LEEDS
GROUP PLC
Annual Report and Accounts 2019
Contents
SGroup Information and Advisors
SStrategic Reports
Chairman’s Statement
Finance and Operating Review
Governance
Board of Directors
Chairman’s Corporate Government Statement
Corporate Governance Report
Directors’ Report
FFinancial Statements
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
6
7
8
17
20
25
26
27
28
29
55
56
57
60
61
Group Information and Advisers
Subsidiary Companies
Wholly owned subsidiary companies of Leeds Group plc (‘‘Leeds Group’’ or ‘‘the Group’’):
Hemmers-Itex Textil Import Export GmbH
‘‘Hemmers’’
Twentestrasse 1
48527 Nordhorn
Germany
Leeds Property GmbH
‘‘Leeds Properties’’
Twentestrasse 1
48527 Nordhorn
Germany
Director during the year
Jörg Hemmers
Director during the year
Jörg Hemmers
Principal activity
Import, sale & distribution of fabric
Principal activity
Property investment
Wholly owned subsidiary companies of Hemmers:
Stoff-Ideen-KMR GmbH
‘‘KMR’’
Twentestrasse 1
48527 Nordhorn
Germany
Director during the year
Jörg Hemmers
Principal activity
Retail textile trading
Group Advisers
Chinoh-Tex Ltd
‘‘Chinoh-Tex’’
F2, Building1, 111 Shennan Road
Xinzhuang Industry Area
201108 Shanghai
China
Director during the year
Jörg Hemmers
Principal activity
Textile trading
Solicitors
Financial Advisers
Auditors
Walker Morris LLP
33 Wellington Street
Leeds
LS1 4DL
Cairn Financial Advisers LLP
62-63 Cheapside
London
EC2V 6AX
BDO LLP
29 Wellington Street
Leeds
LS1 4DL
Solicitors
Registrars*
Principal Bankers
DLA Piper UK LLP
Princes Exchange
Princes Square
Leeds
LS1 4BY
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Lloyds Banking Group
1 Lovell Park Road
Leeds
LS1 1 NS
* Calls to the Link shareholder helpline 0871 664 0300 cost 12p per minute plus your phone company's access
charge. If you are outside the United Kingdom, please call +44 371 664 0300. Calls outside the United Kingdom
will be charged at the applicable international rate. Lines are open between 9.00 am – 5.30 pm, Monday to Friday
excluding public holidays in England and Wales.
1
Chairman’s Statement
It has been an extremely difficult and disappointing year for the Group. Trading conditions have continued to be
challenging with increased competition creating pressure on gross margins within both the wholesale and retail textile
markets. Hemmers-Itex Textile Import Export GmbH (‘Hemmers’), the main trading subsidiary, has been affected by
the deterioration in both its German and external markets.
On 5th July 2018, an additional investment was made in KMR so that the company became a wholly owned subsidiary
rather than a joint venture arrangement. KMR has a limited number of retail shops in Germany and the directors had
hoped that with full control of the business and synergies with Hemmers, that the company would contribute to increased
profits for the Group. As the retail market in Germany has deteriorated, KMR has also been affected with sales falling
during the year with no positive result contribution.
During the year the directors have therefore undertaken a further strategic review of all trading businesses within the
Group. The directors see the need to further concentrate on the Group’s core business, Hemmers, and have implemented
plans and cost cutting measures to ensure that the company is in a good position both to face the current challenging
market conditions and to respond to any improvement. A decision has been made to close Chinoh-Tex, the Chinese
subsidiary of Hemmers, as it is not generating adequate profits despite recent actions taken to reduce costs. A number
of measures have been implemented in KMR to further improve efficiencies and reduce the cost base, such as
implementation of new IT systems and changes to how shops are staffed and managed. Management will closely
monitor the performance of the KMR retail outlets and take the necessary actions to ensure satisfactory levels of profit
are achieved in each.
Trading conditions remain challenging and it will be a difficult year again in 2020, as it will take time for the decisions
taken this year to fully translate into improved results. Given the steps that have been taken during the year to improve
efficiencies which will reduce the cost level further and enable the Group to compete with a more aggressive sales
strategy to regain lost market share, the directors do believe the Group will return to acceptable levels of profit in the
forthcoming years, partly because of the potential for consolidation in the market as we expect some competitors to exit
the market.
