Haberdashery and fabrics wholesaler Leeds Group reports falling profit year-on-year for the six-month period to 30 November 2017.
The business operates through its German trading subsidiary Hemmers/Itex Textil Import Export GmbH (Hemmers) and through 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.
At 9:19am: (LON:LDSG) Leeds Group PLC share price was -2.5p at 34.5p