TIDMLDSG
RNS Number : 8514C
Leeds Group PLC
22 October 2020
Issued on behalf of Leeds Group plc Embargoed: 7.00am
Date: 22 October 2020
Leeds Group plc
("Leeds Group" or "the Group")
Final Results for the year ended 31 May 2020
Leeds Group reports the final results of the Group for the year
to 31 May 2020.
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 - 01937 547877 Liam Murray/Sandy Jamieson - 020
7213 0880
Chairman's Statement
It has been a difficult year for the Group. Trading conditions
have been challenging within both the wholesale and retail textile
markets due to increased competition and pressure on prices. In
addition, the Covid-19 pandemic affected trading for the last three
months of the financial year.
As previously communicated on 31 March 2020, the Directors have
implemented a number of cost cutting measures, identified through a
strategic review undertaken last year, to refocus on our core
business and ensure that the Group has the appropriate
infrastructure and cost base aligned to its sales levels.
In last summer's strategic review of the Chinoh-Tex Ltd
('Chinoh-Tex') business, it was concluded that the company was not
generating adequate profits and was no longer needed to support our
procurement activities in China. Therefore, a decision was taken in
October 2019 to cease operations and close the company. Chinoh-Tex
ceased trading in November 2019 and the costs of closure have been
included in the results for this year. The company was formally
liquidated prior to the year end.
Both Hemmers-Itex Textil Import Export GmbH (' Hemmers') and
Stoff-Ideen-KMR GmbH ('KMR') businesses were considerably
restricted from March 2020 when the German government imposed a
country wide lockdown in response to the Covid-19 pandemic.
Hemmer's wholesale business was affected by the imposed lockdown
and KMR's retail shops were closed from mid-March to mid-April
2020. Both businesses suffered significant sales reductions in the
final three months of the year, the effect of which could only be
partly offset by the mitigating actions taken by management and by
government financial aid. Thus, both companies have experienced
significant losses in the financial year to 31 May 2020.
Even though the Covid-19 situation is still impacting the
marketplace, sales levels for Hemmers and KMR in the first few
months of the new financial year have been better than expected.
However, there is a risk that there may be further local or country
wide restrictions which would again affect trading. The impact of
Covid-19 on the Group is detailed further in the Finance and
Operating Review and Directors' Report. The Directors are confident
that both businesses are better prepared to mitigate this risk and
should benefit again from any government financial support.
The Directors believe that the Group is now leaner and has a
stronger management team with a revised customer focused strategy.
The group's global wholesale business and retail trading in Germany
should now be in a better position to return to acceptable levels
of profit in future years, provided there is a return to normal
trading conditions in the near future.
On behalf of shareholders, I want to thank the management and
staff of Hemmers and KMR who have all continued with their best
efforts to work through difficult and challenging times.
Jan G Holmstrom
Chairman
21 October 2020
Finance and Operating Review
Group result
Group revenue for the continuing operations in the year was
GBP35,067,000 (2019: GBP38,905,000). Market conditions for both
trading subsidiaries have been challenging and Hemmers has faced
intense competition both domestically and internationally. The
consequences of the Covid-19 pandemic affected both Hemmers and KMR
severely in the last three months of the financial year. Although
the German government provided financial support, the reduced sales
figures did not produce enough contribution to cover the fixed
overheads and therefore both Hemmers and KMR made losses for the
year. Thus, the Group's operating loss from continuing activities
was GBP1,756,000 (2019: loss GBP1,053,000).
With the implementation of IFRS 16 with regard to accounting for
leases, the Group has recognised all long-term leases in the
financial statements this year as right-of-use assets. The effect
of this change in accounting has been that long-term lease payments
of GBP915,000 which would have previously been charged to the
profit and loss account have been removed and replaced by an
additional depreciation charge of GBP865,000. There has also been
an additional interest charge of GBP86,000. The net effect of the
implementation is a charge of GBP36,000.
The Group loss before tax from continuing activities was
therefore GBP2,016,000 (2019: loss GBP1,281,000). The result for
last year included an impairment charge of GBP982,000 relating to
the goodwill which arose on the acquisition of Hemmers in 1999.
The tax charge in the year was GBP6,000 (2019: GBP41,000). The
total loss per share was 8.6p (2019: 4.7p).