On behalf of shareholders, I want to thank the management and staff of Hemmers, Chinoh-Tex and KMR who have all
continued to work tirelessly in very difficult conditions.
Jan G Holmstrom
Non-Executive Chairman
11 November 2019
2
Finance and Operating Review
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 2019, 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 £41,271,000 (2018: £41,538,000). Despite including KMR as a wholly owned subsidiary
for eleven months of the year, sales are slightly lower than last year. Market conditions for all trading subsidiaries have
been challenging and all companies have faced intense competition both domestically and internationally.
The Group’s operating loss of £1,022,000 includes a goodwill impairment charge of £982,000. (2018: profit
£1,152,000). Overheads were higher than expected and action has now been taken to realign those overheads to the
reduced turnover levels. The goodwill that arose when the Group acquired Hemmers in 1999 amounting to £982,000
has been provided for in the year as an impairment and shown as an exceptional item. Therefore, the Group loss before
tax this year is £1,250,000 (2018: profit £885,000).
The tax charge in the year was £43,000 (2018: £340,000). Loss per share was 4.7p (2018: earnings per share 2.0p).
Hemmers
This German-based business is engaged in the import, warehousing and wholesaling of fabrics.
Sales for the year were significantly lower than last year at £30,939,000 (2018: £38,299,000). The market in Germany
has fallen considerably during the year and Hemmers has also come under increased price pressure from competitors.
The gross margin percentage decreased slightly to 21.0% (2018: 22.1%) and that, together with the lower level of sales
volume, has resulted in a fall in gross profit. Despite a 6% reduction in overhead expenditure, the pre-tax profit reduced
to £239,000 (2018: £1,123,000). A strategic sales review coupled with a comprehensive cost review was undertaken
during the financial year to ensure the cost base for Hemmers is aligned to the current market conditions. Hemmers is
focused on growing its business domestically and internationally in both its wholesale and retail markets with a more
aggressive sales strategy. Hemmers will thereby be in a better position to compete in the marketplace next year to
regain lost market share, but it will take some time for the new strategies to be fully recognised.
Hemmers bank debt, net of cash, decreased in the year to £4,197,000 (2018: £4,963,000). This bank debt is secured on
the assets of Hemmers.
KMR
On 5 July 2018, KMR became a wholly owned subsidiary within the Group. Prior to that the Group owned 50% of
KMR and it was therefore accounted for as a joint venture. Up to that date, the Group’s share of the post-tax loss of
KMR in the year was £34,000 (2018: £107,000) and that amount is shown separately on the face of the profit and loss
account. From the date of acquisition, KMR has been fully consolidated into the Group accounts.
KMR is a retail business trading in Germany. KMR’s operating performance since acquisition has been well below
expectations. Sales for the company for the whole year were lower than last year at £8,656,000 (2018: £9,343,000).
The German retail market has fallen considerably during the year and therefore KMR sales have fallen also.
Costs were too high for the level of trading resulting in an increased loss for the year of £554,000 (2018: loss of
£210,000). The integration and efficiencies expected at the start of the financial year have not yet been delivered and
further actions have been taken to resolve the situation. Improved working efficiencies have been implemented
including the introduction of new working patterns which should ensure that KMR achieves a breakeven position next
year.
3
Finance and Operating Review (continued)
Chinoh-Tex
Chinoh-Tex is a textile trading subsidiary of Hemmers. It is based in Shanghai and has been trading for eleven years. It
purchases fabric from Chinese suppliers and in 2019 sold to customers in 52 countries. 43% of sales were made to EU
countries (2018: 43%). External sales revenue was considerably lower this year £2,366,000 (2018: £3,239,000). Gross
margins, however, improved to 19% (2018: 15%). In line with the cost review undertaken, overhead spending was
reduced as compared to last year £251,000 (2018: £388,000). Thus, despite the reduced level of sales Chinoh-Tex’s
result for the year was a pre-tax profit of £31,000 (2018: loss £86,000).
Chinoh-Tex has provided valuable assistance to its European parent with the purchasing, inspection and shipping of
material. However internal sales revenue this year, based on arms-length prices, amounted to just £204,000 (2018:
£556,000). With Chinoh-Tex also facing increased competition and decreasing sales as more customers choose to deal
directly with the manufacturers in China, the directors have decided to cease trading effective 28 August 2019 with the
liquidation completed by 31 December 2019. This will enable Hemmers management to entirely focus on developing
the Hemmers and KMR businesses.
