LEEDS
GROUP PLC
Annual Report and Accounts 2016
Contents
Financial Highlights
Directors
Group Information and Advisers
Chairman’s statement
Strategic Report
Directors’ Report
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Company Statement of Financial Position
(prepared under FRS 101 "Reduced Disclosure Framework")
Company Statement of Changes in Equity
Notes to the Financial Statements of the Company
Five Year Summary of Results and Capital Employed
Notice of Annual General Meeting
1
2
3
4
5
8
13
15
16
17
18
19
43
44
45
48
49
Financial Highlights
Leeds Group profit before tax was £1,507,000 (2015: £1,571,000).
Aggregate sales volumes of our two business sectors increased to 16.0
million metres (2015: 15.8 million metres).
Leeds Group sales revenue increased by 4.1% to £36,272,000 (2015:
£34,859,000).
Hemmers sales were £32,775,000 (2015: £31,151,000) and pre-tax profit
was £1,309,000 (2015: £1,443,000).
Hemmers results in Euros were: sales up 8.7% to €44,295,000 (2015:
€40,735,000). PBT was affected by the bankruptcy of a major customer
late in the year and was down 8.9% to €1,705,000 (2015: €1,871,000).
ChinohTex external sales were £3,497,000 (2015: £3,708,000) and pre-
tax profit was £267,000 (2015: £305,000).
In the first full year since the acquisition of a 50% interest in textile
retailer Stoff-Ideen-KMR GmbH, the Leeds Group share of post-tax profit
was £51,000.
Capital expenditure in the year was £4,156,000 (2015: £298,000)
principally on the acquisition and extension of the German warehouse and
office facility.
Leeds Group finished the year with bank debt, net of cash, of £2,646,000
(2015: net cash £596,000).
Leeds Group net asset value per share (excluding treasury shares) was
56.5 pence (2015: 50.2 pence).
Earnings per Leeds Group share were 3.8 pence (2015: 3.8 p).
In view of the capital expenditure in the year and the continuing need to
finance growth plans, as last year the Directors do not propose a dividend.
1
Directors
Jan G Holmstrom (Non-Executive Chairman)
Born 1953, Jan has worked in the financial services sector during his entire career, and has a wealth of
experience of working internationally e.g. in the UK, Hong Kong and Sweden. Jan is Chairman of Johnson &
Starley Limited and a non-executive director of Browallia Holdings Limited, The Union Discount Company of
London Limited and International Fibres Group AB, companies owned and controlled by Peter Gyllenhammar.
Jan is also Chairman of Somerset AB which is his own consultancy business. Jan joined the Board of Leeds
Group in November 2011 and was appointed Chairman in October 2014.
Jörg Hemmers (Executive Director)
Born 1967, Jörg has worked his whole life in the wholesale and retail textile business. He was one of the first in
the trade to realise the potential of sourcing products from China. Leeds Group acquired the Hemmers wholesale
operation in 1999 and appointed Jörg as Managing Director. Jörg retained a financial interest in the retail
operation until 2010, but focused entirely on profitable growth of the wholesale business. Amongst his
achievements is the successful integration in 2003 of the Leeds Group Itex business, based in Holland, to create
Hemmers/Itex GmbH and the successful start-up in 2007 of ChinohTex, a subsidiary based in Shanghai. Jörg
joined the Board of Leeds Group in March 2015.
Johan Claesson (Non-Executive Director)
Born 1951, Johan has been a major shareholder in Leeds Group since 1999, and has extensive business interests,
both private and in the public arena. Johan is Chairman of Claesson & Anderzén, a private property company.
Johan is also a non-executive director of K3 Business Technology Group plc (specialising in business software)
and NightHawk Energy plc (an oil exploration company). Johan joined the Board of Leeds Group in September
2004.
David Cooper (Independent Non-Executive Director)
Born 1958, David is a chartered accountant and member of the Institute of Chartered Accountants of Scotland.
Previously David was Group Finance Director and Company Secretary of AIM-listed Dawson International
PLC, gaining over 25 years’ experience in the global textiles industry. He now operates his own financial
consultancy business. David joined the Board of Leeds Group in October 2014.
2
Group Information and Advisers
Subsidiary Companies
Hemmers-Itex Textil Import Export GmbH
Twentestrasse 1
48527 Nordhorn
Germany
Director during the year
Jörg Hemmers
Principal activity
Import, sale & distribution of fabric
Leeds Property GmbH
Twentestrasse 1
48527 Nordhorn
Germany
Director during the year
Jörg Hemmers
Principal activity
Currently inactive. Potential future vehicle to hold the Group’s German property assets.
Chinoh-Tex Ltd
Wholly owned subsidiary of Hemmers Textil Import Export GmbH. Principal activity: textile trading.
Group Advisers
Solicitors
Walker Morris
Kings Court
12 Kings Street
Leeds
LS1 2HL
Financial Advisers
And Brokers
Auditors
Cairn Financial Advisers LLP
61 Cheapside
London
EC2V 6AX
BDO LLP
1 Bridgewater Place
Water Lane
Leeds
LS11 5RU
Tel: 0113 283 2500
Tel: 020 7148 7900
Tel: 0113 244 3839
Solicitors
Registrars
Principal Bankers
DLA Piper UK LLP
Princes Exchange
Princes Square
Leeds
LS1 4BY
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Bank of Scotland
116 Wellington Street
Leeds
LS1 4LT
Tel: 08700 111111
Tel: 0871 664 0300*
Tel: 0113 388 3200
* Calls to the Capita shareholder helpline cost 10p a minute plus network extras. Lines are open 8.30am-5.30pm Mon-Fri.
3
Chairman’s Statement
I am pleased to present the results for the year ended 31 May 2016.
Results
In the year ended 31 May 2016 Leeds Group made a profit after tax of £1,039,000 (2015: £1,053,000). Pre-tax
profit fell by 4.1% to £1,507,000 (2015: £1,571,000), and was affected close to the year-end by the bankruptcy
of a major German customer which was partially offset by credit insurance. Despite this setback, pre-tax profit
finished slightly ahead of our budget for the year and close to last year’s level.
Net assets at 31 May 2016 increased to £15,512,000 (2015: £13,822,000) and the value per share was 56.5p
(2015: 50.2p). Earnings per share for the year were 3.8p (2015: 3.8p). Following capital expenditure of
£4,156,000 in the year (2015: £298,000), chiefly on the acquisition and extension of the German warehouse and
office facility, the Group closed the year with net bank debt of £2,646,000 (2015: net cash £596,000).
Hemmers-Itex Textil Import Export GmbH (“Hemmers”)
Total fabric sales in the year by Hemmers, Leeds Group’s principal trading company, increased modestly by
1.0% to 13.789 million linear metres (2015: 13.633 million). Revenue in Euro terms increased by 8.8%,
reflecting the sales price increases that were necessary to preserve margins in the face of the depreciation of the
Euro against the US dollar. Pre-tax profit in Euro terms was €1,705,000 (2015: €1,871,000) and was affected by
the bankruptcy of a significant customer referred to above.
In sterling terms, revenue was £32,775,000 (2015: £31,151,000) and pre-tax profit was £1,309,000 (2015:
£1,443,000).
During the year Hemmers invested heavily in purchasing and extending the warehouse and office facility in
Nordhorn at a cost to date of approximately €5,000,000 (£3,700,000). The entire project comprising
warehousing, office space and an enlarged sales area is very close to completion.
In December 2014 Hemmers acquired a 50% interest in Stoff-Ideen-KMR GmbH (“KMR”), a chain of 14 retail
fabric and haberdashery stores. KMR has now relocated to the Hemmers facility and now rents a portion of the
new warehouse extension, enabling both businesses to improve inventory management. In this, the first full year
of our investment in KMR, the business has continued to source a significant proportion of its stock purchases
from Hemmers, and has grown with the opening of two new stores in Saarbrücken and Bamberg, with further
new stores planned to open in the next few months.
Chinoh-Tex, the Hemmers subsidiary based in Shanghai, achieved external sales revenue of £3,497,000 (2015:
£3,708,000) and pre-tax profit of £267,000 (2015: £305,000). Some European customers previously dealing with
Chinoh-Tex bought from Hemmers this year, but Chinoh-Tex maintained its sales volume by developing sales in
China and other far eastern markets. Though small, ChinohTex continues to provide valuable assistance to its
European parent in terms of purchasing, quality inspection and bulk shipping of material bought in China.
Dividend
Leeds Group has made a significant investment in KMR, and in the purchase and expansion of the Nordhorn
facility, where a further £1,000,000 is committed to complete the project in the current financial year. Therefore,
as last year, the Directors do not propose a dividend. In the opinion of the Board, this maximises the long-term
value of the Group to the benefit of all shareholders.
Employees
On behalf of shareholders, I thank the management and staff of Hemmers and ChinohTex for their continued
hard work and commitment that has produced such a highly satisfactory result.
Outlook
We continue to believe potential growth opportunities exist for Hemmers in their traditional wholesale business,
and that even greater potential exists in the retail business in which we have invested more recently. We continue
to monitor possibilities to accelerate this growth potential by way of acquisition.
At this early point in the current financial year, sales have been in line with the expectations of the Board.
Jan G Holmstrom
Chairman
27 July 2016
4
Strategic Report
Business review
The Companies Act 2006 requires the directors to set out in this report a fair review of the business of the
Group during the year ended 31 May 2016, including an analysis of the position of the Group at the end of the
year and a description of the principal risks and uncertainties facing the Group. This information includes a
discussion of the Key Performance Indicators used by the directors to monitor the business which are:
Sales volumes and revenue
gross profit margin
operating overheads and central costs
profit before tax
earnings per share
working capital levels
Group result
Group revenue in the year was £36,272,000 (2015: £34,859,000), and pre-tax profit was £1,507,000 (2015:
£1,571,000). Although sterling at 31 May 2016 was 6.2% weaker against the Euro than had been the case a year
earlier, its average rate for the year as a whole was stronger by 3.6%. Group revenue and pre-tax profit would
have been greater by £871,000 and £43,000 respectively had the results of overseas subsidiaries been translated
at last year’s average rates.
Profitability in Hemmers was adversely affected by the bankruptcy late in the year of a major customer, which
was covered in part by credit insurance.
The average value of the Euro throughout the year was USD 1.105 (2015: USD 1.351). A weaker Euro increases
the Euro cost of stock invoiced in US Dollars but this transaction effect was not significant; margins were close
to their 2015 level by the combined effects of the stockholding period, forward exchange contracts and sales
price increases.
The parent company has granted a loan denominated in Euros to its subsidiary Hemmers and, as sterling
depreciated sharply at the end of the financial year, an unrealised gain arose of £100,000 (2015: unrealised loss
£253,000).
The tax charge in the year was £468,000 net of a deferred tax credit of £28,000 relating to temporary differences
on financial derivatives. Earnings per share were unchanged from 2015 at 3.8p.
Hemmers Europe
This German-based business is engaged in the import, warehousing and wholesaling of fabrics.
Sales volumes increased in the year by 1% to 13.789 million linear metres (2015: 13.633 million) while sales
revenue rose by 8.8% to €44,309,000 (2015: €40,735,000), with the growth achieved predominantly in the
German home market.
As mentioned above, despite the weakness of the Euro gross margins were little changed at 21.5% (2015:
22.2%). Overhead expenditure in local currency (excluding the charge for bad and doubtful debts) increased by
6.5% as a result of the modest sales volume increases and cost inflation.
Pre-tax profit for the year was €1,705,000 (2015: €1,871,000) with the profitability from continued sales growth
proving insufficient to compensate for the need to provide against receivables due from a large customer
entering bankruptcy. Administrators have been appointed and are seeking to achieve asset sales and a financial
reconstruction but a conservative 100% provision was considered appropriate.
In December 2014 Hemmers acquired a 50% interest in Stoff-Ideen-KMR GmbH (“KMR”), a chain of retail
fabric and haberdashery stores, at a cost of €500,000 (£383,000). KMR is operated as a joint venture and in May
2015 each of the two joint venture partners subscribed for additional capital of €250,000 (£192,000) bringing the
total investment by Hemmers to €750,000 (£575,000). The Group’s share of the post-tax income of KMR in the
year was £51,000 (5 months to 31 May 2015: £13,000). Additional information regarding KMR can be found in
note 14 to the consolidated financial statements.
5
Strategic Report (continued)
During the year Hemmers purchased the warehouse and offices it had leased for the previous ten years for
€2,700,000. Having already constructed a freehold extension in 2008, construction of a further extension to
provide additional warehousing and office space was begun in the year at budgeted cost of €3,000,000
(£2,300,000). We had planned to complete this project by 31 May 2016, but building work was suspended for a
while in the autumn owing to excessively wet conditions. At the date of this report, full occupation of warehouse
and offices is imminent. Part of the extension will be leased to KMR, and neither KMR nor Hemmers will now
need to continue to rent warehousing outside the Nordhorn facility.
The final phase of the warehouse extension will increase the total size of the facility to approximately 17,000
square metres and will be completed early in the current year with the purchase and installation of additional
machinery to increase our capacity to meet the customer requirement to double-fold our fabrics before sale. This
will eliminate the need to outsource this work and so reduce cost.
Largely as a result of this investment programme, the Hemmers bank debt, net of cash, increased in the year to
£3,647,000 (2015: £1,077,000). This bank debt is secured on the assets of Hemmers.