Hemmers-Itex
Hemmers is a global business engaged in designing, importing,
warehousing and wholesaling of fabrics from Germany. Sales for the
year were significantly lower than last year at GBP27,060,000
(2019: GBP30,939,000). The market in Germany has fallen
considerably during the year and Hemmers has also been under
increased price pressure from competitors. Sales fell in the last
three months of the year due to the effect of the Covid-19
pandemic. A strategic sales review coupled with a comprehensive
cost review was undertaken during the financial year to ensure the
cost base for Hemmers is aligned to the current market conditions.
The gross contribution percentage decreased to 31% (2019: 36%) due
to the pressure on pricing through competition and that, together
with the lower level of sales volume, has resulted in a fall in
gross contribution. Because of the fall in contribution, it was not
sufficient to meet the fixed overheads despite continued reduction
in staff and wage costs and therefore, the company produced a loss
excluding the share of the joint venture of GBP1,593,000 (2019:
profit GBP239,000).
Hemmers is now focused on growing its business domestically and
internationally in its wholesale markets with a more customer
focused sales strategy. We are confident that Hemmers will be in a
much better position to compete in the global marketplace next year
to regain lost market share.
Hemmers bank debt, net of cash, decreased in the year to
GBP3,184,000 (2019: GBP4,197,000). This was due mainly to the sale
of a warehouse in Nordhorn for GBP744,000. The bank debt is secured
on the assets of Hemmers.
KMR
KMR is a retail business trading in Germany. Sales were lower
than last year at GBP8,007,000 (2019: GBP8,656,000), although
within the group accounts only eleven trading months were included
last year as KMR became a subsidiary in July 2019, previously it
had been included in the accounts as a joint venture. The gross
contribution percentage increased slightly to 53% (2019: 50%).
However, KMR was affected by the closure of all its retail shops
for the last three months of the year from March 2020 due to effect
of the Covid-19 pandemic. This lower level of trading, despite
financial support from the German government, has resulted in a
loss for the year of GBP331,000 (2019: loss GBP554,000). Improved
working efficiencies have been implemented during the year
including the introduction of new working patterns resulting in
reduced cost base. This should eliminate the losses going forward
and provide a better foundation for better results in the coming
years.
KMR bank debt, net of cash, decreased in the year to GBP979,000
(2019: GBP1,738,000). This was due mainly to the sale of land in
Nürnberg for GBP552,000. The bank debt is secured on the assets of
KMR.
Chinoh-Tex
Chinoh-Tex, the Chinese subsidiary of Hemmers, was not
generating adequate profits despite actions taken to reduce costs
and, therefore, a decision was taken during the year to close the
company. The costs of closure have been included in the loss of
GBP332,000 for the year (2019: profit GBP31,000). The company was
formally liquidated prior to the year end.
Fixed Assets
The net book amount of tangible fixed assets in the Consolidated
Statement of Financial Position is GBP8,183,000 (2019:
GBP8,534,000). In accordance with the newly introduced IFRS 16 with
regard to accounting for leases, right-of-use assets with a net
book value of GBP3,067,000 have been introduced in the accounts as
fixed assets this year in addition to finance leases of GBP29,000
already reflected in the financial statements in previous
years.
Capital additions in the year amounted to GBP560,000 (2019:
GBP550,000) and additional right-of-use leases of GBP258,000
included in the accounts. Two properties, included in the financial
statements partly as fixed assets and partly as investment
properties, were sold during this year for sales proceeds of
GBP1,296,000. These were included in the total sales proceeds of
GBP1,317,000 from the sale of assets realising a profit of
GBP32,000.
Working Capital and Cash Flow
Net cash generated in the year was GBP34,000 (2019: GBP497,000),
despite the loss produced in the year of GBP2,354,000. Although the
loss includes a depreciation and amortisation charge of
GBP1,618,000. During the year, cash has been generated from the
sale of assets amounting to GBP1,317,000 with capital expenditure
of GBP560,000. Working capital, which comprises inventories, trade
and other receivables and trade and other payables, decreased in
the year by GBP2,738,000 (2019: GBP1,031,000). Stock and debtor
levels were lower at 31 May 2019 due to the reduced trading in
March to May as a result of the effects of the Covid-19 pandemic on
trading. Loan repayments of GBP2,378,000 have been made this year
to reduce the total Group borrowing and lease liability repayments
of GBP926,000 have been made in the year.
The Group continues to carefully monitor its working capital
requirements to ensure it operates within its current banking
facilities.