Fixed Assets
Capital additions in the year amounted to £550,000 (2018: £400,000). The net book amount of tangible fixed assets in
the Consolidated Statement of Financial Position is £9,543,000 (2018: £8,319,000). The acquisition of KMR increased
fixed assets by £1,307,000, of which £864,000 related to freehold land and buildings.
Working Capital
Working capital which comprises inventories, trade and other receivables, and trade and other payables increased in the
year by £1,031,000 (2018: decreased £345,000). This is due mainly to the acquisition of KMR as KMR had working
capital of £1,761,000 at the date of acquisition. There were no major changes to the working capital requirements for
the Group during the year. The Group continues to monitor its working capital requirements within its current banking
facilities.
Net Asset Value
Net assets decreased in the year by £1,247,000 as follows:
At 31 May 2018
(restated based on shares in issue at 31 May 2019)
Loss after tax
Purchase of treasury shares
Translation differences
At 31 May 2019
Debt Profile
Net assets
£000
18,988
(1,293)
(9)
55
17,741
Per share
pence
69.4
(4.7)
-
0.2
64.9
The funding policy of the Group continues to be to match its funding requirement in trading subsidiaries in a cost-
effective fashion with an appropriate combination of short and longer-term debt. Property investments have been
financed partly by long term loans at fixed interest rates between 1.05% and 4.07%. Working capital finance, when
required, is via short term loans of three months currently attracting interest at rates of between 1.25% and 2.5%. Bank
debt in the subsidiaries is secured by charges on inventories, receivables and property and is without recourse to the
Parent Company.
Impairment reviews
In accordance with IAS 36, an annual impairment review was carried out for each cash-generating subsidiary to which
goodwill is allocated. Based on this review the directors considered that the goodwill of £982,000 arising on the
acquisition of Hemmers in 1999 was impaired and thus the goodwill was written off in the financial statements.
4
Finance and Operating Review (continued)
Principal risks and uncertainties
The Board has identified the main categories of business risk in relation to the Group’s strategic aims and objectives,
and has considered reasonable steps to prevent, mitigate and manage these risks. The principal risks identified are as
follows:
Funding risk
The Group has a combination of short-term borrowing facilities and longer-term loan agreements secured on Group
properties. The Group remains dependent upon the support of these funders and there is a risk that failure in a company
to meet banking covenants could have implications for the Group. Borrowing facilities are monitored regularly and the
facilities agreed are more than needed for the Group’s requirements. The Group has close working relationships with
their current funders but believe alternative banking funders could be secured if required.
Market risk
There is always the ongoing threat of reduced market demand. This has been seen this year and the Group continues to
strive to combat the reduced demand by looking at other markets both domestically and internationally and looking at
expanding its product ranges for example introducing home furnishing products.
The commercial risks of operating in the highly competitive European fabric market are limited by the fact that
Hemmers has a wide range of suppliers, and no customer accounts for more than 5% of revenues.
Foreign exchange risk
Most fabric purchased by Hemmers is paid for in US dollars, while the Euro is the principal currency in which Hemmers
sells its product. The Euro/dollar rate is of greater significance to Leeds Group than the strength of Sterling. The
Hemmers management continue to manage this transactional currency risk by a combination of forward exchange
contracts with reputable banks and sales price increases where necessary.
Brexit
Following the UK referendum result in favour of leaving the European Union (“EU”), the economic environment has
become much more uncertain. This uncertainty has continued as the UK looks to secure an acceptable deal and the
revised date of 31 October 2019 to leave the EU has been extended. The threat of no deal creates even more uncertainty
as does the continual deadline extensions. 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 3% only of Group revenue.
For this reason, the Directors do not believe that a material risk to Leeds Group will arise from the terms on which the
UK will, in the future, have access to EU markets, and vice versa. Leeds Group has loans denominated in euros which
do carry a currency risk and may be affected by Brexit, however, the directors do not believe the impact would have a
material effect on the Group’s results as the subsidiary trades in Euros and the directors consider this provides a natural
hedge.
The currency markets dislike the current air of uncertainty surrounding the current negotiations with regard to the UK
leaving the EU and sterling has weakened since the UK announced it was leaving the EU. This benefits Leeds Group
since, as the pound weakens, the value of the revenues, profits and net assets of foreign subsidiaries are increased in
sterling terms. This effect has been seen in both this year’s and last year’s trading and Statement of Financial Position.