Hemmers China
Chinoh-Tex is a textile trading subsidiary of Hemmers. It is based in Shanghai and has been trading for eight
years. It purchases fabric from Chinese suppliers and in 2016 sold to customers in 31 countries. External sales
increased marginally in the year to 2.202 million linear metres (2015: 2.191 million). 40% of sales were made to
EU countries (2015: 60%) with the reduction caused chiefly by certain European customers being supplied from
Hemmers rather than from Chinoh-Tex, who compensated for this by increasing sales in China to £597,000
(2015: £103,000) with significant growth also in Viet Nam.
External sales revenue fell by 5.7% to £3,497,000 (2015: £3,708,000) reflecting the changes to product and
market mix, and gross margin fell slightly to 21.5% (2015: 22.0%). Overhead spending was reduced by 5.5% to
£484,000 (2015: £512,000) and pre-tax profit amounted to £267,000 (2015: £305,000).
Importantly, ChinohTex continues to give valuable assistance to its European parent with the purchasing,
inspection and shipping of material.
Holding Companies’ Costs
The holding companies generated net income in the year as follows:
Holding companies’ costs net of interest receivable
Unrealised exchange gain/(loss) on Group loan
Net holding companies’ income/(costs)
Year ended
31 May 2016
£000
Year ended
31 May 2015
£000
(73)
100
27
(42)
(253)
(295)
The voluntary liquidation of the CLG Holding BV, the Dutch holding company, was completed in the year.
Fixed Assets
Capital additions in the year amounted to £4,156,000 (2015: 298,000) and included expenditure of £3,697,000 in
respect of the purchase and extension of the warehouse and office facility in Nordhorn. The net book amount of
tangible fixed assets in the Consolidated Statement of Financial Position is £5,864,000 (2015: £1,760,000). A
further £1,000,000 has been authorised and committed to complete the Nordhorn project in the current year.
Working Capital
Working capital comprises inventories, trade and other receivables, and trade and other payables and increased
in the year by just £127,000 (2015: £555,000). The directors anticipate that working capital will now rise to its
annual peak over the next few months.
6
Strategic Report (continued)
Net Asset Value
Net assets increased in the year by £1,690,000 as follows:
At 31 May 2015
Profit after tax
Purchase of own shares for treasury (cost)
Purchase of own shares for treasury (reduced denominator)
Translation differences
At 31 May 2016
Net assets
£000
13,822
1,039
(42)
-
693
15,512
Per share
pence
50.2
3.8
(0.2)
0.2
2.5
56.5
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. The warehouse constructed
in 2008 in Germany is financed by a 20-year loan at a fixed interest rate of 4.07%. Property investments in the
year have been financed partly from cash generated in the year, but principally from loans at fixed interest rates
between 1.65% and 3.4%. Working capital finance, when required, is via short term loans of three months
currently attracting interest at approximately 1.4%.
Bank debt in the subsidiaries is secured by charges on inventories, receivables and property and is without
recourse to the Parent Company.
Principal risks and uncertainties
Following the UK referendum result in favour of leaving the European Union (“EU”), the economic
environment has become much more uncertain. However, the business of Leeds Group is conducted entirely by
subsidiaries incorporated in Germany or China, and their exports to the UK account for approximately 4% 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.
Of greater risk is the possibility of reduced demand owing to falling consumer confidence, although the business
has proved robust in earlier recessions with some evidence that reduced consumer spending on ready-made
apparel or furnishings generates increased demand for Hemmers fabrics that customers use to make equivalent
goods in the home.
The currency markets in particular dislike the current air of uncertainty, and sterling immediately lost ground on
news of the referendum result. This benefits Leeds Group since, as the pound weakens, the value of the
revenues, profits and net assets of foreign subsidiaries is increased in sterling terms.
Most fabric purchased by Hemmers is paid for in US dollars, while the Euro is the principal currency in which
Hemmers sells its product. Thus the Euro/dollar rate is of greater significance to Leeds Group than the strength
of sterling. Since the referendum result the Euro has not depreciated against the US dollar to a material extent,
and at the date of this report is actually stronger than in the winter months of the financial year just ended. We
shall continue to manage this transactional currency risk by a combination of forward exchange contracts with
reputable banks and sales price increases where necessary.
Fire risk is mitigated by insurance, including consequential loss insurance to cover the loss of business
opportunity while replacement stocks are obtained. There is an adequate disaster recovery programme in place
with regard to essential computer systems. 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. The Directors therefore consider the principal operating risks of
operating in this market to be the financial risks identified in note 3 to the financial statements.
Jan G Holmstrom
Chairman
27 July 2016
7
Directors’ Report
The directors present their annual report and the audited financial statements for the year ended 31 May
2016.
Results and dividend
The results of the Group are set out in detail in the Strategic Report. The directors do not recommend the
payment of a dividend.
Directors and directors’ interests
The Directors who held office during the year were Mr Johan Claesson, Mr David Cooper, Mr Jörg
Hemmers and Mr Jan G Holmstrom and their remuneration for the year is set out in note 5 to the financial
statements.
The Director retiring by rotation is Johan Claesson who, being eligible, offers himself for re-appointment
at the forthcoming Annual General Meeting.
The directors who held office at the end of the year had the following interests in the ordinary shares of
the Company:
Number of shares
Interest at end of year
Beneficial
Non-beneficial
Interest at beginning of year
Beneficial
Non-beneficial
7,978,050
-
-
-
-
-
-
-
7,978,050
-
-
-
-
-
-
-
Johan Claesson
David Cooper
Jörg Hemmers
Jan Holmstrom
There are no outstanding share options granted to directors or employees of the Company.
No changes in directors’ share interests or share options have taken place between the end of the year and
27 July 2016.
Major shareholdings
The Company is aware of the following shareholders having 3% or more of the issued share capital at 27
July 2016:
% of issued share capital % of issued share capital excluding
shares held in treasury
Mr Johan Claesson and associates
Mr Peter Gyllenhammar and associates
Sunningdale Investments Ltd
25.25
21.31
8.69
29.08
24.54
10.01
Directors’ and officers’ liability insurance
The Group maintains directors’ and officers’ liability insurance that gives appropriate cover for any legal
actions brought against its directors or senior managers. This policy remained in force on the date on
which the financial statements of the Group were approved by the Board.
Leeds Group plc Ordinary shares of 12 pence each
The market value of Leeds Group shares between 1 June 2015 and 31 May 2016 ranged between 31.0p
and 39.5p. The average market value for the year was 36.4p, and at 31 May 2016 the market value was
39.5p (31 May 2015: 35.5p).
Political and charitable contributions
The Group made no political contributions, nor any donations to UK charities in the years ended 31 May
2016 and 31 May 2015.
8
Directors’ Report (continued)
Creditor payment policy
It is Group policy to agree the terms of payment with suppliers when agreeing each transaction and to
abide by the terms of payment. At 31 May 2016, the amount of trade creditors shown in the consolidated
statement of financial position represents 29 days (2015: 26 days). There are no trade creditors shown in
the Company statement of financial position (2015: nil).
Going concern
After making enquiries, and notwithstanding the present uncertainties in the global economy, the directors
have a reasonable expectation that the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. For this reason, they have adopted the going concern
basis in preparing the financial statements.
Treasury shares
The Company bought back 112,500 of its own Ordinary Shares for treasury in the year at a cost of
£42,000. The directors intend to continue to buy back any shares which are available for purchase in the
future. The terms on which the Company may purchase its own shares for treasury are detailed in
Resolution 4 of the Notice of Annual General Meeting. In buying back the Company’s ordinary 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.
Corporate Governance
Leeds Group plc is a UK registered company and is quoted on AIM, the London Stock Exchange market
for smaller companies. It is regulated by UK and EU legislation and by the AIM rules for Companies.
AIM companies are not required to comply with the UK Corporate Governance Code. Leeds Group has
instead chosen to adopt the Corporate Governance Code for Small and Medium Sized Companies issued
by the Quoted Companies Alliance (“the QCA Code”).
The Board recognises its responsibility for the proper management of the Company and is committed to
maintaining a high standard of corporate governance which is appropriate to the size of the Company and
the interests of its Shareholders. Below we set out the measures in place to ensure that this is achieved.
he The Board
Director
Position
Jan Holmstrom
Johan Claesson
David Cooper
Jörg Hemmers
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Executive Director
Board
Meetings
Attended
3/3
3/3
3/3
2/3
Independent
No
No
Yes
No
Biographical details of each director are set out on page 2 of this annual report.
The Board meets formally at least three times a year. In addition, telephone Board meetings are convened
throughout the year as required to address any particular issues arising and to approve significant items of
expenditure.
To enable the Board to discharge its duties, all Directors receive appropriate and timely information
including monthly financial reporting packs and Board briefing packs which are issued in advance of all
Board meetings.
Each director has access to the advice of the Company Secretary who is responsible for ensuring that all
Board procedures are complied with and that the directors are kept aware of regulatory compliance
developments. Directors may also take independent legal or financial advice at the expense of the Company
if this is necessary for the proper performance of their duties. No such advice was sought during the year.
The Board is responsible for setting the overall strategy of the group; reviewing and approving the annual
revenue and capital budgets; monitoring performance against budget and ensuring action is taken to
mitigate any adverse performance; establishing appropriate frameworks for Corporate Governance and
internal controls. Certain functions are delegated to Board committees which report back to the full Board.
9
Directors’ Report (continued)
The Board (continued)
Audit Committee
The audit committee comprises the three non-executive Directors of the Company, and is chaired by the
Group’s independent non-executive Director, Mr David Cooper. The audit committee meets not less than
twice a year, and receives and reviews reports from the Company’s auditors relating to the annual accounts
and to the internal control procedures in use throughout the Group. It is responsible for ensuring that the
financial performance of the Group is properly reported with particular regard to legal requirements,
accounting standards and the AIM Rules for Companies.
Remuneration Committee
The remuneration committee comprises the three non-executive Directors of the Company. It meets not less
than once a year. It is responsible for determining and reviewing the terms and conditions of service
(including remuneration) of the senior management of the trading subsidiary, Hemmers Itex Textil Import
Export GmbH.
Financial control and non-financial risk assessment
The Board is responsible for the systems of internal control and for reviewing their effectiveness. The
internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute
assurance against misstatement or loss. Due to the size of the group it is not deemed necessary or cost
effective to have an internal audit function. The Board obtains assurance of internal financial control by
establishing and reviewing key policies and detailed monthly review of financial results compared with
approved budgets.
The identification and management of the principal operating risks facing Leeds Group are dealt with in
note 3 to the financial statements.
The Company maintains appropriate insurance cover in respect of the operations of the Group and the
actions of its Directors and Officers.
Director Independence and Shareholder Communication
The Board considers that there is sufficient independence and expertise on the Board given the size and
complexity of the Group.
The principal forum for shareholder dialogue is the Annual General Meeting. Details of this year’s meeting
and business to be conducted there are set out on pages 49 to 54 of this report. Shareholders are encouraged
to attend the meeting and question the Board on any matters of interest or concern regarding the results and
prospects of the Group. In addition, shareholders may contact the Chairman or the Independent Non-
Executive Director during the course of the year to raise any questions they have which require more
immediate attention. Contact details may be obtained from the Company Secretary at the Company’s
registered office. The Chairman and Independent Non-Executive Director are responsible for bringing any
such matters raised to the attention of the Board.
Directors’ conflicts of interest and share dealings
The Board has effective procedures in place to identify, record and deal with conflicts of interest. Each
director is made aware of his responsibility to bring any potential conflict of interest to the attention of the
Board.
The Directors comply with Rule 21 of the AIM Rules for Companies and the EU Directive on Market
Abuse Regulation which came into effect on 3 July 2016 relating to directors’ and applicable employees’
dealings in the Company’s securities.
Auditor Independence
The external auditors, BDO LLP (“BDO”) were first appointed in 2006. The Company is satisfied that
there are adequate safeguards in place to ensure that BDO maintain their objectivity and independence.
Proposals for any non-audit work must be approved by the audit committee. Periodic rotation of audit `
partners has now become standard practise within the auditing profession.
Fees paid to BDO in respect of audit and non-audit services are set out in note 4 to the financial statements.
10
Directors’ Report (continued)
Compliance with QCA Code Principles
The Board considers that it complies with the principles of the QCA code except as follows:
The Company has only one independent non-executive director rather than two as recommended
by the Code. The Board considers that this is appropriate given the current size and complexity of
the Group and is kept under review.
The Company does not have a formal Board evaluation process.
There is no Nominations Committee. The Board considers that a Nominations Committee is
unnecessary as the composition of the Board, succession planning for Board members and Board
vacancies are considered to be a matter for the Board as a whole.
The Company does not have a Chief Executive Officer. The Board considers that this is
appropriate given the current size and complexity of the Group. The Managing Director of the
principal trading subsidiary is a member of the Board and the sole executive director. The
Chairman does not act as Chief Executive Officer.
The Company does not publish a Corporate Social Responsibility Statement. The Board considers
that it complies with or exceeds all applicable legal, environmental and employment requirements
in all jurisdictions where it operates.
The City Code on Takeovers and Mergers
The Company is subject to The City Code on Takeovers and Mergers.
Directors’ responsibilities
The directors are responsible for preparing the strategic report, the annual report and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law
the directors have elected to prepare the Group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union. The Company financial
statements are prepared in accordance with FRS 101 "Reduced Disclosure Framework", which has been
applied for the first time this year. There has been no impact of this change on the reported results of the
Company, nor on its balance sheet.
Under company law the directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of
the Group for that year. The directors are also required to prepare financial statements in accordance with
the rules of the London Stock Exchange for companies trading securities on the Alternative Investment
Market.
In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether they have been prepared in accordance with IFRSs as adopted by the
European Union, subject to any material departures disclosed and explained in the financial
statements;
prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the Company will continue in business.