Net Asset Value
Net assets decreased in the year by GBP2,158,000 as follows:
Net assets Per share
GBP000 pence
At 31 May 2019 17,741 64.9
(Loss) after tax (including discontinued
operations) (2,354) (8.6)
Translation differences 196 0.7
At 31 May 2020 15,583 57.0
=========================================== ==================== ===========
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. Property investments have been financed partly by long term
loans at fixed interest rates between 1.05% and 4.07%. Working
capital finance, when required, is via short term loans of three
months currently attracting interest at rates of between 1.25% and
3%. Bank debt in the subsidiaries is secured by charges on
inventories, receivables and property and is without recourse to
the Parent Company.
Impairment reviews
In accordance with IAS 36, annual impairment reviews are carried
out for each cash-generating unit to which goodwill is allocated.
An impairment loss of GBP982,000 was recognised in the last
financial period in respect of the goodwill which arose on the
acquisition of Hemmers in 1999.
Following the implementation of IFRS16, the right-of-use assets
are now considered part of the cash generating units. Although
annual impairment reviews are not required on tangible assets,
management have performed an impairment review on these assets due
to historic trading losses and the effects of the Covid-19
pandemic. Impairment tests have been performed by assessing
relevant cash flows of each cash generating unit and assessing this
against the value of assets relating to that specific cash
generating unit. Following this review, no impairment charge has
been recognised during this financial year.
Principal risks and uncertainties
The Board has identified the main categories of business risk in
relation to the Group's strategic aims and objectives, and has
considered reasonable steps to prevent, mitigate and manage these
risks. The principal risks identified are as follows:
Funding risk
The Group has a combination of short-term borrowing facilities
and longer-term loan agreements secured on Group assets. The Group
remains dependent upon the support of these funders and there is a
risk that failure in a company to meet banking covenants could have
implications for the Group. Borrowing facilities are monitored
regularly and the facilities agreed are more than needed for the
Group's requirements. The Group has close working relationships
with their current funders but believe alternative banking funders
could be secured if required.
Market risk
There is always the ongoing threat of reduced market demand.
This has been seen this year and the Group continues to strive to
combat the reduced demand by looking at other markets both
domestically and internationally and looking at expanding its
product ranges for example introducing home furnishing
products.
The commercial risks of operating in the highly competitive
European fabric market are limited by the fact that Hemmers has a
wide range of suppliers, and no customer accounts for more than 5%
of revenues.
Foreign exchange risk
Most fabric purchased by Hemmers is paid for in US dollars,
while the Euro is the principal currency in which Hemmers sells its
product. The Euro/dollar rate is of greater significance to Leeds
Group than the strength of Sterling. The Hemmers management
continue to manage this transactional currency risk by a
combination of forward exchange contracts with reputable banks and
sales price increases where necessary.
Covid-19
During the year, the global Covid-19 situation which resulted in
lockdowns across the world, has affected both businesses. This
affected the last three months of the year, March to May. KMR whose
main business is retail shops was required to close all its shops
from mid-March to mid-April. The financial impact on all businesses
was partly mitigated by financial support from the German
government. Financial support was provided to cover the wages of
staff unable to work due to the country wide lockdown. There is a
risk that if infections of Covid-19 are not controlled that a
further country wide or local lockdown will be required. It is
expected that in this event, Government support would again be
provided, and the management have looked at further measures to
mitigate the risk having experienced the first wave of the
pandemic. See note 1 for additional disclosure.
Brexit
Following the UK's decision to leave the European Union ("EU")
by 31 December 2020, the economic environment is still uncertain.
This uncertainty continues as the UK looks to secure an acceptable
deal to leave the EU. The threat of no deal creates more
uncertainty. However, the business of Leeds Group is conducted
entirely by subsidiaries incorporated in Germany, and their exports
to the UK account for approximately 3% only of Group revenue. For
this reason, the Directors do not believe that a material risk to
Leeds Group will arise from the terms on which the UK will, in the
future, have access to EU markets, and vice versa. Leeds Group has
a loan denominated in euros which does carry a currency risk and
may be affected by Brexit, however, the Directors do not believe
the impact would have a material effect on the Group's results as
the subsidiary trades in Euros and the Directors consider this
provides a natural hedge.