Jan G Holmstrom
Chairman
11 November 2019
5
Board of Directors
Jan G Holmstrom (Non-Executive Chairman) (Age 66)
Jan has worked in the financial services sector during his entire career and has a wealth of experience working
internationally e.g. in the UK, Hong Kong and Sweden. Jan is Non-Executive Chairman of Johnson and Starley Limited,
Combat Heating Solutions Limited and a Non-Executive Director of International Fibres Group (Holdings) Limited.
Jan joined the Board of Leeds Group in November 2011 and was appointed Chairman in October 2014.
Jörg Hemmers (Executive Director) (Age 52)
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. Amongst his achievements is the successful integration in 2003 of Leeds Group’s
Itex business, based in Holland, to create Hemmers-Itex Textil Import Export GmbH. Jörg joined the Board of Leeds
Group in March 2015.
Johan Claesson (Non-Executive Director) (Age 68)
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). Johan joined the Board
of Leeds Group in September 2004.
David Cooper (Independent Non-Executive Director) (Age 61)
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.
6
Chairman’s Corporate Governance Statement
As Chairman of the Board my role is to develop the strategy for the Company together with the Board of Directors,
monitor the ongoing performance of the companies within the Group to ensure that they are meeting our requirements
and identify potential acquisitions targets.
In addition, my role also encompasses overseeing the functioning of the Board and its effectiveness, also to ensure
sound corporate governance practices are followed.
All the directors believe strongly in the importance of good corporate governance for the creation of shareholder value
over the medium to long term and to engender trust and support amongst the Group’s wider stakeholders.
In accordance with the changes to AIM Rule 26 the Company is now applying the revised Quoted Companies Alliance
(‘QCA’) Corporate Governance Code (‘QCA Code’) published in April 2018.
I work with key executives throughout the organisation to instil good corporate governance practices in accordance with
the QCA Code.
The Board monitors our corporate governance practices and will always implement improvements which further
enhance performance and/or benefit stakeholders.
Jan G Holmstrom
Non-Executive Chairman
11 November 2019
7
Corporate Governance Report
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.
The Board considers it appropriate to adopt the principles of the Corporate Governance Code for Small and Medium Sized
Companies issued by the Quoted Companies Alliance (“the QCA Code”) published in April 2018. Below we set out the
extent of compliance with the ten principles of the QCA Code. Where there are any areas of non-compliance, the steps
taken or intended to take in order to move to full compliance are explained:
Extent of
compliance
Fully
compliant
1
Principle
Establish a
strategy and
business
model which
promotes
long-term
value for
shareholders
Fully
compliant
2
Seek to
understand
and meet
shareholder
needs and
expectations
Application
The Company’s strategy is shaped by the executive Board and is set out in the
Annual Report and on the ‘About Leeds Group PLC’ website page. The
company’s shares are traded on the AIM market of the London Stock
Exchange.
The Group is a textiles business which designs, sources and sells fabric. It
sources mainly from the Far East and sells mainly to the European market into
three channels: Retail, Wholesale and Garment Manufacturing. In order to
service these markets, the Group has invested significantly in recent years in
warehousing and distribution facilities and into double folding plant and
machinery so as to provide a complete, rapid response, in-house service.
The Board believes that these investments promote long term value for
shareholders.
The strategic reports as presented by the directors in the Annual Report, further
explains the Company’s business model and strategy. The reports also include
the key performance indicators used by the Board to monitor business
performance and the risks and uncertainties facing the business and how these
are addressed.
The Board is committed to communicating openly with shareholders to ensure
that its strategy and performance are clearly understood. The Board
communicates with shareholders through the Annual Report and the Interim
Statement, trading and other announcement made on RNS and at the Annual
General Meeting (‘AGM’) where the Board encourages investors to participate.
The Company also maintains a website https://www.leedsgroup.plc.uk which
contains information on the Group’s business, corporate information and
specific disclosures required under AIM Rules and the QCA Code.
In this way the Directors have developed a good understanding of the needs and
expectations of all elements of the Company’s shareholder base.
There have been no significant votes against resolutions at previous AGMs.
As the companies within the Group expand, we continually review the risks
and uncertainties facing the Group to ensure we identify any new key risks and
how we implement appropriate action to manage these risks.