11
Directors’ Report (continued)
Directors’ responsibilities (continued)
The directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Company’s transactions and disclose with reasonable accuracy at any time the financial
position of the Company, and enable them to ensure that the financial statements comply with the
requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company, and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
Website publication
The directors are responsible for ensuring that the annual report and the financial statements are made
available on a website. Financial statements are published on the Company’s website in accordance with
legislation in the United Kingdom governing the preparation and dissemination of financial statements,
which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's
website is the responsibility of the directors. The directors' responsibility also extends to the ongoing
integrity of the financial statements contained therein. The Company’s website also includes the
information required by Rule 26 of the AIM Rules for Companies.
Auditors
All of the current directors have taken all the steps that they ought to have taken to make themselves
aware of any information needed by the Group’s auditors for the purposes of their audit and to establish
that the auditors are aware of that information. The directors are not aware of any relevant audit
information of which the auditors are unaware.
In accordance with Section 489 of the Companies Act 2006, Resolution 3 is to be proposed at the
forthcoming Annual General Meeting for the re-appointment of BDO LLP as auditors of the Company, to
hold office from the conclusion of the meeting until the conclusion of the next annual general meeting of
the Company at which the accounts are laid.
By Order of the Board
Malcolm Wilson
Company Secretary
27 July 2016
Old Mills
Whitehall Grove
Drighlington
Bradford, BD11 1BY
12
Independent Auditor’s Report
to the Shareholders of Leeds Group plc
We have audited the financial statements of Leeds Group plc for the year ended 31 May 2016, which are
set out on pages 15 to 47 and comprise the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Financial Position, the Consolidated Cash Flow Statement, the Consolidated
Statement of Changes in Equity, the Company Statement of Financial Position, the Company Statement
of Changes in Equity, and all related notes. The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been
applied in preparation of the Parent Company financial statements is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice) including Financial
Reporting Standard 101 ‘Reduced Disclosure Framework’.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those standards require us to comply
with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the FRC’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the Group’s and the Parent
Company’s affairs as at 31 May 2016 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union;
the Parent Company’s financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the strategic report and the directors’ report for the financial year
for which the financial statements are prepared is consistent with the financial statements.
13
Independent Auditor’s Report
to the Shareholders of Leeds Group plc (continued)
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us
to report to you if, in our opinion:
adequate accounting records have not been kept by the Parent Company, or returns adequate for our
audit have not been received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Linda Cooper (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
Leeds
27 July 2016
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
14
Consolidated Statement of Comprehensive Income
for the year ended 31 May 2016
Note
6
4
7
7
14
8
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Profit from operations
Finance expense
Finance income
Share of post-tax profit of joint venture
Profit before tax
Tax expense
Profit for the year attributable to the equity
holders of the Parent Company
Other comprehensive income
Translation differences on foreign operations
Other comprehensive income for the year
Total comprehensive income for the year
attributable to the equity holders of the
Parent Company
Year ended
31 May 2016
£000
Year ended
31 May 2015
£000
36,272
(28,563)
7,709
(2,216)
(3,949)
1,544
(92)
4
51
1,507
(468)
1,039
693
693
34,859
(27,066)
7,793
(2,316)
(3,855)
1,622
(71)
7
13
1,571
(518)
1,053
(1,215)
(1,215)
1,732
(162)
The results shown in the consolidated statement of comprehensive income derive wholly from continuing
operations. 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.
Earnings per share attributable to
the equity holders of the Company
Note
Year ended
31 May 2016
Year ended
31 May 2015
Basic and diluted earnings per share (pence)
9
3.8p
3.8p
The notes on pages 19 to 42 form part of these financial statements.
15
Consolidated Statement of Financial Position
at 31 May 2016
Company number 00067863
Assets
Non-current assets
Property, plant and equipment
Goodwill
Investment in joint venture
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial asset
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Non-current liabilities
Loans and borrowings
Deferred tax
Total non-current liabilities
Current liabilities
Trade and other payables
Loans and borrowings
Derivative financial liability
Corporation tax liability
Total current liabilities
Total liabilities
TOTAL NET ASSETS
Capital and reserves attributable to
equity holders of the Company
Share capital
Capital redemption reserve
Treasury share reserve
Foreign exchange reserve
Retained earnings
TOTAL EQUITY
Note
31 May 2016
£000
31 May 2015
£000
11
12
14
15
16
17
18
20
8
19
20
17
21
21
21
5,864
855
640
7,359
7,765
5,779
-
1,612
15,156
22,515
(3,843)
(230)
(4,073)
(2,283)
(415)
(40)
(192)
(2,930)
(7,003)
1,760
802
553
3,115
7,258
6,000
59
2,027
15,344
18,459
(665)
(244)
(909)
(2,666)
(766)
-
(296)
(3,728)
(4,637)
15,512
13,822
3,792
600
(767)
642
11,245
15,512
3,792
600
(725)
(51)
10,206
13,822
The financial statements on pages 15 to 42 were approved and authorised for issue by the Board of directors on
27 July 2016 and were signed on behalf of the Board by:-
Jan G Holmstrom
Chairman
The notes on pages 19 to 42 form part of these financial statements.
16
Consolidated Cash Flow Statement
for the year ended 31 May 2016
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation
Finance expense
Finance income
Movement in derivative financial asset
Loss on sale of property, plant and equipment
Share of post-tax profit of joint venture
Income tax expense
Cash flows from operating activities before
changes in working capital and provisions
Increase in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/(increase) in trade and other payables
Cash generated from operating activities
Income taxes paid
Net cash flows from operating activities
Investing activities
Purchase of property, plant and equipment
Sale of property, plant and equipment
Investment in joint venture
Bank interest received
Net cash used in investing activities
Financing activities
Purchase of treasury shares
Bank borrowings drawn down
Bank interest paid
Net cash generated in financing activities
Net (decrease)/increase in cash and cash equivalents
Translation gain/(loss) on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
Year ended
31 May 2016
Year ended
31 May 2015
£000
1,039
300
92
(4)
99
1
(51)
468
1,944
(44)
538
(621)
1,817
(613)
1,204
(4,156)
-
-
4
(4,152)
(42)
2,640
(92)
2,506
(442)
27
2,027
1,612
£000
1,053
226
71
(7)
(63)
2
(13)
518
1,787
(1,063)
(495)
1,003
1,232
(679)
553
(298)
-
(575)
7
(866)
(44)
717
(71)
602
289
(34)
1,772
2,027
11
7
7
17
14
8
15
16
19
8
11
11
14
7
21
20
7
18
18
The notes on pages 19 to 42 form part of these financial statements.
17
Consolidated Statement of Changes in Equity
for the year ended 31 May 2016
Share
capital
£000
Capital
redemption
reserve
£000
Treasury
share
reserve
£000
Foreign
exchange
reserve
£000
Retained
earnings
£000
Total equity
£000
At 31 May 2014
3,792
600
(681)
1,164
9,153
14,028
Profit for the year
Other comprehensive income
Total comprehensive income
Transaction with Shareholders:
Purchase of treasury shares
-
-
-
-
-
-
-
-
-
-
-
-
1,053
1,053
(1,215)
-
(1,215)
(1,215)
1,053
(162)
(44)
-
-
(44)
At 31 May 2015
3,792
600
(725)
(51)
10,206
13,822
Profit for the year
Other comprehensive income
Total comprehensive income
Transaction with Shareholders:
Purchase of treasury shares
-
-
-
-
-
-
-
-
-
-
-
-
1,039
693
-
1,039
693
693
1,039
1,732
(42)
-
-
(42)
At 31 May 2016
3,792
600
(767)
642
11,245
15,512
The following describes the nature and purpose of each reserve within equity:
Reserve
Share capital
Description and purpose
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.
The notes on pages 19 to 42 form part of these financial statements.
18
Notes
forming part of the financial statements for the year ended 31May 2016
1
Accounting policies
Basis of preparation
The principal accounting policies adopted in the preparation of the consolidated financial statements are set
out below. The policies have been consistently applied to all the periods presented, unless otherwise stated.
The financial statements have been prepared under the historical cost convention subject to fair valuing of
financial instruments.
These financial statements have 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
In the current year the following new and revised Standards and Interpretations have been adopted
which have not resulted in any significant impact on the results or net assets of the Group:
Annual Improvements to IFRSs (2010-2012 Cycle) (effective 1 February 2015)
Annual Improvements to IFRSs (2011-2013 Cycle) (effective 1 January 2015)
Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)
The Group has decided against early adoption of the following new and amended IFRS, IAS and IFRIC
interpretations which are mandatory for future accounting periods and which are potentially relevant to
the Group:
Accounting for Acquisitions of Interests in Joint Operations: Amendments to IFRS 11
Annual Improvements to IFRSs (2012-2014 Cycle)
Disclosure Initiative: Amendments to IAS 1
The following new and amended IFRS, IAS and IFRIC interpretations are mandatory for future
accounting periods and are not expected at this stage to be relevant to the Group or have any anticipated
significant impact on the results or net assets of the Group:
Clarification of Acceptable Methods of Depreciation and Amortisation: Amendments to IAS 16 and IAS 38
Amendments to IAS 16 and IAS 41: Agriculture: Bearer Plants
Equity Method in Separate Financial Statements (Amendments to IAS 27)
The following IFRS, IAS and IFRIC interpretations, which are potentially relevant to the Group, are
not currently endorsed for use in the EU but are expected to be mandatory for future accounting periods:
IFRS 9 Financial instruments
IFRS 14 Regulatory Deferral Accounts
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)
Recognition of deferred tax assets for unrealised losses (Amendments to IAS 12)
Disclosure Initiative: Amendments to IAS 7
Clarifications to IFRS 15 revenue from Contracts with Customers
Where future new and amended standards have been identified as potentially relevant management are
assessing their future impact.
Revenue
Revenue is shown in the consolidated statement of comprehensive income net of VAT and returns, and is
based on the fair value of consideration receivable by the Group in the ordinary course of its business for
the sale of fabric. Revenue on sale of goods is recognised in the consolidated statement of comprehensive
income when the significant risks and rewards of ownership have been transferred, which is typically upon
despatch of goods to the customer.
19
Notes
forming part of the financial statements for the year ended 31May 2016
1
Accounting policies (continued)
Basis of consolidation
Where the company has control over an investee, it is classified as a subsidiary. The company controls an
investee if all three of the following elements are present: power over the investee, exposure to variable
returns from the investee, and the ability of the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these
elements of control. The consolidated financial statements present the results of the Company and its
subsidiaries ("the Group") as if they formed a single entity. Inter-company transactions and balances
between Group companies are therefore eliminated in full.
Business combinations
The consolidated financial statements incorporate the results of business combinations using the purchase
method. In the consolidated statement of financial position, the acquired entity’s identifiable assets,
liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated statement of comprehensive income from the
date on which control is obtained.
Goodwill
Goodwill represents the excess of the cost of a business combination over the interest in the fair value of
identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair values of assets
acquired, liabilities assumed and equity instruments issued, plus any direct costs of acquisition.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the
consolidated statement of comprehensive income.
Segment reporting
The Board considers that the Group’s business comprises two operating segments, namely Hemmers
Europe and Hemmers China. The remainder of Group activities comprise holding companies.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker who is identified as the Board of Directors which is responsible for allocating
resources, assessing performance of the operating segments and making strategic decisions.
Impairment of non-financial assets (excluding inventories and deferred tax assets)
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are
undertaken annually at the end of the financial period. Other non-financial assets are subject to impairment
tests whenever events or changes in circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value
in use and fair value less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is
carried out on the asset's cash-generating unit (i.e. the lowest Group of assets in which the asset belongs for
which there are separately identifiable cash flows). Goodwill is allocated on initial recognition to each of
the Group's cash-generating units that are expected to benefit from the synergies of the combination giving
rise to the goodwill.
Impairment charges are included in the administrative expenses line item in the consolidated statement of
comprehensive income, except to the extent they reverse gains previously recognised in the consolidated
statement of comprehensive income. An impairment loss recognised for goodwill is not reversed.
20
Notes
forming part of the financial statements for the year ended 31May 2016
1
Accounting policies (continued)
Foreign currency
The consolidated financial statements are presented in sterling, which is the functional currency of the
Parent Company and the presentational currency of the Group.
Transactions entered into by Group entities in a currency other than the currency of the primary economic
environment in which they operate (their "functional currency") are recorded at the rates ruling when the
transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the
date of the statement of financial position. Exchange differences arising on the retranslation of unsettled
monetary assets and liabilities are recognised immediately in the consolidated statement of comprehensive
income.
On consolidation, the results of overseas operations are translated into Sterling at rates approximating to
those ruling when the transactions took place. All assets and liabilities of overseas operations, including
goodwill arising on the acquisition of those operations, are translated at the rate ruling at the date of the
statement of financial position. Exchange differences arising on translating the opening net assets at
opening rate and the results of overseas operations at actual rate are recognised directly in equity (the
"foreign exchange reserve").
Exchange differences recognised in the income statement of Group entities' separate financial statements on
the translation of long-term monetary items forming part of the Group's net investment in the overseas
operation concerned are reclassified to the foreign exchange reserve on consolidation.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange
reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of
comprehensive income as part of the profit or loss on disposal.
Financial assets
The Group classifies its financial assets into one of the three categories discussed below, depending on the
purpose for which the asset was acquired. The Group has not classified any of its financial assets as held to
maturity.