The currency markets dislike the current air of uncertainty
surrounding the current negotiations with regard to the UK leaving
the EU and sterling has weakened since the UK announced it was
leaving the EU. This benefits Leeds Group since, as the pound
weakens, the value of the revenues, profits and net assets of
foreign subsidiaries are increased in sterling terms. This effect
has been seen in both this year's and last year's accounts with
translation gains in the Statement of Financial Position of
GBP196,000 (2019: GBP55,000).
Section 172 Report
Leeds Group is committed to acting ethically and with integrity
throughout all its business dealings and relationships. It is
important to the company and its subsidiaries that trusted business
relationships are established and maintained with key stakeholders,
customers and suppliers and that it invests in and supports all its
employees equally.
The Directors have always acted in accordance with their lawful
duties, which includes their duty to act in good faith to promote
the success of the Group for the benefits of its shareholders,
having regard to its stakeholders and matters set out in Section
172 (1) of the Companies Act 2006. Section 172 considerations are
embedded throughout the decision making of the Board. Issues,
factors and risks which the Directors have considered when
discharging their duty under section 172 (1) are further detailed
in the Chairman's Statement, Directors' Report and Corporate
Governance Report contained within these report and accounts.
During the year, as detailed in the Chairman's Statement, the
Directors took the decision to close Chinoh-Tex after consultation
with the employees affected and the closure was overseen by Jörg
Hemmers, one of the Directors. He also ensured the completion of
the two property sales transacted in the year. The sale of the
warehouse in Nordhorn was agreed as Hemmers no longer required the
warehouse space and external rentals could not be secured,
therefore the decision was taken to sell as it would also release
cash to pay down the group debt. As part of the acquisition of KMR
in 2019, it had been agreed to sell the land at Nurnberg, adjacent
to one of the KMR shops as it was a development opportunity as part
of the acquisition of the company. The Directors are now looking to
focus on developing the Hemmers and KMR businesses.
The two major shareholders are represented as non-executive
members on the Board. The Board recognises the importance of
effective and transparent dialogue with shareholders and ensuring
that non-management shareholders understand and support the Group's
strategy and objectives. The Board meet quarterly on as formal
basis, and ad hoc, as necessary, throughout the year. The Board is
more than happy to engage with shareholders at any time and answer
questions they may have. The AGM is a formal meeting at which to
have this dialogue.
The Board looks to ensure the systems, processes and controls
established to manage its businesses to the highest standards. The
supply chain is an integral part of trading business and it is of
paramount importance that best practice in terms of anti-bribery
and modern slavery are adhered to. All employees have therefore
completed training to ensure this is in place. The Board receives
updates from the management team at Hemmers as to the relationships
with key customers and suppliers. Hemmers management regularly
engage in dialogue with key suppliers and customers. All
operational staff are based in Germany, based either at Nordhorn or
work within one of the KMR retail shops. Regular dialogue is
maintained with all staff and meetings are held regularly to ensure
staff understand the strategy and positions of the businesses.
Staff are encouraged to discuss any concerns or issues they may
have with their line manager or Hemmers management are always
available to meet staff if necessary.
Jan G Holmstrom
Chairman
21 October 2020
Consolidated Statement of Comprehensive Income
for the year ended 31 May 2020
Year ended Year ended
31 May 2020 31 May 2019
GBP000 GBP000
------------------------------------ ----- -------------------- -------------------
Continuing operations
Revenue 35,067 38,905
Cost of sales (29,039) (30,365)
------------------------------------------- -------------------- -------------------
Gross profit 6,028 8,540
Distribution costs (2,876) (3,229)
------------------------------------------- -------------------- -------------------
Impairment of goodwill - (982)
Administrative expenses (4,908) (5,393)
------------------------------------------- -------------------- -------------------
Administrative costs Other income (4,908) (6,375)
- 11
------------------------------------------ -------------------- -------------------
(Loss) from operations (1,756) (1,053)
Finance expense (260) (194)
Share of post-tax (loss) of
joint venture - (34)
(Loss) before tax (2,016) (1,281)
Tax charge (6) (41)
------------------------------------------- -------------------- -------------------
(Loss) from continuing operations (2,022) (1,322)
------------------------------------------- -------------------- -------------------
Discontinued operations
(Loss)/profit from discontinued
operations (332) 29
------------------------------------------- -------------------- -------------------
(Loss) for the year attributable
to the equity holders of the
Parent Company (2,354) (1,293)
------------------------------------------- -------------------- -------------------
Other comprehensive income
Translation differences on foreign
operations 196 55
------------------------------------------- -------------------- -------------------
Total comprehensive loss for
the year attributable to the
equity holders of the Parent
Company (2,158) (1,238)
=========================================== ==================== ===================
There is no tax effect relating to other comprehensive income
for the year. Amounts included in other comprehensive income may be
reclassified subsequently as profit or loss.