8
Corporate Governance Report (continued)
3
4
Take into
account wider
stakeholder
and social
responsibilities
and their
implications
for long-term
success
Embed
effective risk
management,
considering
both
opportunities
and threats,
throughout the
organisation
Fully
compliant
The Board recognises its responsibility under UK law to promote the success of
the Group for the benefit of its stakeholders and understands that the business
has a responsibility towards its stakeholders including shareholders, employees,
customers, suppliers, regulators and to the local community.
The Board sets standards across the Group and monitors these at regular Board
meetings. The Board is very conscious that the tone and culture it sets impacts
all aspects of the Group and the way employees behave and operate.
The Board encourages open dialogue and commitment to providing the best
service possible to the Group’s customers and considerate interactions with
suppliers.
The Company monitors feedback from all its stakeholders as reported by the
Group companies and the Board uses this to develop future policy. Being a
participant in the textile industry, the Board is keenly aware of environmental
and labour considerations and is actively working to ensure that it is at the
forefront of meeting the standard expected over the coming years.
Fully
compliant
The Board has an active program of working with all the Group companies to
assist with achieving goals and to discuss and resolve any issues that arise.
The Board is responsible for the Group’s system of internal controls and for
reviewing its effectiveness. The system is designed to manage, rather than
eliminate, the risk of failure to achieve the Group’s strategic objectives and can
only provide reasonable but not absolute assurance against material
misstatement or loss.
The Board monitors financial controls through the setting and approval of
annual budgets throughout the Group and the regular review of monthly
management accounts which are produced within three weeks of the month
end.
Each Group company has defined authorisation levels for expenditure, the
placing of orders and signing authorities. The daily cash movements of the
Group companies are reconciled and monitored by their finance departments.
The Group’s cash flow is monitored by the Board.
Each year on behalf of the Board, the Company Secretary attends audit review
meetings at which the auditors present their findings including a comprehensive
review of risks/potential risks which cover both financial and non-financial
issues potentially affecting a Group company.
Group Board meetings are held in Germany at least twice a year which include
a meeting with the Hemmers senior management team.
9
Corporate Governance Report (continued)
5 Maintain the
Board as a
well-
functioning,
balanced team
led by the
chair
Fully
compliant
The purpose of the Board is to ensure that the business is managed for the long-
term benefit of all shareholders, whilst at the same time having regard for all
stakeholders.
The Board has a formal schedule of matters reserved for its decisions as set out
in Principle 10 below. There are at least four full Board meetings spread across
each year which tie in as far as possible with the Group’s financial reporting
calendar. At least two meetings will be based at Hemmers. Additional meetings
are held as required.
The full Board is responsible and accountable to the shareholders for the
management and success of the Group and to provide effective controls to
assess and manage risks in the Company.
The Board currently comprises the Non-Executive Chairman, two other Non-
Executive Directors, one of whom is an independent non-executive director and
one executive director who is managing director of the main operating
business, Hemmers.
The Non-Executive Directors are considered to be independent of the
management. However, the Non-Executive Chairman and one other Non-
Executive Director are representatives of significant shareholders and so do not
meet the definition of Independent Non-Executive Director.
Each is aware of his statutory responsibilities to act in the interests of all
shareholders and they consider their interests to be aligned to promote the long-
term success of the company.
Thus, the Board only has one Independent Non-Executive Director rather than
two as recommended by the QCA code. The Directors believe that the current
Board structure has the necessary range of skills, objectivity and diversity to
manage what is a simple structure business and that to increase the number of
Independent Non-Executive Directors would add cost rather than benefit. The
Board continually keeps this position under review and has identified triggers
that it believes would lead to additional appointments. These include proposed
diversification into new business areas; a significant acquisition; significant
organic growth into new territories.
The Board has established procedures to identify and monitor potential or
actual conflicts of interest.
The Board is supported by the Audit, Remuneration and Nominations
Committees, each of which has access to information, resources and advice that
it deems necessary, at the Company’s cost, to enable the committee to
discharge its duties.
The Committees’ Terms on Reference are posted on the AIM rule 26 page of
Company’s website.
10
Corporate Governance Report (continued)
5 Maintain the
Board as a
well-
functioning,
balanced team
led by the
chair
The Remuneration Committee comprises the Non-Executive Directors and is
chaired by the Chairman. The Remuneration Committee reviews and if
appropriate sanctions remuneration proposals made by the executive Directors.