The Group's accounting policy for each category is as follows:
(i) Fair value through profit or loss: This category comprises only in-the-money derivatives (see
financial liabilities section for out-of-the-money derivatives). They are carried in the statement of
financial position at fair value with changes in fair value recognised in the consolidated statement of
comprehensive income in the cost of sales line. Other than these derivative financial instruments,
the Group does not have any assets held for trading nor does it voluntarily classify any financial
assets as being at fair value through profit or loss.
(ii) Loans and receivables: Group loans and receivables comprise trade and other receivables and
cash and cash equivalents in the statement of financial position. These assets are non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market. They
arise principally through the provision of goods and services to customers (e.g. trade receivables),
but also incorporate other types of contractual monetary asset. They are initially recognised at fair
value, and subsequently carried at amortised cost using the effective interest rate less provision for
impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial
difficulties on the part of the counter-party or default or significant delay in payment) that the Group
will be unable to collect all of the amounts due under the terms receivable, the amount of such a
provision being the difference between the net carrying amount and the present value of the future
expected cash flows associated with the impaired receivable. For trade receivables, which are
reported net, such provisions are recorded in a separate allowance account with the loss being
recognised within administrative expenses in the consolidated statement of comprehensive income.
On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset
is written off against the associated provision.
21
Notes
forming part of the financial statements for the year ended 31May 2016
1
Accounting policies (continued)
(ii) Loans and receivables (continued)
From time to time, the Group elects to renegotiate the terms of trade receivables due from customers
with which it has previously had a good trading history. Such renegotiations will lead to changes in
the timing of payments rather than changes to the amounts owed and, in consequence, the new
expected cash flows are discounted at the original effective interest rate.
Cash and cash equivalents include cash in hand, deposits held at call with banks, and bank
overdrafts. Cash and cash equivalents have maturities of three months or less. Bank overdrafts are
shown within loans and borrowings in current liabilities in the statement of financial position.
The Group does not engage in hedge accounting.
Financial liabilities
The Group classifies its financial liabilities into one of the two categories below, depending on the purpose
for which the liability was incurred. The Group's accounting policy for each category is as follows:
(i) Fair value through profit or loss: This category comprises only out-of-the-money derivatives
(see financial assets for in-the-money derivatives). They are carried in the statement of financial
position at fair value with changes in fair value recognised in the consolidated statement of
comprehensive income in the cost of sales line. Other than these derivative financial instruments,
the Group does not have any liabilities held for trading nor has it designated any financial
liabilities as being at fair value through profit or loss.
(ii) Other financial liabilities: Other financial liabilities include the following items, which are
initially recognised at fair value and subsequently carried at amortised cost using the effective
interest method:
Bank borrowings
Trade payables
Bill discounting facilities
Share capital
The Group’s ordinary shares are classified as equity instruments.
Retirement benefits
The Group operates no defined benefit pension schemes. The Group operates a defined contribution
pension scheme for its UK employees, and contributions are charged to the consolidated statement of
comprehensive income in the period to which they relate. The Group does not operate pension schemes in
Germany where pension arrangements are provided by the state.
Leased assets
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an
"operating lease"), the total rentals payable under the lease are charged to the consolidated statement of
comprehensive income on a straight-line basis over the lease term. The aggregate benefit of lease
incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.
Taxation
The charge for taxation is based on the results for the year, and takes into account deferred taxation.
22
Notes
forming part of the financial statements for the year ended 31May 2016
1
Accounting policies (continued)
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the
statement of financial position differs from its tax base, except for differences arising on:
the initial recognition of goodwill;
the initial recognition of an asset or liability in a transaction which is not a business combination
and at the time of the transaction affects neither accounting or taxable profit; and
investments in subsidiaries where the Group is able to control the timing of the reversal of the
difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will
be available against which the difference can be utilised. The amount of the asset or liability is determined
using tax rates that have been enacted or substantively enacted by the date of the statement of financial
position and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current
tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
the same taxable Group company; or
different Group entities which intend either to settle current tax assets and liabilities on a net basis,
or to realise the assets and settle the liabilities simultaneously, in each future period in which
significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.
Dividends
Interim dividends are recognised when paid and final dividends are recognised when approved by the
shareholders at the AGM.
Property, plant and equipment
Other than freehold land, all items of property, plant and equipment are carried at depreciated cost.
Freehold land is not depreciated. Depreciation is provided on all other items of property, plant and
equipment to write off the carrying value of items on a straight line basis over their expected useful
economic lives as follows:
Land and buildings
Plant and machinery
8 - 33 years
5 – 15 years
Treasury shares
Consideration paid/(received) for the purchase/(sale) of treasury shares is recognised directly in equity. The
cost of treasury shares held is presented as a separate component of equity (the "treasury share reserve").
Any excess of the consideration received on the sale of treasury shares over the weighted average cost of
the shares sold is credited to the share premium account.
Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value.
Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the
inventories to their present location and condition. Weighted average cost is used to determine the cost of
ordinarily interchangeable items.
Government grants
Government grants received on capital expenditure are generally deducted in arriving at the carrying
amount of the asset purchased. Grants for revenue expenditure are netted against the cost incurred by the
Group. Where retention of a government grant is dependent on the Group satisfying certain criteria, it is
initially recognised as deferred income. When the criteria for retention have been satisfied, the deferred
income balance is released to the consolidated statement of comprehensive income or netted against the
asset purchased.
23
Notes
forming part of the financial statements for the year ended 31May 2016
1 Accounting policies (continued)
Provisions
Provisions are recognised for liabilities of uncertain timing or amount that have arisen as a result of past
transactions and are discounted at a pre-tax rate reflecting current market assessments of the time value of
money and the risks specific to the liability.
Where the buyer has the right to return the goods the Group estimates the return rate based on past
experience with similar sales and recognises revenue on this transaction with a corresponding provision
against revenue for estimated returns.
Joint arrangements
The group is a party to a joint arrangement when there is a contractual arrangement that confers joint
control over the relevant activities of the arrangement to the group and at least one other party. Joint control
is assessed under the same principles as control over subsidiaries.
The group classifies its interests in joint arrangements as either:
Joint ventures: where the group has rights to only the net assets of the joint arrangement
Joint operations: where the group has both the rights to assets and obligations for the liabilities of
the joint arrangement.
In assessing the classification of interests in joint arrangements, the Group considers:
The structure of the joint arrangement
The legal form of joint arrangements structured through a separate vehicle
The contractual terms of the joint arrangement agreement
Any other facts and circumstances (including any other contractual arrangements).
The Group accounts for its interests in joint ventures using the equity method. Any premium paid for an
investment in a joint venture above the fair value of the Group's share of the identifiable assets, liabilities
and contingent liabilities acquired is capitalised and included in the carrying amount of the investment in
joint venture. Where there is objective evidence that the investment in a joint venture has been impaired the
carrying amount of the investment is tested for impairment in the same way as other non-financial assets.
The Group accounts for its interests in joint operations by recognising its share of assets, liabilities,
revenues and expenses in accordance with its contractually conferred rights and obligations.
2
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are
continually evaluated based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. In the future, actual experience may
differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year
are discussed below:
(i) Impairment of goodwill
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The
recoverable amount is determined based on value in use calculations. The use of this method requires the
estimation of future cash flows and the choice of a discount rate in order to calculate the present value of
the cash flows. Actual outcomes may vary.
(ii) Useful lives of property, plant and equipment
Property, plant and equipment are depreciated over their useful lives. Useful lives are based on the
management's estimates of the period that the assets will generate revenue, which are periodically reviewed
for continued appropriateness. Changes to estimates can result in significant variations in the carrying
value and amounts charged to the consolidated statement of comprehensive income in specific periods.
24
Notes
forming part of the financial statements for the year ended 31May 2016
2
Critical accounting estimates and judgements (continued)
(iii) Impairment of trade receivables
The management team of Hemmers-Itex manages the credit risk in its customer base by taking credit
references before dealing with new customers, by closely monitoring customer payments against agreed
terms, and by taking credit risk insurance wherever possible. Customers that are graded as “high risk” are
placed on a restricted customer list, and future sales are made on a prepayment basis with approval of the
Hemmers-Itex managing director. Where there is objective evidence that a customer may fail to pay in full
an amount that is owed, an impairment charge is made based on the difference between the amount of the
doubtful receivable and the estimated amount (if any) that may prove collectible. The main Board directors
review the Hemmers-Itex debtor profile on a quarterly basis.
(iv) Inventory
The Company reviews the net realisable value of, and demand for, its inventory on a regular basis to
provide assurance that recorded inventory is stated at the lower of cost or net realisable value. Factors that
could impact estimated demand and selling prices include competitor actions, supplier prices and economic
trends.
(v) Classification of joint arrangements
For all joint arrangements structured in separate vehicles the Group must assess the substance of the joint
arrangement in determining whether it is classified as a joint venture or joint operation. This assessment
requires the Group to consider whether it has rights to the joint arrangement’s net assets (in which case it is
classified as a joint venture), or rights to and obligations for specific assets, liabilities, expenses, and
revenues (in which case it is classified as a joint operation). Factors the group must consider include:
Structure
Legal form
Contractual agreement
Other facts and circumstances
Upon consideration of these factors, the directors have determined that the joint arrangement in respect of
Stoff-Ideen-KMR GmbH is structured through a separate vehicle giving the Group rights to the net assets,
and is therefore classified as a joint venture.
3
Financial instruments - risk management
The Group is exposed through its operations to the following financial risks:
Credit risk
Market risk in the form of: -
o Fair value or cash flow interest rate risk
o Foreign exchange risk
o Other market price risk
Liquidity risk
In common with all other businesses, the Group is exposed to risks that arise from its use of financial
instruments. The following describes the Group’s objectives, policies and processes for managing those
risks and the methods used to measure them.
During the year the Group’s non-current bank debt increased from £665,000 to £3,843,000 to finance
capital expenditure. Other than that, there have been no substantive changes in the Group’s exposure to
financial instrument risks, its objectives, policies and processes for managing those risks or the methods
used to measure them from previous periods.
25
Notes
forming part of the financial statements for the year ended 31May 2016
3
Financial instruments - risk management (continued)
Principal financial instruments
The principal financial instruments used by the Group, giving rise to financial instrument risk, are as
follows:
Trade receivables
Cash at bank
Bank overdrafts
Trade and other payables
Fixed rate bank loans
Forward currency contracts
General objectives, policies and processes
The directors have overall responsibility for the determination of the Group’s risk management objectives
and policies and, whilst retaining ultimate responsibility for them, they have delegated the authority for
designing and operating processes that ensure the effective implementation of the objectives and policies to
the Hemmers-Itex management team and, to the limited extent that risk arises in the UK, to the company
secretary. The Board receives monthly reports through which it reviews the effectiveness of the processes
put in place and the appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly
affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out
below:
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. It is
Group policy, implemented locally, to assess the credit risk of new customers before entering contracts.
Such credit ratings are taken into account by local business practices.
A credit policy has been established under which each new customer is analysed individually for
creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The
Group’s review includes external ratings, when available, and in some cases bank references. Purchase
limits are established for each customer, which represents the maximum open amount without requiring
approval from senior management. These limits are reviewed quarterly. Customers that fail to meet the
Group’s benchmark creditworthiness may transact with the Group on a prepayment basis.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions.
For banks and financial institutions, only independently rated parties with minimum rating “A” are
accepted.
The directors monitor the utilisation of the credit limits regularly and at the reporting date do not expect
losses from non-performance by the counterparties to exceed amounts that have been provided. Details of
the provisions held against trade receivables are given in note 16 to the financial statements.
Market risk
Market risk arises from the Group’s use of interest bearing, tradable and foreign currency financial
instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other
market factors (other price risk).
(i) Cash flow interest rate risk
The Group manages its cash flow interest rate risk by borrowing at fixed interest rates wherever possible.
Working capital is financed by short or medium term bank debt at fixed rates, leaving a small residual
overdraft at variable rates.
26
Notes
forming part of the financial statements for the year ended 31May 2016
3
Financial instruments - risk management (continued)
(i) Cash flow interest rate risk (continued)
The borrowings of overseas subsidiaries are denominated in Euros, their functional currency, in order to
avoid those subsidiaries being exposed to unnecessary foreign exchange risk. Bank borrowings or cash
deposits of the Parent Company are denominated in Sterling.
(ii) Foreign exchange risk
The Group has operations located in Germany and China whose functional currencies are, respectively, the
Euro and the RMB. Foreign exchange risk arises when these entities enter into transactions denominated in
a currency other than their functional currency, which almost invariably involves sales or purchases
denominated in US Dollars. It is Group policy that Euro / US Dollar exposures should be commercially
hedged locally by entering into forward contracts with reputable banks wherever appropriate. Exposure
and risk relating to RMB / US Dollar transactions is small and is not hedged.
At the date of the consolidated statement of financial position, a 10% strengthening of Sterling against the
Euro and the RMB, all other variables held constant, would have resulted in an estimated decrease of
£1,153,000 in the reported net asset value of the Group. A 10% weakening of Sterling against the Euro and
the RMB at the date of the statement of financial position, on the same basis, would have resulted in an
estimated increase of £1,407,000 in the reported net asset value of the Group.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and
principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due.
The Board monitors and manages the Group’s net indebtedness by reference to cash flow forecasts
prepared in their functional currencies by subsidiary companies. These forecasts are regularly updated,
allowing the Board to ensure that the Group will always be able to meet its liabilities when they become
due by maintaining adequate cash balances and committed loan facilities. The Group also seeks to reduce
liquidity risk by fixing interest rates (and hence cash flows) on a portion of its long-term borrowings. This
is further discussed in the ‘interest rate risk’ section above.