(Loss) per share attributable to the equity holders of the
Company
Note Year ended Year ended
31 May 31 May 2019
2020
----------------------------------- ------ ------------ --------------
Basic and diluted total (loss)
per share (pence) 11 (8.6)p (4.7)p
=================================== ====== ============ ==============
Basic and diluted (loss)
from continuing operations per
share (pence) 11 (7.4)p (4.8)p
=================================== ====== ============ ==============
Consolidated Statement of Financial Position
at 31 May 2020
Company number 00067863 31 May 2020 31 May 2019
GBP000 GBP000
-------------------------------- -------------- --------------
Assets
Non-current assets
Property, plant and equipment 8,183 8,534
Right-of-use assets 2,374 -
Investment property - 1,009
Intangible assets 67 72
Total non-current assets 10,624 9,615
-------------------------------- -------------- --------------
Current assets
Inventories 10,188 11,760
Trade and other receivables 3,464 4,382
Tax recoverable 206 733
Cash and cash equivalents 1,104 1,065
Total current assets 14,962 17,940
-------------------------------- -------------- --------------
Total assets 25,586 27,555
================================ ============== ==============
Liabilities
Non-current liabilities
Loans and borrowings (1,950) (2,289)
Lease liabilities (1,478) -
Total non-current liabilities (3,428) (2,289)
-------------------------------- -------------- --------------
Current liabilities
Trade and other payables (2,877) (2,770)
Loans and borrowings (2,671) (4,655)
Lease liabilities (927) -
Provisions (100) (100)
Total current liabilities (6,575) (7,525)
-------------------------------- -------------- --------------
Total liabilities (10,003) (9,814)
================================ ============== ==============
TOTAL NET ASSETS 15,583 17,741
================================ ============== ==============
Capital and reserves attributable
to
equity holders of the Company
Share capital 3,792 3,792
Capital redemption reserve 600 600
Treasury share reserve (807) (807)
Foreign exchange reserve 2,741 2,545
Retained earnings 9,257 11,611
TOTAL EQUITY 15,583 17,741
==================================== ======== ========
The financial statements were approved and authorised for issue
by the Board of Directors on 21 October 2020 and were signed on
behalf of the Board by:-
Jan G Holmstrom
Chairman
Consolidated Cash Flow Statement
for the year ended 31 May 2020
Year ended Year ended
31 May 2020 31 May 2019
GBP000 GBP000
-------------------------------------------- -------------- --------------
Cash flows from operating activities
(Loss) for the year (2,354) (1,293)
Adjustments for:
Depreciation of property, plant
and equipment 723 668
Depreciation of right-of-use assets 876 -
Depreciation of investment property 13 16
Amortisation of intangible assets 6 7
Finance expense - interest on bank
loans 174 194
Finance expense - interest lease
liabilities 86
Impairment of goodwill - 982
Net goodwill arising on acquisition - (7)
Gain on sale of property, plant
and equipment (32) (5)
Share of post-tax loss of joint
venture - 34
Tax charge 6 43
Cash flows (to)/from operating
activities before
changes in working capital and
provisions (502) 639
Decrease in inventories 1,735 441
Decrease in trade and other receivables 965 140
Increase in trade and other payables 38 450
Cash generated from operating activities 2,236 1,670
Tax received/(paid) 519 (430)
Net cash flows from operating activities 2,755 1,240
============================================ ============== ==============
Investing activities
Purchase of property, plant and
equipment (560) (550)
Purchase of subsidiary net of debt - 75
Proceeds from the sale of fixed
assets 1,317 6
Net cash generated/(used) in investing
activities 757 (469)
============================================ ============== ==============
Financing activities
Purchase of treasury shares - (9)
Bank borrowings repaid (2,378) (1,358)
Bank borrowings drawn down - 1,287
Repayment of principal on lease (840) -
liabilities
Repayment of interest on lease (86) -
liabilities
Bank interest paid (174) (194)
Net cash (used) in financing activities (3,478) (274)
============================================ ============== ==============
Net increase in cash and cash equivalents 34 497
Translation gain/(loss) on cash
and cash equivalents 5 (4)
Cash and cash equivalents at the
beginning of the year 1,065 572
Cash and cash equivalents at the
end of the year 1,104 1,065
============================================ ============== ==============
Consolidated Statement of Changes in Equity
for the year ended 31 May 2020
Share Capital Treasury Foreign Retained
capital redemption share exchange earnings Total equity
reserve reserve reserve GBP000
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---------- ------------- ---------- ----------- ----------- ----------------
At 31 May 2018 3,792 600 (798) 2,490 12,904 18,988