No director is permitted to participate in discussions or decisions concerning
his own remuneration. The Remuneration Committee meets as and when
necessary.
The Nominations Committee comprises all members of the Board and is
chaired by the Chairman. The Nomination Committee reviews and, if
appropriate, approves recommendations for the appointment of additional
Directors or replacement of current Directors and for succession planning for
the Company.
The Board and its Committees receive appropriate and timely information and
minutes are kept of all relevant committee meeting matters.
Any director can challenge proposals with decisions being taken after
discussion. Any director can ask for a concern to be formally noted. Specific
actions arising from meetings are agreed by the Board or relevant committee
and then followed up by management.
Directors have access to advice or services needed to enable them to carry out
their roles and duties.
In 2018/19 all directors attended the three Board meetings and six telephone
meetings.
In 2018/19 all non-executive directors attended the two audit committee
meetings and the one remuneration committee meeting.
All Directors are subject to reappointment by shareholders at the first Annual
General Meeting following their appointment and thereafter by rotation.
The Directors spend such time as is necessary to ensure that their roles and
duties are carried out effectively.
11
Corporate Governance Report (continued)
6
Ensure that
between them
the Directors
have the
necessary up-
to-date
experience,
skills and
capabilities
Fully
compliant
The skills and experience of the Board are set out in their biographical details
included within the Directors’ Report of the Company’s Annual Report. The
experience and knowledge of each of the Directors gives them the ability to
constructively challenge strategy and to scrutinise performance.
The Board comprises Directors with a range of different skills including
business and financial experience, IT experience and corporate finance
experience. All the Directors have considerable experience within the textile
and leather industry and therefore are well placed to offer challenge to the
Executive Director and Senior management of the textile trading companies.
In addition, the Company’s Non-Executive Directors have held senior
executive positions for a number of years in UK plc companies and therefore
are fully aware of their corporate responsibilities and the need to ensure
compliance with the AIM regulatory requirements.
The Directors of the Company and their responsibilities on the Board are:
Role of the Non-Executive Chairman – Jan Holmstrom:
The Non-Executive Chairman has overall responsibility for corporate
governance and in promoting high standards throughout the Company. As well
as leading and chairing the Board, the Non-Executive Chairman’s
responsibilities are:
• Committees are properly structured and operate with appropriate terms
of reference;
• The Company has a coherent strategy and sets objectives against this;
and
• There is effective communication between the Company and its
shareholders.
Jan Holmstrom has held a number of positions as Chairman of private and plc
companies and has considerable textile and corporate finance experience.
Role of the Group Finance Manager and Company Secretary – Dawn
Henderson:
The roles of Group Finance Manager and Company Secretary are combined.
The Board acknowledges the QCA guidelines on this matter and consider the
joint roles appropriate for the Company’s size.
The Group Finance Manager is responsible for providing financial oversight of
the Group, preparing the accounts, monitoring the performance of the Group
companies and reporting on financial matters to the Board. Providing financial
input on acquisitions.
The Company Secretary is responsible for providing clear and timely
information flow to the Board and its Committees and supports the Board on
matters of corporate governance and risk. The Company Secretary has direct
access to the Chairman on matters of Corporate Governance.
Dawn Henderson is a qualified Chartered Accountant who qualified with
KPMG in 1988. She has held various Finance Director and Company
Secretary roles both within the private and plc environment.
12
Corporate Governance Report (continued)
6
Ensure that
between them
the Directors
have the
necessary up-
to-date
experience,
skills and
capabilities
Fully
compliant
Role of the Independent Non-Executive Director – David Cooper:
The role of the Independent Non-Executive Director is to contribute
independent thinking and judgement through the application of their external
experience and knowledge, scrutinise the performance of the Executive
Director, provide constructive challenge and ensure that the Company is
operating within the governance and risk framework approved by the Board.
David Cooper is a qualified Chartered Accountant with considerable corporate
and accounting experience and has also worked in the textile industry for many
years.
Role of the Non-Executive Director – Johan Claesson:
The role of the Non-Executive Director is to scrutinise the performance of the
Executive Director, provide constructive challenge and ensure that the
Company is operating within the governance and risk framework approved by
the Board.