Capital policy
The Group’s capital comprises equity as shown in the consolidated statement of financial position plus net
debt, which is set out in note 20 to the financial statements. The Board’s objectives when managing capital
are to safeguard the Group’s ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders, and to maintain a capital structure that optimises the cost
of capital. In order to maintain or adjust the capital structure the Group may adjust the amount of dividends
paid to shareholders, return capital to shareholders, issue new shares, sell assets or reduce debts.
27
Notes
forming part of the financial statements for the year ended 31May 2016
4
Profit from operations
Profit from operations is stated after charging/(crediting):
Auditors’ fees
Statutory audit services
- Audit of the Parent Company and the consolidated accounts
- Audit of subsidiary companies
Non-audit related services
- Tax compliance
Total auditor’s fees
Staff costs
Depreciation of property, plant and equipment
Operating lease expense
- Plant and machinery
- Property
Loss on disposal of property, plant and equipment
Year ended
31 May 2016
Year ended
31 May 2015
£000
£000
17
28
5
50
4,515
300
119
210
1
16
28
4
48
4,201
226
116
207
2
5
Staff costs
The average number of persons employed in the year by the Group (including directors) was as follows:
Management
Sales and
customer service
Warehousing Administration
Group total
2016
2015
9
9
56
50
74
71
32
27
171
157
Staff costs, including directors, comprise
Wages, salaries and directors’ fees
Defined contribution pension cost
Employer’s national insurance contributions and similar taxes
Total staff costs
Year ended
31 May 2016
Year ended
31 May 2015
£000
3,754
4
757
4,515
£000
3,484
4
713
4,201
Included in employer’s national insurance contributions and similar taxes are the amounts paid by
Hemmers-Itex Textil Import / Export GmbH to fund employees’ pension entitlements provided by the
German state.
Executive director
Jörg Hemmers (appointed 30 Mar 2015)
Non -executive directors
Johan Claesson
David Cooper (appointed 21 Oct 2014)
Kathryn Davenport (resigned 21 Oct 2014)
Jan G Holmstrom
Salary &
Fees
Bonus
Pension
£000
£000
£000
Year ended
31 May
2016
£000
Year ended
31 May
2015
£000
168
44
11
223
15
15
-
25
-
-
-
-
-
-
-
-
15
15
-
25
223
44
11
278
28
29
15
10
10
21
85
Notes
forming part of the financial statements for the year ended 31May 2016
5
Staff costs (continued)
Jörg Hemmers is managing director of Hemmers-Itex Textil Import / Export GmbH, a wholly owned
subsidiary of Leeds Group plc, and based in Germany. No recharge of his salary is made to the parent
company.
The fees relating to Johan Claesson and Jan G Holmstrom are paid, respectively, to Johan & Marianne
Claesson Aktiebolag and Somerset Aktiebolag who invoice the Company for the services of these directors.
Outstanding share options granted to employees or directors at 31 May 2016 were nil (2015: nil).
Key management personnel are those persons having authority and responsibility for planning, directing
and controlling the activities of the Group, and comprise the directors of the Group listed on page 2.
Salary and fees
Bonuses
Employer’s national insurance contributions and similar taxes
Total remuneration of key management personnel
6
Segmental information
Year ended
31 May 2016
Year ended
31 May 2015
£000
£000
223
44
11
278
224
47
9
280
The Group’s trading businesses are Hemmers-Itex Textil Import Export GmbH, and its subsidiary Chinoh-
Tex Limited. Hemmers is incorporated in Germany and is engaged in the import and distribution of fabric
from its principal place of business in Nordhorn, Germany. ChinohTex is incorporated in China and based
in Shanghai, buying fabric from Chinese manufacturers to be sold internationally.
The chief operating decision maker is the Board, which considers that the Hemmers business comprises
two operating segments, namely Hemmers Europe and Hemmers China. These two segments report to the
Board under local GAAP, and the adjustments required to permit the Group to report under IFRS are made
centrally.
The following tables set out a segmental analysis of the Group’s operations. The Holding Companies are
not in themselves operating segments, but their net costs are shown in order that the segmental information
presented to the Board can be reconciled to the Consolidated Statement of Comprehensive Income.
Analysis of revenue by category
Year ended 31 May 2016
Hemmers
China
£000
Hemmers
Europe
£000
Group
Total
£000
Year ended 31 May 2015
Hemmers
Europe
£000
Hemmers
China
£000
Group
Total
£000
Sale of goods
32,775
3,497
36,272
31,151
3,708
34,859
Total revenue
32,775
3,497
36,272
31,151
3,708
34,859
Since sales to no customer amount to more than 5% of total revenue, the directors hold the opinion that the
Group is not reliant upon trade with any major customer.
29
Notes
forming part of the financial statements for the year ended 31May 2016
6
Segmental information (continued)
Year ended
31 May 2016
Hemmers
Europe
£000
Hemmers
China
£000
Inter
segmental
£000
Total
Hemmers
£000
Holding
companies
£000
External revenue
Inter-segmental
revenue
Cost of sales
32,775
3,497
-
36,272
10
(25,731)
622
(3,368)
(632)
635
-
(28,464)
Gross profit
Distribution costs
Admin expenses
7,054
(1,964)
(3,582)
751
(252)
(232)
Profit from
operations
Finance expense
Finance income
Internal interest
Share of JV profit
1,508
(92)
-
(158)
51
267
-
-
-
-
Profit before tax
1,309
267
3
-
-
3
-
-
-
-
3
7,808
(2,216)
(3,814)
1,778
(92)
-
(158)
51
-
-
-
-
-
(135)
(135)
-
4
158
-
1,579
27
At 31 May 2016
Hemmers
Europe
£000
Hemmers
China
£000
Inter
segmental
£000
Total
Hemmers
£000
Holding
companies
£000
Property, plant &
equipment
Goodwill
Investment in JV
Inventories
Trade receivables
Other receivables
Cash & equivalents
5,794
-
640
7,526
4,215
702
611
70
-
-
271
401
438
453
-
-
-
(32)
-
-
-
5,864
-
640
7,765
4,616
1,140
1,064
Total assets
19,488
1,633
(32)
21,089
-
-
-
-
-
23
548
571
Group loans &
current accounts
Non-current
liabilities
Trade payables
Other payables
Derivative financial
liability
Corporation tax
Current loans &
borrowings
(2,178)
(127)
(3,843)
(1,066)
(691)
-
(178)
-
(328)
(161)
-
(14)
(415)
-
Total liabilities
(8,371)
(630)
-
-
-
-
-
-
-
-
(2,305)
2,305
(3,843)
(1,394)
(852)
-
(192)
(415)
-
-
(37)
-
-
-
IFRS adjustments
Financial
derivatives
£000
£000
Goodwill
-
-
(99)
(99)
-
-
(99)
-
-
-
-
(99)
-
-
-
-
-
-
-
-
-
-
-
-
IFRS adjustments
Financial
derivatives
£000
£000
Goodwill
Group
total
£000
36,272
-
(28,563)
7,709
(2,216)
(3,949)
1,544
(92)
4
-
51
1,507
Group
total
£000
5,864
855
640
7,765
4,616
1,163
1,612
-
-
-
-
-
-
-
-
-
-
-
-
(40)
-
-
-
855
-
-
-
-
-
855
22,515
-
-
(230)
-
-
(4,073)
(1,394)
(889)
-
-
-
(40)
(192)
(415)
(9,001)
2,268
(40)
(230)
(7,003)
Net assets
11,117
1,003
(32)
12,088
2,839
(40)
625
15,512
30
Notes
forming part of the financial statements for the year ended 31May 2016
6
Segmental information (continued)
Year ended
31 May 2015
Hemmers
Europe
£000
Hemmers
China
£000
Inter
segmental
£000
Total
Hemmers
£000
Holding
companies
£000
External revenue
Inter-segmental
revenue
Cost of sales
31,151
3,708
-
34,859
68
(24,303)
924
(3,815)
(992)
989
-
(27,129)
Gross profit
Distribution costs
Admin expenses
6,916
(2,082)
(3,177)
817
(234)
(278)
Profit from
operations
Finance expense
Finance income
Internal interest
Share of JV profit
1,657
(71)
-
(156)
13
305
-
-
-
-
(3)
-
-
(3)
-
-
-
-
7,730
(2,316)
(3,455)
1,959
(71)
-
(156)
13
-
-
-
-
-
(458)
(458)
-
7
156
-
Profit before tax
1,443
305
(3)
1,745
(295)
At 31 May 2015
Hemmers
Europe
£000
Hemmers
China
£000
Inter
segmental
£000
Total
Hemmers
£000
Holding
companies
£000
Property, plant &
equipment
Goodwill
Investment in JV
Inventories
Trade receivables
Other receivables
Derivative financial
asset
Cash & equivalents
1,678
-
553
7,107
4,522
742
-
354
82
-
-
184
238
480
-
595
-
-
-
(33)
-
-
-
-
1,760
-
553
7,258
4,760
1,222
-
949
-
-
-
-
-
18
-
1,078
Total assets
14,956
1,579
(33)
16,502
1,096
Group loans &
current accounts
Non-current
liabilities
Trade payables
Other payables
Corporation tax
Current loans &
borrowings
(1,629)
(204)
(665)
(1,364)
(705)
(269)
-
(418)
(132)
(15)
(766)
-
Total liabilities
(5,398)
(769)
-
-
-
-
-
-
-
(1,833)
1,833
(665)
(1,782)
(837)
(284)
(766)
-
(3)
(44)
(12)
-
IFRS adjustments
Financial
derivatives
£000
£000
Goodwill
IFRS adjustments
Financial
derivatives
£000
£000
Goodwill
Group
total
£000
34,859
-
(27,066)
7,793
(2,316)
(3,855)
1,622
(71)
7
-
13
-
-
-
-
-
58
58
-
-
-
-
58
1,571
Group
total
£000
1,760
802
553
7,258
4,760
1,240
59
2,027
-
802
-
-
-
-
-
-
802
18,459
-
-
(227)
-
-
-
(909)
(1,785)
(881)
(296)
-
(766)
-
-
63
63
-
-
63
-
-
-
-
63
-
-
-
-
-
-
59
-
59
-
(17)
-
-
-
-
(6,167)
1,774
(17)
(227)
(4,637)
Net assets
9,558
810
(33)
10,335
2,870
42
575
13,822
31
Notes
forming part of the financial statements for the year ended 31May 2016
6
Segmental information (continued)
Analysis of revenue by destination
Year ended 31 May 2016
Year ended 31 May 2015
Hemmers
Europe
£000
Hemmers
China
£000
1,205
22,088
7,762
31,055
1,186
100
71
1,230
1,401
335
Group
total
£000
1,305
22,159
8,992
32,456
1,521
Hemmers
Europe
£000
Hemmers
China
£000
1,087
20,205
8,215
29,507
1,070
324
822
1,059
2,205
157
Group
total
£000
1,411
21,027
9,274
31,712
1,227
UK
Germany
Rest of EU
Total EU
Rest of Europe
Total Europe
32,241
1,736
33,977
30,577
2,362
32,939
North America
Asia
Oceania
South America
Africa
187
140
80
108
19
580
831
301
19
30
767
971
381
127
49
251
102
106
113
2
669
295
350
11
21
920
397
456
124
23
Total revenue
32,775
3,497
36,272
31,151
3,708
34,859
Other information
Year ended 31 May 2016
Year ended 31 May 2015
Hemmers
Europe
£000
Hemmers
China
£000
Group
total
£000
Hemmers
Europe
£000
Hemmers
China
£000
Additions to property,
plant & equipment
Depreciation
4,147
279
9
21
4,156
300
284
208
14
18
Group
total
£000
298
226
7
Finance income and expense
Finance income
Interest received on bank deposits
Finance expense
Interest paid on bank overdrafts and loans
Net finance expense recognised in comprehensive income
Year ended
31 May 2016
Year ended
31 May 2015
£000
£000
4
(92)
(88)
7
(71)
(64)
32
Notes
forming part of the financial statements for the year ended 31May 2016
8 Tax expense
Current tax expense
UK corporation tax and income tax of overseas operations on profits for
the year
Adjustments for under provision in prior years
Total current tax expense
Deferred tax (credit)/expense for the year
Total tax expense
Year ended
31 May 2016
Year ended
31 May 2015
£000
£000
441
55
496
(28)
468
483
-
483
35
518
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation
tax in the UK applied to the profit for the year are as follows:
Year ended
31 May 2016
Year ended
31 May 2015
£000
£000
Profit before taxation
1,507
1,571
Expected tax charge based on the standard rate of corporation tax in the
UK of 20% (2015:20.83%)
Expenses not deductible for tax purposes
Income not subject to taxation
Unrelieved losses
Utilisation of past losses
Current tax underprovided in previous years
Different tax rates applied in overseas jurisdictions
Total tax expense (see above)
301
10
(10)
-
(6)
55
118
468
327
19
61
-
111
518
The Group has UK capital losses carried forward of £13,085,000 and unrelieved UK trading losses of
£1,455,000. No recognition has been made of deferred tax assets in respect of these losses carried forward as
the directors believe it unlikely that there will be suitable profits to reverse these temporary differences in the
foreseeable future.
The deferred tax liability relates to a timing difference arising as a result of a difference in accounting under
German GAAP, and the movement in the year is analysed as follows:
Liability at 31 May 2015
Provision released in the year
Effect of movements in foreign exchange rates
Liability at 31 May 2016
33
Deferred tax
£000
244
(28)
14
230
Notes
forming part of the financial statements for the year ended 31May 2016
9 Earnings per share
Since there are no outstanding share options, there is no difference
between basic and diluted earnings per share.