(Loss) for the year - - - - (1,293) (1,293)
Other comprehensive
income - - - 55 - 55
Total comprehensive
income/(loss) - - - 55 (1,293) (1,238)
------------------------- ---------- ------------- ---------- ----------- ----------- ----------------
Transaction with
Shareholders:
Purchase of treasury
shares - - (9) - - (9)
------------------------- ---------- ------------- ---------- ----------- ----------- ----------------
At 31 May 2019 3,792 600 (807) 2,545 11,611 17,741
------------------------- ---------- ------------- ---------- ----------- ----------- ----------------
(Loss) for the year - - - - (2,354) (2,354)
Other comprehensive
income - - - 196 - 196
------------------------- ---------- ------------- ---------- ----------- ----------- ----------------
Total comprehensive
income/(loss) - - - 196 (2,354) (2,158)
------------------------- ---------- ------------- ---------- ----------- ----------- ----------------
At 31 May 2020 3,792 600 (807) 2,741 9,257 15,583
========================= ========== ============= ========== =========== =========== ================
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Share capital The nominal value of issued ordinary shares
in the Company.
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
1. Basis of preparation
This announcement has been prepared in accordance with
International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively IFRS) issued
by the International Accounting Standards Board (IASB) as adopted
by the European Union ("adopted IFRS"), and with the Companies Act
2006 applicable to companies reporting under IFRS.
Changes in accounting policies
The Directors have adopted the following accounting standards
which became effective for periods beginning on or after 1 January
2019:
IFRS 16, 'Leases' is effective for periods beginning on or after
1 January 2019. The impact of the new standard has brought
operating lease arrangements on the balance sheet, with the right
of use asset and corresponding financial liability recognised on
transition. Within the income statement rental expense has been
replaced by depreciation and interest expenses. This has resulted
in an increase in depreciation and finance costs.
The Group has significant operating lease commitments and
therefore the adoption of the standard has had a material impact on
the Financial Statements of the Group. The Directors have applied
the modified retrospective approach and therefore at the date of
initial application an amount equal to the lease liability, using
appropriate incremental borrowing rates, has been recognised as a
right-of-use asset. The weighted average incremental borrowing rate
of 3% has been used at the date of initial application. This has
been calculated as the net present value of the remaining lease
payments. There has been no impact on the opening reserves on the
date of the initial application and in using the modified
retrospective approach, the comparative figures for last year have
not been restated. The portfolio of leases consists of vehicle
leases and property leases. For short-term leases, the Directors
have decided to apply the exemptions not to recognise those leases
as a right-of-use asset and a lease liability.
The effect of adopting IFRS 16 resulted in the recognition of
right-of-use assets and lease liabilities of GBP3,067,000 as at 1
June 2019. Instead of recognising operating lease expenses for its
operating leases, the Group has recognised interest on its lease
liabilities and depreciation on its right-of-use assets. The
overall impact on the financial results to 31 May 2020 has resulted
in an additional charge to the profit and loss of GBP36,000.
Going Concern
When considering its opinion about the application of the going
concern basis of preparation of the financial statements to 31 May
2020, the Directors have given due consideration to:
-- The performance of the Group in the last financial year and
the robustness of forecasts for the next 24 months, which return
the Group to profit.
-- The impact of the Covid-19 pandemic on the business, its suppliers and its customers.
-- The financing facilities available to the Group and the
circumstances in which these could be limited or withdrawn.
Financial performance and forecasts
Having been consistently profitable the Group has been loss
making in each of the last two years.
-- In the year to 31 May 2019, the Group reported a pre-tax loss
from continuing operations of GBP1.3m after writing off goodwill of
GBP1.0m.
-- In the year to 31 May 2020, the Group reported a pre-tax loss
from continuing operations of GBP2.0m. Approximately GBP1.0m of
this loss arose in the final quarter which was significantly
impacted by the Covid-19 restrictions discussed below. To address
the poor underlying performance the Directors and management
restructured the business in the first half of the year to focus on
profitable business streams and reduce its operating costs.