Johan Claesson has held a number of positions as Non-Executive Director of
private and plc companies and has also worked in the textile industry for many
years. He also has considerable experience in the IT and property.
Each director is responsible for maintaining the level of skill set required by the
role and this is achieved by continuing professional education, technical
updates from professional bodies and advisors and an active role assisting the
existing Group companies.
Whenever required the Directors seek legal, regulatory and audit advice from
external advisors.
The Board as a whole is well placed to implement the Company’s strategy
7
8
Evaluate
Board
performance
based on clear
and relevant
objectives,
seeking
continuous
improvement
Promote a
corporate
culture that is
based on
ethical values
and
behaviours.
Partially
compliant
There is no formal performance evaluation process in place currently. The
Directors will consider what performance evaluation framework is required for
the Group.
Responsibility for succession planning lies with the Nomination Committee.
The Committee is satisfied that the Board has the skills it presently requires.
The Board has considered the critical functions within each of the businesses to
ensure adequate cover exists for each position which would enable contingency
and succession to be managed in an appropriate timescale.
Fully
compliant
The Board recognises that its decisions will impact the corporate culture of the
Group as a whole and that this will affect the performance of the business. The
Board is also very conscious that the tone and culture that it sets will greatly
impact all aspects of the Group and the way employees behave and operate.
The importance of sound ethical values and behaviours is crucial to the ability
of the Group to successfully achieve its corporate objectives. Senior
management regularly visit group companies and employees are invited to
other group company offices.
The Board has regular interaction with Group company employees and
monitors corporate culture in this way. Additionally, it ensures its sound
ethical practices and behaviours are deployed at Group company meetings.
13
Corporate Governance Report (continued)
9 Maintain
Governance
structures and
processes that
are fit for
purpose and
support good
decision
making by the
Board
10 Communicate
how the
company is
governed and
is performing
by maintaining
a dialogue
with
shareholders
and other
relevant
stakeholders
Fully
compliant
The roles and responsibilities of each Director are set out in the response to
Principle 6.
The terms of reference of the Board committees are set out in response to
Principle 5.
There are a wide range of matters reserved for the Board. These include
strategy, finance, corporate governance, approval of significant capital
expenditure, appointment of key personnel and compliance with legal and
regulatory requirements.
The Company’s governance framework is reviewed to maintain the highest
levels of business performance.
Fully
compliant
The Board recognises that meaningful engagement with its shareholders is
integral to the continued success of the Group. The Board are kept informed of
the views of the shareholders through reports from the Independent Non-
Executive Director and Company Secretary.
The Board believes that the Annual Report, and the Interim Report published at
the half-year, play an important part in presenting all shareholders with an
assessment of the Group’s position and prospects. All reports and press releases
are published on the Group’s website.
The Annual General Meeting is the principal opportunity for private
shareholders to meet and discuss the Group’s business with the Directors.
There is an open question and answer session during which shareholders may
ask questions both about the resolutions being proposed and the business in
general. The Directors are also available after the meeting for an informal
discussion with shareholders.
The Committees of the Board have not published committee reports. They will
consider whether to do so in the future.
The Board is supported by the Audit and Remuneration Committees, each of
which has access to information, resources and advice that it deems necessary,
at the company’s cost, to enable the Committee to discharge its duties. These
duties are set out in the Terms of Reference which are available on the website.
The Audit Committee
The Audit Committee has met with the external auditors during the course of
the year to monitor progress and discuss any issues arising.
The Remuneration Committee
The Remuneration Committee reviews and determines on behalf of the Board
and shareholders of the Company the pay, benefits and other terms of service of
the executive Directors of the Company and the broad pay strategy with respect
to senior Company employees.
Remuneration Policy
The objective of the Company’s remuneration policy is to develop
remuneration packages which motivate Directors and support the business
objectives in the short, medium and long term; to align the interests of
executive Directors with the interests of long term shareholders; encourage
executives to operate within the risk parameters set by the Board and ensure
that the company can recruit and retain high quality executives through
packages which are fair and attractive but not excessive.