Year ended
31 May 2016
Year ended
31 May 2015
Numerator
Profit for the year from continuing operations, being the earnings used in
earnings per share
£1,039,000
£1,053,000
Denominator
Weighted average number of shares used in earnings per share (excluding
treasury shares)
27,506,459
27,583,006
Basic and diluted earnings per share
3.8p
3.8p
10 Dividend
The directors have not proposed a dividend in respect of the year ended 31 May 2016 nor for the year ended
31 May 2015.
11 Property, plant and equipment
Cost
Balance at 31 May 2014
Additions
Disposals
Effect of movements in foreign exchange rates
Balance at 31 May 2015
Additions
Disposals
Effect of movements in foreign exchange rates
Balance at 31 May 2016
Accumulated depreciation
Balance at 31 May 2014
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange rates
Balance at 31 May 2015
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange rates
Balance at 31 May 2016
Land and
buildings
£000
Plant and
machinery
£000
1,911
95
(2)
(228)
1,776
3,697
-
248
5,721
1,502
203
(54)
(156)
1,495
459
(36)
101
2,019
Land and
buildings
£000
Plant and
machinery
£000
1,030
163
(52)
(114)
1,027
226
(35)
66
483
63
(2)
(60)
484
74
34
592
34
1,284
1,876
Total
£000
3,413
298
(56)
(384)
3,271
4,156
(36)
349
7,740
Total
£000
1,513
226
(54)
(174)
1,511
300
(35)
100
Notes
forming part of the financial statements for the year ended 31May 2016
11 Property, plant and equipment (continued)
Net book amount
At 31 May 2014
At 31 May 2015
At 31 May 2016
12 Goodwill
Balance at 31 May 2014
Effect of movements in foreign exchange rates
Balance at 31 May 2015
Effect of movements in foreign exchange rates
Balance at 31 May 2016
Land and
buildings
£000
Plant and
machinery
£000
1,428
1,292
5,129
472
468
735
Total
£000
1,900
1,760
5,864
£000
908
(106)
802
53
855
Goodwill arose in 1999 on the acquisition of the cash-generating unit Hemmers-Itex Textil Import Export
GmbH, whose recoverable amount has been determined from value-in-use calculations based on expected
cash flows. Principal assumptions underlying this calculation are the achievement of improved profit in 2017
reflecting planned volume growth and the cost savings flowing from capital expenditure in 2016, and
thereafter an annual growth rate into perpetuity of 3% in revenue, profits and working capital. Forecasted
operating margins and expenses are based on past experience and future expectations that reflect anticipated
economic and market conditions, and a pre-tax discount rate of 13% has been applied to anticipated cash
flows. On this basis, the recoverable amount of the cash-generating unit exceeds its carrying value with
considerable headroom and in view of this excess, the Directors do not consider the impairment calculation
to be unduly sensitive to changes to the above assumptions, and are of the opinion that no provision for
impairment is required.
13 Subsidiaries
The subsidiaries of Leeds Group plc, all of which were wholly owned in both 2016 and 2015, and which
have been included in these consolidated statements, are as follows:
Name
Country of
incorporation Nature of business
*† CLG Holding B.V.
* Hemmers-Itex Textil Import Export GmbH. Germany
Germany
* Leeds Property GmbH.
China
** Chinoh-Tex Ltd.
Holland
Holding company
Import, sale, and distribution of textiles
Currently inactive
Textile trading
* Wholly owned subsidiaries of Leeds Group plc.
† The voluntary liquidation of CLG Holding B.V was completed in April 2016.
** Wholly owned subsidiary of Hemmers-Itex Textil Import Export GmbH.
35
Notes
forming part of the financial statements for the year ended 31May 2016
14 Investment in joint venture
Investment in shares in KMR at cost
Share of post-tax profit of 5 months ended 31 May 2015
Share of post-tax profit of year ended 31 May 2016
Effect of movements in foreign exchange rates
At 31 May 2016
31 May 2016
£000
31 May 2015
£000
553
-
51
36
640
575
13
-
(35)
553
On 31 December 2014 the Group’s subsidiary Hemmers-Itex Textil Import/Export GmbH (“Hemmers”)
completed its purchase of 50% of the issued share capital of Stoff-Ideen-KMR GmbH (“KMR”) at a cost of
£383,000. Completion documentation included revised articles of KMR providing for its two partners to
share joint control of the company, its assets and its operations. Leeds Group accounts for this joint venture
under the equity method.
KMR is a retailer of fabric and haberdashery, operating a total of sixteen leased shops in various German
cities. Following the investment by Hemmers, KMR has changed its accounting year to 31 May, and in May
2015 the joint venture partners subscribed equally to an increase in share capital of £383,000 in total.
KMR had long been a customer of Hemmers, and this relationship continues on an arm’s length basis. In the
year ended 31 May 2016 Hemmers sales to KMR amounted to £1,282,000 (five months ended 31 May 2015
£528,000). For the purposes of reporting the Group’s share of the profit of the joint venture, the profit after
tax reported by KMR is adjusted for the movement in the period of the unrealised profit within KMR
inventories purchased from Hemmers.
Summarised unaudited accounts of KMR :
All values translated at £1 = € 1.305
Year ended
31 May 2016
£000
5 months ended
31 May 2015
£000
Year ended
31 Dec 2014
£000
Sales
Cost of sales
Gross margin
Depreciation
Other overheads
Interest
Tax
Profit after tax
Non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Non-current loans and borrowings
Trade and other payables
Current loans and borrowings
Corporation tax
Total liabilities
Net assets
6,734
(4,966)
1,768
(50)
(1,527)
(8)
(64)
119
2,346
(1,068)
1,278
(20)
(1,153)
(4)
(31)
5,517
(2,492)
3,025
(43)
(2,666)
(18)
(95)
70
203
31 May 2016
£000
277
2,366
132
35
2,810
31 May 2015
£000
126
1,923
81
78
2,208
31 Dec 2014
£000
97
1,681
69
25
1,872
426
728
169
-
1,323
1,487
250
562
-
28
840
1,368
304
554
81
18
957
915
36
Notes
forming part of the financial statements for the year ended 31May 2016
15 Inventories
Finished goods and goods for resale
7,765
7,258
The amount of inventories recognised as an expense during the year was £25,171,000 (2015: £24,439,000).
16 Trade and other receivables
31 May 2016
£000
31 May 2015
£000
Trade receivables
Less provision for impairment of trade receivables
Net trade receivables
Other receivables
Prepayments
Total trade and other receivables
Net trade receivables
Other receivables
Cash and cash equivalents (note 18)
Total financial assets classified as loans and receivables
31 May 2016
£000
31 May 2015
£000
5,537
(921)
4,616
1,051
112
5,779
5,397
(637)
4,760
1,159
81
6,000
31 May 2016
£000
31 May 2015
£000
4,616
1,051
1,612
7,279
4,760
1,159
2,027
7,946
In the opinion of the directors, the book value of assets classified as loans and receivables approximates to
their fair value.
Management monitors trade receivable accounts, and provisions for bad and doubtful debts are raised where
it is deemed appropriate.
As at 31 May 2016 trade receivables of £3,845,000 were not due for payment (2015: £3,968,000).
As at 31 May 2016 trade receivables of £644,000 were past due but not impaired (2015: £753,000). They
relate to customers that have not been able to pay to agreed terms in what are difficult trading conditions but
that the directors regard as good for their debts. The ageing analysis of these receivables is as follows:
Up to 3 months overdue
Overdue by 3 to 6 months
Overdue by 6 to 12 months
Total trade receivables past due but not impaired
31 May 2016
£000
31 May 2015
£000
519
96
29
644
669
30
54
753
Concentrations of credit risk with respect to trade receivables are limited given that the Group’s customer
base is large and unrelated and, due to this, the directors believe there is no further credit risk provision
required in excess of the normal provision for bad and doubtful receivables set out above.
37
Notes
forming part of the financial statements for the year ended 31May 2016
16 Trade and other receivables (continued)
As at 31 May 2016 trade receivables of £1,048,000 were past due and impaired (2015: £676,000). The
amount of the provision was £921,000 (2015: £637,000). These receivables relate to customers who have not
been able to pay to agreed terms in what are difficult trading conditions. In determining the amount of the
impairment, the directors have taken into account their knowledge of the customer base, the extent to which
receivables relate to goods delivered on terms that include retention of title, and the extent to which credit
insurance is in place. The ageing of these receivables is as follows:
Overdue by 3 to 6 months
Overdue by 6 to 12 months
Overdue by more than 12 months
Total trade receivables past due and impaired
31 May 2016
£000
31 May 2015
£000
72
29
947
1,048
46
37
593
676
Movements on the Group provision for impairment of trade receivables are as follows:
At 1 June
Provided during the year
Receivables written off during the year
Effect of movements in foreign exchange rates
At 31 May
31 May 2016
£000
31 May 2015
£000
637
287
(44)
41
921
679
127
(92)
(77)
637
The movement on the provision for impaired receivables has been included in the administrative expenses
line in the consolidated statement of comprehensive income.
Other classes of financial assets included within trade and other receivables do not contain impaired assets.
The carrying values of the Group’s trade and other receivables are denominated in the following currencies:
Euro
Chinese Yuan
US Dollar
Sterling
Total trade and other receivables
31 May 2016
£000
31 May 2015
£000
4,829
446
410
94
5,779
5,153
486
307
54
6,000
The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable set out
above.
17 Derivative financial instruments
Cash flow forward exchange contracts at fair value through profit and loss
Foreign exchange risk arises when individual Group operations enter into transactions denominated in a
currency other than their functional currency. Where the risk to the Group is considered to be significant, the
operation makes use of currency derivatives in order to provide an economic hedge over future transactions
and cash flows.
38
Notes
forming part of the financial statements for the year ended 31May 2016
17 Derivative financial instruments (continued)
At 31 May 2016 the maximum notional principal amount of outstanding forward exchange contracts was
£1,309,000 (2015: £3,453,000), and all these contracts reach maturity no later than 19 October 2016. These
forward contracts, when marked to market as at 31 May 2016, gave rise to a financial derivatives liability of
€52,000 (2015: asset €82,000). The movement in the year of €134,000 is a charge against profit which,
translated into sterling at the average rate for the year, equates to £99,000 (2015: credit £63,000). For the
purposes of the Consolidated Statement of Financial Position, the financial derivatives liability is translated
at closing rate, and equates to £40,000 (2015: asset £59,000) which, in the opinion of the Directors, is the fair
value of the derivative financial instruments.
18 Cash and cash equivalents
31 May 2016
£000
31 May 2015
£000
Cash on demand or on short-term deposit
1,612
2,027
Cash held by the Parent Company is deposited with Bank of Scotland, earning interest at variable rates. Cash
held by subsidiaries is mainly the excess of property related loans drawn down over amounts spent to date
and will be utilised over the coming months as projects are completed. In the opinion of the directors, the
carrying value of cash and cash equivalents approximates to its fair value.
19 Trade and other payables
Trade payables
Other tax and social security taxes
Accruals
Other payables
Total trade and other payables
31 May 2016
£000
31 May 2015
£000
1,394
54
380
455
2,283
1,785
48
344
489
2,666
Trade payables, other payables and accruals are non-interest bearing and principally comprise amounts
outstanding for trade purchases and continuing overhead expense. The average credit period taken is 29 days
(2015: 26 days). The Directors consider that the carrying amount of trade and other payables approximates to
their fair value.
20 Loans and borrowings
The book value of loans and borrowings are as follows:
31 May 2016
£000
31 May 2015
£000
Current
Secured bank loans and bill discounting facilities
Non - current
Secured bank loans
Total loans and borrowings
415
3,843
4,258
766
665
1,431
Since all short-term loans have less than three months to maturity, and the fixed interest rate attaching to
long-term loans is in line with market rates, it is the opinion of the directors that the fair value of loans and
borrowings approximates to their book values.
39
Notes
forming part of the financial statements for the year ended 31May 2016
20 Loans and borrowings (continued)
The Group’s loans and borrowings are exclusively within the accounts of Hemmers-Itex Textil Import Export
GmbH (Hemmers). They are denominated in Euros, and their principal terms are as follows:
Current loans and borrowings
At 31 May 2016 current loans and borrowings were €542,000 (2015: €1,065,000) and comprise discounted
bills amounting to €42,000 (2015: €65,000) and short-term loans of €500,000 (2015: €1,000,000). The
interest rate agreed for the discounted bills and short-term loans is 1.4% (2015: 1.4%). Current loans and
borrowings are secured on the inventories and trade receivables of Hemmers.
The current loans and borrowings of €542,000 are drawn down by Hemmers against short term borrowing
facilities of €7,500,000. Neither the Parent Company nor any of its subsidiaries other than Hemmers have
borrowing facilities. Following the recent review of bank facilities, the directors have a reasonable
expectation that these facilities will remain available for the foreseeable future.