Restructuring costs of GBP0.4m were incurred in the financial year
which will benefit results going forward. Although loss making, the
business was cash generative in the year with net debt reducing by
GBP2.4m, of which GBP1.3m resulted from the sale of investment
properties.
Forecasts have been prepared for the 24-month period to 31 May
2022 which indicate a return to modest profit over that period.
These forecasts have been prepared in the knowledge of current
Covid-19 conditions and assume that there is no protracted period
of total lockdown. At the end of the first quarter of the current
financial year sales and profit were ahead of forecast. The company
has sensitised these forecasts for a reduction in revenues of 10%
at both Hemmers and KMR in the forecast period and an additional
net EUR1 million profit reduction from a second period of lockdown.
The Directors are of the opinion that this is a reasonable worst
case, and the currently available facilities would be sufficient in
this scenario.
Covid-19 Impact
Both Hemmers and KMR are located in Germany which has responded
well to the outbreak. KMR was most directly impacted by the
measures put in place with all stores closed from the mid-March to
the mid-April. Since reopening, the stores have performed ahead of
both last year and forecast. Hemmers saw significantly reduced
demand during March and April but like KMR, has traded strongly in
the first quarter of the current year, ahead of last year and
forecast.
Considering the progress made to restructure the Group, the
trading results in the first quarter of the current financial year,
the likely ongoing impact of the Covid-19 pandemic and the headroom
available on the Hemmers working capital facility, the Directors
are of the opinion that it is appropriate to apply the going
concern basis of preparation to the financial statements.
2. Dividends
The Directors do not recommend the payment of a dividend in 2020
(2019: GBPnil).
3. (Loss) per share
Year ended Year ended
31 May 2020 31 May 2019
----------------------------------------------- ---------------- ----------------
Numerator
Total (loss) for the year GBP(2,354,000) GBP(1,293,000)
Denominator
Weighted average number of shares (excluding
treasury shares) 27,320,843 27,330,788
Basic and diluted total (loss) per share (8.6)p (4.7)p
=============================================== ================ ================
Numerator
(Loss)/profit for the year from continuing GBP(2,022,000) GBP(1,322,000)
operations
Denominator
Weighted average number of shares (excluding
treasury shares) 27,320,843 27,330,788
Basic and diluted (loss) from continuing
operations per share (7.4)p (4.8)p
=============================================== ================ ================
Numerator
(Loss)/profit for the year from discontinued GBP(332,000) GBP29,000
operations
Denominator
Weighted average number of shares (excluding
treasury shares) 27,320,843 27,330,788
Basic and diluted (loss)/profit from discontinued
operations per share (1.2)p 0.1p
==================================================== ============== ============
Since there are no outstanding share options, there is no
difference between basic and diluted earnings per share.
4. Segmental information
Year ended Hemmers KMR Inter Parent Continuing Discontinued Total
31 May 2020 segmental Company operations operations Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ---------- --------- ------------ ---------- ------------- -------------- ----------
External revenue 27,060 8,007 - - 35,067 488 35,555
Inter-segmental
revenue 1,563 5 (1,681) - (113) 113 -
Cost of sales (24,468) (5,930) 1,472 - (28,926) (697) (29,623)
Gross profit/(loss) 4,155 2,082 (209) - 6,028 (96) 5,932
Distribution
costs (1,628) (1,312) 64 - (2,876) (51) (2,927)
Admin expenses (3,913) (988) 233 (240) (4,908) (185) (5,093)
Other income 88 - (88) - - - -
Operating (loss) (1,298) (218) - (240) (1,756) (332) (2,088)
Finance expense (147) (113) - - (260) - (260)
Internal interest (148) - - 148 - - -
(Loss) before
tax (1,593) (331) - (92) (2,016) (332) (2,348)
====================== ========== ========= ============ ========== ============= ============== ==========
At 31 May 2020 Hemmers KMR Inter Parent Continuing Discontinued Total
segmental Company operations operations Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- --------- --------- ------------ ---------- ------------- -------------- ----------
Total assets 16,998 5,745 (218) 3,061 25,586 - 25,586
Total liabilities (5,769) (4,151) - (83) (10,003) - (10,003)
Total net assets 11,229 1,594 (218) 2,978 15,583 - 15,583
