6 months to 30 November 2016 £000	Year  to 31 May 2017 £000
Cash flows from operating activities
Profit for the period	404	848	1,114
Adjustments for:
Depreciation	331	294	531
Amortisation of intangible assets	-	-	4
Finance expense	88	83	163
Finance income	-	(1)	(1)
Movement in derivative financial assets	(52)	(145)	4
Loss on sale of property, plant and equipment	-	-	3
Share of post-tax loss/(profit) of joint venture	47	65	(33)
Income tax expense	224	226	334
Cash flows from operating activities before changes in working capital and provisions	1,042	1,370	2,119
Increase in inventories	(716)	(1,434)	(1,271)
Increase in trade and other receivables	(6)	(1,234)	(211)
(Decrease)/increase in trade and other payables	(572)	668	475
Cash (absorbed)/generated by operating activities	(252)	(630)	1,112
Income taxes paid	(152)	(517)	(838)
Net cash flows from operating activities	(404)	(1,147)	274
Investing activities
Purchase of property, plant and equipment	(251)	(1,248)	(2,280)
Purchase of intangible assets	-	(84)	(83)
Increase in joint venture investment	-	-	(68)
Bank interest received	-	1	1
Net cash used in investing activities	(251)	(1,331)	(2,430)
Financing activities
Purchase of treasury shares	-	-	(31)
Net drawdown of bank borrowings	464	2,511	2,191
Bank interest paid	(88)	(83)	(163)
Net cash generated by financing activities	376	2,428	1,997
Net decrease in cash and cash equivalents	(279)	(50)	(159)
Translation (loss)/gain on cash and cash equivalents	(2)	119	114
Cash and cash equivalents at beginning of the period	1,567	1,612	1,612
Cash and cash equivalents at end of the period	1,286	1,681	1,567

Unaudited Consolidated Statement of Changes in Equity

for the six months ended 30 November 2017

	Share capital £000	Capital redemption reserve £000	Treasury share reserve £000	Foreign exchange reserve         £000	Retained earnings £000	Total equity £000
At 1 June 2017	3,792	600	(798)	2,349	12,359	18,302
Profit for the period	-	-	-	-	404	404
Other comprehensive income	-	-	-	143	-	143
At 30 November 2017	3,792	600	(798)	2,492	12,763	18,849

	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 2016	3,792	600	(767)	642	11,245	15,512
Profit for the year	-	-	-	-	1,114	1,114
Other comprehensive income	-	-	-	1,707	-	1,707
Transaction with shareholders:
Purchase of treasury shares	-	-	(31)	-	-	(31)
At 31 May 2017	3,792	600	(798)	2,349	12,359	18,302

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

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 2017 and 30 November 2016 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 directors are in the process of assessing the potential impact of the following forthcoming accounting standards:

IFRS9 (Financial instruments)

IFRS 15 (Revenue from contracts with customers)

Any changes, as a result of these new standards, are expected to impact the comparative results shown in the 31 May 2019 financial statements.

The financial information for the year ended 31 May 2017 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 May 2017 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 2017 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 2017	6 months to 30 November 2016	Year to 31 May 2017
	27,350,843	27,435,843	27,422,227

3.  Reconciliation of movements in net bank debt

	6 months to 30 November 2017 £000	6 months to 30 November 2016 £000	Year to 31 May 2017 £000
Decrease in cash & cash equivalents	(279)	(50)	(159)
Translation (loss)/gain on cash and cash equivalents	(2)	119	114
Increase in loans	(464)	(2,511)	(2,191)
Translation loss on loans	(82)	(461)	(638)
Net cash outflow	(827)	(2,903)	(2,874)
Net bank debt at beginning of period	(5,520)	(2,646)	(2,646)
Net bank debt at end of period	(6,347)	(5,549)	(5,520)

4.  Analysis of net bank debt

	6 months to 30 November 2017 £000	6 months to 30 November 2016 £000	Year to 31 May 2017 £000
Cash	1,286	1,681	1,567
Loans repayable in less than one year	(3,748)	(3,025)	(3,103)
Loans repayable in more than one year	(3,885)	(4,205)	(3,984)
Net bank debt at end of period	(6,347)	(5,549)	(5,520)

5.  Segmental information

	6 months to 30 November 2017 £000	6 months to 30 November 2016 £000	Year to 31 May 2017 £000
External revenue
Hemmers Europe	20,501	19,008	37,554
Hemmers China	1,679	2,049	3,499
Total Group external revenue	22,180	21,057	41,053

	6 months to 30 November 2017 £000	6 months to 30 November 2016 £000	Year to 31 May 2017 £000
Profit before tax
Hemmers Europe (local GAAP)	722	616	1,012
Share of post-tax (loss)/profit of JV	(47)	(65)	33
IFRS adjustment - financial derivatives	4	89	44
Hemmers Europe (IFRS)	679	640	1,089
Hemmers China	(29)	143	47
Unrealised profit in stock	-	(2)	12
Holding company	(22)	293	300
Group profit before tax	628	1,074	1,448

	6 months to 30 November 2017 £000	6 months to 30 November 2016 £000	Year to 31 May 2017 £000
Net assets
Hemmers Europe (local GAAP)	14,024	12,660	13,415
IFRS adjustment - financial derivatives	3	33	-
IFRS adjustment - goodwill amortisation	705	618	697
Hemmers Europe (IFRS)	14,732	13,311	14,112
Hemmers China	1,056	1,223	1,106
Unrealised profit in stock	(25)	(37)	(24)
Holding company	3,086	3,132	3,108
Group net assets	18,849	17,629	18,302

This information is provided by RNS

The company news service from the London Stock Exchange

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