Non-current loans and borrowings
A non-current loan was drawn down in 2007 from Kreissparkasse to finance the freehold extension of the
warehouse in Nordhorn that was at that time leased by Hemmers. In the year ended 31 May 2016 three
further loans were assumed or drawn down from Kreissparkasse to finance the purchase of the leased
warehouse and a further extension of it. Amounts outstanding at 31 May 2016 were:
Fixed
Interest
Rate
4.07%
3.40%
2.15%
1.65%
Loan 1
Loan 2
Loan 3
Loan 4
Non-current loans
Repayment
Profile
Final repayment
date
31 May 2016
£000
31 May 2015
£000
Equal monthly instalments
Single bullet repayment
Equal monthly instalments
Equal quarterly instalments
September 2027
March 2020
March 2018
September 2025
653
919
356
1,915
3,843
665
-
-
-
665
The carrying values of assets that the Group has pledged as collateral for
liabilities or contingent liabilities are as follows:
31 May 2016
£000
31 May 2015
£000
Inventories
Trade receivables
Freehold land and buildings
7,526
4,215
5,129
7,107
4,522
1,264
Total carrying value of assets pledged as collateral
16,870
12,893
The maturity profile of anticipated cash flows, including interest, in
respect of loans and borrowings is as follows:
31 May 2016
£000
31 May 2015
£000
Not later than 1 year
Later than one year and not later than five years
Later than five years
Less interest included in the above
Total loans and borrowings
787
2,538
1,377
4,702
(444)
4,258
846
294
464
1,604
(173)
1,431
40
Notes
forming part of the financial statements for the year ended 31May 2016
20 Loans and borrowings (continued)
Reconciliation of movements in net debt
(Decrease)/increase in cash and cash equivalents in the year
Translation gain/(loss) on cash and cash equivalents
Increase in loans
Translation (loss)/gain on loans
(Increase)/decrease in net debt
Net cash at the beginning of the year
Net (debt)/cash at the end of the year
Classification of financial liabilities
Trade payables
Accruals
Other payables
Loans and borrowings
Total of financial liabilities at amortised cost
31 May 2016
£000
31 May 2015
£000
(442)
27
(2,640)
(187)
(3,242)
596
(2,646)
289
(34)
(717)
143
(319)
915
596
31 May 2016
£000
31 May 2015
£000
1,394
380
455
4,258
6,487
1,785
344
489
1,431
4,049
2015
£000
3,792
21 Share capital
Issued and fully paid
2016
Number
2016
£000
2015
Number
At beginning and end of the year
31,600,000
3,792
31,600,000
At 31 May 2016, no options over ordinary shares of the Company were outstanding (2015: nil).
The Group has made purchases of its own ordinary shares of 12 pence each to be held in treasury as follows:-
Shares purchased as at 31 May 2015
Shares purchased in year ended 31 May 2016
Total shares purchased
Number of
shares
9,050,260
112,500
9,162,760
Cost
£000
1,774
42
1,816
Shares cancelled as at 31 May 2016 and 31 May 2015
(4,998,603)
(1,049)
Shares held in treasury at 31 May 2016
Shares held in treasury at 31 May 2015
4,164,157
4,051,657
767
725
The cost of cancelled shares has been calculated on a “first in, first out” basis, and the nominal value of
cancelled shares (£599,832) is shown in the consolidated statement of financial position as the capital
redemption reserve, a component of equity. The cost of shares held in treasury is shown in the consolidated
statement of financial position as the treasury share reserve, again as a component of equity.
41
Notes
forming part of the financial statements for the year ended 31May 2016
22 Leases
The Group holds no assets under finance leases. The Group owns the freehold title to the warehouse and
office facility at Nordhorn, Germany, part of which was previously leased prior to its purchase in 2016.
During the year it has also occupied other warehousing in Nordhorn on short-term leases that expired in June
2016, and occupies premises under a long-term lease in China that falls due for renewal in January 2017. The
Group holds operating leases in respect of plant and machinery used in Germany.
The total future values of minimum lease payments in respect of all operating leases are due as follows:
Not later than one year
Later than one year and not later than five years
Total future values of minimum lease payments
23 Commitments
31 May 2016
£000
31 May 2015
£000
96
79
175
273
719
992
At 31 May 2016 capital commitments authorised and committed amounted to £1,000,000 (2015: £nil). There
were no amounts authorised but not committed (2015: £nil).
24 Related party transactions
Mr Jörg Hemmers is an executive director of Leeds Group plc (“the Company”) and managing director of
Hemmers-Itex Textil Import Export GmbH (“Hemmers GmbH”), and is considered to be part of the key
management of the Group. During the year ended 31 May 2016 Hemmers GmbH paid rental of €185,000
(2015: €230,000) in respect of a warehouse and office facility to a company in which Mr Hemmers has a
financial interest. On 28 January 2016 the Company announced that Hemmers GmbH had agreed the
purchase of this property for a consideration of €2,700,000, which price was supported by an independent
professional valuation.
In December 2014 Hemmers GmbH acquired a 50% interest in Stoff-Ideen-KMR GmbH (“KMR”), a chain
of retail shops which sources its product in part from Hemmers GmbH. Details of this investment and of
sales made by Hemmers GmbH to KMR are disclosed in note 14 to the consolidated accounts. In addition,
KMR paid to Hemmers in the year €99,000 (2015 (5 months) €37,000) in respect of warehouse rent and
management fees.
The directors consider that all the above transactions have been made on an arm’s length basis.
42
Company Statement of Financial Position at 31 May 2016
Prepared under FRS 101 "Reduced Disclosure Framework"
Company number 00067863
Note
31 May 2016
£000
31 May 2015
£000
Fixed assets
Investments in subsidiary undertakings
Total fixed assets
Current assets
Debtors
Cash at bank and in hand
4
5
Creditors – amounts falling due within one year
6
Net current assets
NET ASSETS
Capital and reserves
Called up equity share capital
Capital redemption reserve
Treasury share reserve
Profit & loss account
CAPITAL AND RESERVES
7
3,370
3,370
2,328
548
2,876
(37)
2,839
3,367
3,367
1,851
1,051
2,902
(46)
2,856
6,209
6,223
3,792
600
(767)
2,584
6,209
3,792
600
(725)
2,556
6,223
The financial statements on pages 43 to 47 were approved and authorised for issue by the Board of directors on
27 July 2016 and were signed on behalf of the Board by: -
Jan G Holmstrom
Chairman
27 July 2016
The notes on pages 45 to 47 form part of these financial statements.
43
Company Statement of Changes in Equity
for the year ended 31 May 2016
At 31 May 2014
Loss for the year
Transaction with Shareholders:
Purchase of treasury shares
At 31 May 2015
Profit for the year
Transaction with Shareholders:
Purchase of treasury shares
Share
capital
Capital
redemption
reserve
Treasury
share
reserve
Retained
earnings
Total
equity
£000
£000
£000
3,792
-
-
£000
600
-
-
£000
(681)
2,851
6,562
-
(295)
(295)
(44)
-
(44)
3,792
600
(725)
2,556
6,223
-
-
-
-
-
28
28
(42)
-
(42)
At 31 May 2016
3,792
600
(767)
2,584
6,209
The following describes the nature and purpose of each reserve within equity:
Reserve
Share capital
Description and purpose
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.
Retained earnings
Cumulative net gains/losses recognised in the Company’s profit and loss
account after deducting the cost of cancelled treasury shares.
The notes on pages 45 to 47 form part of these financial statements.
44
Notes
forming part of the financial statements of the Company for the year ended 31May 2016
1 Accounting policies
Basis of preparation
In previous years the financial statements were prepared in accordance with applicable UK accounting
standards. In the current year the company has adopted FRS 100 and FRS 101. This change in the basis of
preparation has not materially altered the recognition and measurement requirements previously applied in
accordance with applicable accounting standards. Consequently, the principal accounting policies are
unchanged from the prior year. The change in basis of preparation has enabled the company to take advantage
of all of the available disclosure exemptions permitted by FRS 101 in the financial statements, the most
significant of which are summarised below.
• certain disclosures regarding the company's capital;
• certain disclosures regarding financial instruments;
• a statement of cash flows;
• the effect of future accounting standards not yet adopted;
• the disclosure of the remuneration of key management personnel; and
• disclosure of related party transactions with other wholly owned members of Leeds Group plc.
There have been no other material amendments to the disclosure requirements previously applied in
accordance with applicable accounting standards.
Investments
Investments in subsidiary undertakings are stated at cost less any impairment for permanent diminution in
value.
Leases
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Company (an
"operating lease"), the total rentals payable under the lease are charged to the profit and loss account on a
straight-line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of
the rental expense over the lease term on a straight-line basis.
Foreign Currency
The financial statements are presented in UK pounds sterling, which is the company's functional currency.
Transactions entered into by the Company in a currency other than sterling are recorded at the rates ruling
when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at
the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities
are recognised immediately in profit or loss.
Dividends
Dividends are recognised when they become legally payable.
2 Profit and loss account
A separate profit and loss account for the Company is not presented, in accordance with Section 408 of the
Companies Act 2006. The profit for the year for the Company dealt with in the consolidated financial
statements of the Company was £28,000 (2015 –loss £295,000).
The remuneration of the Auditors is disclosed in note 3 to the consolidated financial statements.
45
Notes
forming part of the financial statements of the Company for the year ended 31May 2016
3 Staff costs
The average number of persons employed in the year by the Company (including directors) was 4 (2015: 4).
Staff costs, including directors, comprise
Wages and salaries
Defined contribution pension cost
Employer’s national insurance contributions and similar taxes
Total staff costs
Year ended
31 May 2016
Year ended
31 May 2015
£000
£000
97
4
9
110
96
4
4
104
The remuneration of the directors is disclosed in note 5 to the consolidated financial statements.
Outstanding share options granted to employees or directors at 31 May 2016 were nil (2015: nil).
4 Investments in subsidiary undertakings
At 31 May 2015
Investment in Leeds Property GmbH
Capital repayment by CLG Holding BV
Realised loss on liquidation of CLG Holding BV
At 31 May 2016
Cost
Accumulated
impairment
Net carrying
amount
£000
4,599
20
(12)
(1,237)
3,370
£000
(1,232)
-
-
1,232
£000
3,367
20
(12)
(5)
-
3,370
Details of subsidiary undertakings are given in the Group Information section on page 3 and in note 13 to the
consolidated financial statements.
During the year ended 31 May 2016, the voluntary liquidation of the Company’s subsidiary CLG Holding
BV CLG was completed.
5 Debtors
Other debtors
Prepayments and accrued income
Amounts receivable from subsidiary undertakings
Total debtors
6 Creditors
Accruals and deferred income
Total creditors
46
31 May 2016
£000
31 May 2015
£000
6
17
2,305
2,328
2
16
1,833
1,851
31 May 2016
£000
31 May 2015
£000
37
37
46
46
Notes
forming part of the financial statements of the Company for the year ended 31May 2016
7 Share capital
Issued and fully paid
2016
Number
2016
£000
2015
Number
At beginning and end of the year
31,600,000
3,792
31,600,000
At 31 May 2016, no options over ordinary shares of the Company were outstanding (2015: nil).
Details of the shares held in treasury are disclosed in note 21 to the consolidated accounts.
2015
£000
3,792
8 Commitments
The Company holds no assets under finance leases.
The Company leases the property it occupies in Drighlington at an inclusive rent of £9,000 per annum. The
lease may be terminated by either party following three months’ notice in writing.
The annual lease commitments in respect of non-cancellable operating leases for land and buildings, based on
date of expiry, are as follows:
Within one year
31 May 2016
£000
31 May 2015
£000
2
2
2
2
There were no contracted capital commitments for the Company in either period.
47
Five Year Summary of Results and Capital Employed
Year ended
31 May
2016
£000
Year ended
31 May
2015
£000
Year ended
31 May
2014
£000
Year ended
31 May
2013
£000
Year ended
31 May
2012
£000
36,272
(28,563)
34,859
(27,066)
34,210
(26,440)
31,140
(24,350)
28,364
(22,080)
7,709
(6,165)
7,793
(6,171)
7,770
(6,088)
6,790
(5,267)
6,284
(5,108)
1,544
1,622
1,682
1,523
1,176
-
(88)
51
-
(64)
13
-
(71)
-
1,507
(468)
1,571
(518)
1,611
(532)
(745)
(83)
-
695
(412)
(236)
(122)
-
818
(315)
1,039
1,053
1,079
283
503
7,359
15,156
3,115
15,344
2,808
14,919
2,959
15,805
3,531
15,072
Results
Revenue
Cost of sales
Gross profit
Operating expenses
Profit from operations (excluding
impairment charges)
Impairment of available-for-sale
investments
Net finance expense
Share of post-tax profit of joint
venture
Profit before tax
Tax expense
Profit after tax
Assets employed
Non-current assets
Current assets
Total assets
22,515
18,459
17,727
18,764
18,603
Non-current liabilities
Current liabilities
(4,073)
(2,930)
(909)
(3,728)
(1,052)
(2,647)
(2,048)
(3,136)
(2,011)
(3,970)
Total liabilities
(7,003)
(4,637)
(3,699)
(5,184)
(5,981)
Net assets
15,512
13,822
14,028
13,580
12,622
Financed by
Equity
Key Statistics
15,512
13,822
14,028
13,580
12,622
Basic and diluted earnings per share
3.8p
3.8p
3.9p
1.0p
1.8p
Net assets per share
56.5p
50.2p
50.7p
49.1p
45.4p
48
Notice of Annual General Meeting
The one hundred and sixteenth annual general meeting of the Leeds Group plc (“the Company”) will be held at 12
noon on Thursday 13 October 2016 at the offices of BDO LLP at 1 Bridgewater Place, Water Lane, Leeds, LS11
5RU for the following purposes:
Ordinary business
To consider, and if thought fit, pass the following resolutions which will be proposed as ordinary resolutions:
1.
2.
3.
4.
To receive the report of the directors, the financial statements for the year ended 31 May 2016 and the report
of the auditors thereon.
To re-appoint Mr Johan Claesson as a director.
To re-appoint Mr Jan G Holmstrom as a director
To re-appoint BDO LLP as auditors of the Company from the conclusion of this meeting until the conclusion
of the next general meeting at which the financial statements are laid before the Company and to authorise
the directors to fix their remuneration.