==================== ========= ========= ============ ========== ============= ============== ==========
Year ended Hemmers KMR Inter Parent Continuing Discontinued Total
31 May 2019 segmental Company operations operations Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ---------- --------- ------------ ---------- ------------- -------------- ----------
External revenue 30,939 7,966 - - 38,905 2,366 41,271
Inter-segmental
revenue 1,852 - (2,056) - (204) 204 -
Cost of sales (25,911) (6,092) 1,842 - (30,161) (2,093) (32,254)
Gross profit/(loss) 6,880 1,874 (214) - 8,540 477 9,017
Distribution
costs (2,027) (1,202) - - (3,229) (195) (3,424)
Admin expenses (4,231) (1,119) 193 (1,218) (6,375) (251) (6,626)
Other income 11 - - - 11 - 11
Operating profit/(loss) 633 (447) (21) (1,218) (1,053) 31 (1,022)
Finance expense (155) (39) - - (194) - (194)
Internal interest (239) - - 239 - - -
Share of JV (loss) (34) - - - (34) - (34)
Profit/(loss)
before tax 205 (486) (21) (979)_ (1,281) 31 (1,250)
========================== ========== ========= ============ ========== ============= ============== ==========
At 31 May 2019 Hemmers KMR Inter Parent Continuing Discontinued Total
segmental Company operations operations Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- ---------- --------- ------------ ---------- ------------- -------------- ----------
Total assets 22,330 4,609 (331) 109 26,717 838 27,555
Total liabilities (10,130) (2,450) - 2,961 (9,619) (195) (9,814)
Total net assets 12,200 2,159 (331) 3,070 17,098 643 17,741
==================== ========== ========= ============ ========== ============= ============== ==========
5. Loans and borrowings
The book value of loans and borrowings are as follows:
31 May 2020 31 May
GBP000 2019
GBP000
Current
Secured bank loans 2,671 4,655
Non - current
Secured bank loans 1,950 2,289
Total loans and borrowings 4,621 6,944
============================= ============= =========
At 31 May 2020 current loans and borrowings of GBP2,671,000
(2019: GBP4,655,000) comprise short term loans of GBP2,290,000 and
instalments due on long term loans detailed below of GBP381,000.
The interest rate on the short-term loans range from 1.25% to 3%
(2019: 1.25% to 2.5%) and these loans are secured on the
inventories and trade receivables of Hemmers and KMR. The
short-term loans are drawn down by Hemmers against short term
borrowing facilities of EUR11.5m and by KMR against short term
borrowing facilities of EUR1.5m. Neither the Parent Company nor any
of its subsidiaries other than Hemmers and KMR have borrowing
facilities. The bank facilities are reviewed annually and are now
in place for the forthcoming year.
A non-current loan was drawn down in 2007 from Kreissparkasse to
finance the freehold extension of the warehouse in Nordhorn. In
2016 and 2017 further loans were drawn down to finance developments
at Nordhorn.
Amounts outstanding at 31 May 2020 were:
Fixed Repayment Final repayment 31 May 2020 31 May 2019
interest profile date GBP000 GBP000
rate
Loan September
1 4.07% Equal monthly instalments 2027 436 493
Loan Equal quarterly September
2 1.65% instalments 2025 1,124 1,350
Loan Equal quarterly
3 1.05% instalments March 2026 390 446
Non-current loans 1,950 2,289
================================================= ================= ============= =============
6. Other information
The financial information set out above does not constitute the
company's statutory accounts for 2020 or 2019.
Statutory accounts for the years ended 31 May 2020 and 31 May
2019 have been reported on by BDO LLP, Statutory Auditor. The
Independent Auditor's Report on the Annual Report and Financial
Statements for both 2020 and 2019 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.
Statutory accounts for the year ended 31 May 2019 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 May 2020 will be delivered to the Registrar in
due course. The Annual Report and Accounts giving notice of the
2020 Annual General Meeting, have been today published on the
Group's website at www.leedsgroup.plc.uk . and have been sent to
those shareholders who have elected to receive a hard copy of the
Annual Report and Accounts by the post.
The Annual General Meeting will be held at 12 noon on 23
November 2020. In light of the UK Government's current guidance on
public gatherings due to the Covid-19 pandemic, for this year's
Annual General Meeting, the Board has concluded that shareholders
cannot be permitted to attend the annual general meeting in person
and so it will take place as a closed meeting. The annual general
meeting will be held by electronic means.
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