Special business
To consider and, if thought fit, pass the following resolutions, of which resolution 6 will be proposed as an ordinary
resolution and resolutions 5 and 7 will be proposed as special resolutions:
5.
That in accordance with Article 21.1 of the Articles of Association of the Company and Part 18 of the
Companies Act 2006 (“the Act”) the Company be and is hereby granted general and unconditional authority
(pursuant to section 701 of the Act) to make one or more market purchases (as defined in section 693(4) of
the Act) of any of its own ordinary shares of 12 pence each on such terms and in such manner as the Board of
directors of the Company may from time to time determine provided that:
5.1
5.2
5.3
5.4
the maximum number of ordinary shares authorised to be purchased by this resolution is 765,000
being 2.42 per cent of the issued ordinary share capital at the date of this notice;
the maximum price that may be paid for such an ordinary share (exclusive of expenses) is an amount
equal to but not more than the higher of:
5.2.1
5.2.2
105 per cent of the average middle market quotations for an ordinary share in the Company
taken from the AIM appendix to The London Stock Exchange Daily Official List for the five
business days immediately preceding the date of purchase; and
the higher of the price of the last independent trade and the highest current independent bid
on the London Stock Exchange for an ordinary share in the Company at the time the
purchase is carried out;
the minimum price that may be paid for such an ordinary share (exclusive of expenses) is 5 pence
per share; and
unless previously revoked or varied, the authority conferred by this resolution shall expire on the
conclusion of the next annual general meeting of the Company held after the passing of this
resolution or the date which falls 15 months from the date of passing of this resolution (whichever
shall first occur) except that the Company may, before such expiry, enter into a contract for the
purchase of its own ordinary shares which may be completed by or executed wholly or partly after
the expiration of this authority and may purchase ordinary shares in pursuance of any such contract
as if the authority conferred by this resolution 4 had not expired.
49
Notice of Annual General Meeting (continued)
Special business (continued)
6.
7.
That the directors be and hereby are generally and unconditionally authorised for the purposes of section 551
of the Act to exercise all powers of the Company to allot shares in the Company and to grant rights to
subscribe for, or to convert any security into shares in the Company (Rights) up to an aggregate nominal
amount of £1,095,000. The authority conferred by this resolution shall expire on the conclusion of the next
annual general meeting of the Company held after the passing of this resolution or the date which falls 15
months from the date of passing of this resolution (whichever shall first occur), except that the Company
may, before such expiry, make an offer or agreement which would or might require shares to be allotted or
Rights to be granted after such expiry, and the directors may allot shares and grant Rights in pursuance of
such offer or agreement notwithstanding that the authority conferred by this resolution has expired. This
authority is in substitution for all previous authorities granted to the directors to allot shares and grant Rights,
but without prejudice to the allotment or grant of Rights already made or to be made pursuant to such
authorities.
That, subject to the passing of resolution 6 above, the directors be and hereby are empowered pursuant to
sections 570 and 573 of the Act to allot equity securities (within the meaning of section 560 of the Act)
wholly for cash pursuant to the authority conferred by the previous resolution or where the allotment
constitutes an allotment of equity securities by virtue of section 560(3) of the Act as if section 561 of the Act
did not apply to any such allotment, provided that this power shall be limited to the allotment of equity
securities:
7.1
in connection with an offer of such securities by way of a rights issue, open offer or other pre-
emptive issue or offer to holders of ordinary shares in proportion (as nearly as may be practicable) to
their respective holdings of such shares, but subject to such exclusions or other arrangements as the
directors may deem necessary or expedient in relation to fractional entitlements, treasury shares,
record dates or any legal, regulatory or practical problems under the laws of any territory, or the
requirements of any recognised regulatory body or stock exchange in any territory or any other
matter whatever; and
7.2
otherwise than pursuant to sub-paragraph 6.1 above up to an aggregate nominal amount of £189,000.
The authority conferred by this resolution shall expire on the conclusion of the next annual general meeting
of the Company held after the passing of this resolution or the date which falls 15 months from the date of
passing of this resolution (whichever shall first occur), except that the Company may, before such expiry
make an offer or agreement which would or might require equity securities to be allotted after such expiry
and the directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that
the power conferred by this resolution has expired.
By Order of the Board
Malcolm Wilson
Company Secretary
Old Mills
Whitehall Grove
Drighlington
Bradford
BD11 1BY
27 July 2016
50
Notice of Annual General Meeting (continued)
Notes
1.
Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001 (as amended) and section 360B
of the Companies Act 2006 (the Act”), only those shareholders registered in the register of members of the
Company at 6.00 pm on 11 October 2016 as holders of ordinary shares of 12p each in the capital of the
Company shall be entitled to attend and vote at the meeting in respect of the number of shares registered in
their name at that time. Changes to entries in the register of members of the Company after that time shall be
disregarded in determining the rights of any person to attend and vote at the meeting.
2.
3.
4.
A member entitled to attend and vote may appoint a proxy to attend, speak and to vote in his or her stead. A
member may appoint more than one proxy in relation to the meeting provided that each proxy is appointed to
exercise the rights attached to a different share or shares held by that member. A proxy need not be a member
of the Company. A form of proxy has been inserted into this annual report and accounts and contains notes
for its completion.
To be valid, the form of proxy and any power of attorney or the authority under which it is signed (or a
notarially certified copy of it) must be completed and lodged at the Registrars of the Company, Capita Asset
Services, PXS, 34 Beckenham Road, Beckenham, BR3 4TU not later than 12.00 noon on 11 October 2016.
Completion and return of a form of proxy does not preclude a member from subsequently attending and
voting at the meeting. If a member appoints a proxy or proxies and then decides to attend the annual general
meeting in person and vote using his poll card, then the vote in person will override the proxy vote(s). If the
vote in person is in respect of the member's entire holding, then all proxy votes will be disregarded. If,
however, the member votes at the meeting in respect of less than the member's entire holding, then if the
member indicates on his polling card that all proxies are to be disregarded, that shall be the case; but if the
member does not specifically revoke proxies, then the vote in person will be treated in the same way as if it
were the last received proxy and earlier proxies will only be disregarded to the extent that to count them
would result in the number of votes being cast exceeding the member's entire holding. If you do not have a
proxy form and/or believe that you should have one or if you require additional forms, please contact the
Company at its registered office.
5.
To change your proxy instructions simply submit a new proxy appointment using the methods set out above.
Note that the cut-off time for receipt of proxy appointments (see note 3 above) also applies in relation to
amended instructions; any amended proxy appointment received after the relevant cut-off time will be
disregarded.
Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions
using another hard-copy proxy form, please contact Capita Asset Services, PXS, 34 Beckenham Road,
Beckenham, BR3 4TU.
If you submit more than one valid proxy appointment, the appointment received last before the latest time for
the receipt of proxies will take precedence.
6.
In order to revoke a proxy instruction, you will need to inform the Company by sending a signed hard copy
notice clearly stating your intention to revoke your proxy appointment to Capita Asset Services. In the case
of a member which is a company, the revocation notice must be executed under its common seal or signed on
its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other
authority under which the revocation notice is signed (or a duly certified copy of such power or authority)
must be included with the revocation notice. The revocation notice must be received by Capita Asset
Services at PXS, 34 Beckenham Road, Beckenham, BR3 4TU no later than 12 noon on 11 October 2016. If
you attempt to revoke your proxy appointment but the revocation is received after the time specified then,
subject to paragraph 4 above, your proxy appointment will remain valid.
7.
Copies of the following documents will be available for inspection at the registered office of the Company
during normal business hours until the date of the annual general meeting and on that day, at the place of the
meeting from at least 15 minutes prior to the meeting until its conclusion:
a.
b.
Directors' letters of appointment
Current articles of association
51
Notice of Annual General Meeting (continued)
Notes (continued)
8.
9.
As at 27 July 2016 (being the last practicable business day prior to the publication of this notice) the
Company’s issued share capital consisted of 31,600,000 ordinary shares of 12 pence each, with one voting
right per share. There are 4,164,157 shares held in treasury, representing approximately 13.18 per cent of the
total issued share capital. Thus the total voting rights in the Company as at 27 July 2016 are 27,435,843.
If a corporation is a member of the Company, it may by resolution of its directors or other governing body
authorise one or more persons to act as its representative or representatives at the Meeting and any such
representative or representatives shall be entitled to exercise on behalf of the corporation all the powers that
the corporation could exercise if it were an individual member of the Company.
Corporate representatives should bring with them either an original or certified copy of the appropriate Board
resolution or an original letter confirming the appointment, provided it is on the corporation's letterhead and
is signed by an authorised signatory and accompanied by evidence of the signatory's authority.
10. A member may not use any electronic address (within the meaning of section 333(4) of the Act) provided in
this notice of meeting (or in any related or accompanying document, including the form of proxy) to
communicate with the Company for any purposes other than those expressly stated.
11.
Section 311A of the Act requires a traded company to make available on its website
a. notice of its Annual General Meeting
b. details of its issued share capital and of its members’ voting rights
c. members’ statements, members’ resolutions and members’ matters of business received by the
company after the date on which notice of its meeting was first given.
Although the Company, as an AIM quoted company, is not required to comply with the requirements of
Section 311A of the Act, it has nevertheless elected to do so. The Annual Report and Accounts, including the
notice of the Company’s AGM, can be found at the Company’s website www.leedsgroup.plc.uk. The
necessary details of its issued share capital and of its members’ voting rights are shown in note 8 above.
Upon receipt of any of the items detailed in c. above, the Company will promptly make them available on the
Documentation and Notifications page of its website.
52
Explanation of resolutions
Resolution number 1
The directors must present to shareholders the report of the directors and the accounts for the Company for the year
ended 31 May 2016. That report and those accounts, and the report of the Company's auditors on those accounts,
are set out on pages 8 to 48 of this document.
Resolution numbers 2 and 3
At each annual general meeting, one third of the directors of the Company for the time being (other than those
appointed since the last annual general meeting) are required to retire. If the number of relevant directors is not a
multiple of three, the number nearest to but not less than one third of the directors are required to retire. Any retiring
director is eligible for re-appointment. At this annual general meeting, Mr Johan Claesson and Mr Jan G Holmstrom
are the directors subject to retirement by rotation. Resolutions numbers 2 and 3 propose the re-appointment of Mr
Claesson and Mr Holmstrom respectively.
Resolution number 4
The auditors of the Company must be re-appointed at each meeting at which accounts are presented. Resolution 4
proposes the re-appointment of BDO LLP, who have indicated their willingness to be so re-appointed. The
resolution also follows past practice in giving the directors authority to agree the auditor’s remuneration.
Resolution number 5
The directors are seeking authority to enable the Company to purchase ordinary shares in the capital of the Company
by utilising some of the Company's available distributable profits. The directors would only consider effecting
purchases under this authority, if granted, where to do so would improve the Company's earnings per share and
would be in the best interests of shareholders generally. The authority would allow purchases of up to 765,000
ordinary shares, being approximately 2.42 per cent of the Company's ordinary share capital in issue as at the date of
this notice, at a minimum price per ordinary share of 5 pence and a maximum price per ordinary share of the higher
of 5 per cent above the average of the middle market quotations for an ordinary share as derived from the AIM
appendix of the London Stock Exchange Daily Official List for the five business days immediately preceding the
day on which any purchases are made and the higher of the last independent trade and the highest current
independent bid on the London Stock Exchange at the time the purchase is carried out. This authority expires at the
conclusion of the next annual general meeting of the Company or 15 months from the date of passing of the
resolution, whichever is the earlier.
Companies are permitted to retain any of their own shares that they have purchased as treasury stock, as an
alternative to cancelling them. Shares held in treasury may be subsequently cancelled, sold for cash or used to
satisfy share options and share awards under employee share schemes and provide the Company with additional
flexibility in the management of its capital base. Accordingly, if the directors exercise the authority granted by
resolution 5 to purchase ordinary shares, the Company will consider exercising the option of holding those ordinary
shares in treasury.
Resolution number 6
The directors are seeking authority to allot shares in the Company and to grant rights to subscribe for or to convert
any security into shares in the Company (Rights) up to an aggregate nominal amount of £1,095,000 being an
amount representing approximately 33 per cent of the Company's current issued share capital (excluding treasury
shares). It is not the directors' current intention to allot shares or to grant Rights pursuant to this resolution. This
authority expires at the conclusion of the next annual general meeting of the Company or 15 months from the date of
passing of the resolution, whichever is the earlier.
Resolution number 7
This resolution disapplies the statutory pre-emption rights which would otherwise apply on an issue of shares for
cash and is limited to allotments in connection with a rights issue or other pre-emptive offer where the securities
attributable to the interests of all shareholders are proportionate (as nearly as may be) to the number of shares held
and otherwise up to a further nominal amount of £189,000, being approximately 5 per cent of the Company's current
issued share capital (including treasury shares). This disapplication of the statutory pre-emption rights expires at the
conclusion of the next annual general meeting of the Company or 15 months from the date of passing of the
resolution, whichever is the earlier. This authority also covers the sale of treasury shares for cash.
It is the Company's intention to adhere to the provisions in the Pre-Emption Group's Statement of Principles
regarding cumulative usage of authorities within a three year rolling period where the principles provide that usage
in excess of 7.5 per cent should not take place without prior consultation with shareholders.
53
LEEDS
GROUP PLC
Registered in England and Wales
Registered Number 00067863
Registered Office
Old Mills
Whitehall Grove
Drighlington
Bradford
BD11 1BY
Tel: 0113 285 4324
Email: admin@leedsgroup.plc.uk
Website: www.leedsgroup.plc.uk