14
Corporate Governance Report (continued)
10 Communicate
how the
company is
governed and
is performing
by maintaining
a dialogue
with
shareholders
and other
relevant
stakeholders
Matters reserved for the Board
1. Management structure and appointments
• Senior management responsibilities
• Board and other senior management appointments or removals
• Board and senior management succession, training, development and
appraisal
• Appointment or removal of Company Secretary
• Appointment or removal of internal auditor
• Remuneration, contracts, grants of options and
incentive
arrangements for senior management
• Delegation of the board’s powers
• Agreeing membership and terms of reference of board committees and
task forces
• Establishment of managerial authority limits for smaller transactions
• Matters referred to the board by the board committees
2. Strategic/Policy considerations
Business strategy
•
• Diversification/retrenchment policy
•
Specific risk management policies including insurance, hedging,
borrowing limits and corporate security
• Agreement of codes of ethics and business practices
•
• Annual assessment of significant risks and effectiveness of internal
Receipt and review of regular reports on internal controls
controls
Calling of shareholders’ meetings
•
• Avoidance of wrongful or fraudulent trading
3. Transactions
• Acquisitions and disposals of subsidiaries or other assets over, say
•
•
5% of net assets/profits
Investment and other capital projects over a similar level
Substantial commitments including:
i. Pension funding
ii. Contracts in excess of one year’s duration
iii. Giving securities over significant Company assets (including
mortgages and charges over the Company’s property)
Contracts not in the ordinary course of business
•
• Actions or transactions where there may be doubt over property
• Approval of certain announcements, prospectuses, circulars and
similar documents
• Disclosure of directors’ interests
•
Transactions with directors or other related parties
15
Corporate Governance Report (continued)
10 Communicate
how the
company is
governed and
is performing
by maintaining
a dialogue
with
shareholders
and other
relevant
stakeholders
Matters reserved for the Board (continued)
4. Finance
•
•
Raising new capital and confirmation of major financing facilities
Treasury policies including foreign currency and interest rate
exposure
• Discussion of any proposed qualification to the accounts
•
Final approval of annual and interim reports and accounts and
accounting policies
• Appointment/proposal of auditors
•
Charitable and political donations
• Approval and recommendation of dividends
• Approval before each year starts of operating budgets for the year
and periodic review during the year
5. General
• Governance of company pension schemes and appointment of
company nominees as trustee
• Allotment, calls or forfeiture of shares
Notices of all general meetings for the past 5 years are contained within the
Annual Accounts. These are included on the Company’s website in the
Documents and Notifications section.
There have been no significant votes against any resolution proposed at a
general meeting in the past 5 years. Significant means more than 20% of those
who voted, voting against a resolution.
Jan G Holmstrom
Non-Executive Chairman
11 November 2019
16
Directors’ Report
The directors present their annual report and the audited financial statements for the year ended 31 May 2019.
Principal activities
Leeds Group plc has been established for more than a century and is incorporated in England and Wales under Company
Number 67863. Its principal country of operation is Germany.
For most of its history, the Group has been mainly engaged in textile processing, specialising in fabric printing and yarn
dyeing, and by 1996 had manufacturing operations in UK, Holland and Italy. In recent years, the European textile
manufacturing industry has contracted, with an ever-increasing proportion of European textile consumption being
sourced from the low wage economies of the Far East. In response, Leeds Group has ceased all manufacturing activities
and is today totally focused on the import and sale throughout the world of fabric imported chiefly from the Far East.
Leeds Group’s trading operations are conducted by Hemmers. Hemmers is based in Nordhorn, Germany and has a
German subsidiary, KMR based in Nordhorn and a Chinese subsidiary, Chinoh-Tex based in Shanghai.
Results and dividend
The Consolidated statement of comprehensive income for the year is set out on page 25.
Given the results of the financial year, the directors do not recommend the payment of a dividend in 2019 (2018: £nil).
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 Holmstrom and their remuneration for the year is set out in note 5 to the financial statements.
The directors retiring by rotation are David Cooper and Jörg Hemmers who, being eligible, offer themselves 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 share capital 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 11 November
2019.
Substantial shareholdings
The following shareholders held interests of 3% or more of the issued share capital of the Company as at 11 November
2019:
% 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
8.91
29.20
24.64
10.31
17
Directors’ Report (continued)
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.
Political and charitable contributions
The Group made no political contributions, nor any donations to UK charities in the years ended 31 May 2019 and 31
May 2018.
Leeds Group plc Ordinary shares of 12 pence each
The market value of Leeds Group shares between 1 June 2018 and 31 May 2019 ranged between 20p and 32p. The
average market value for the year was 27p, and at 31 May 2019 the market value was 21p (31 May 2018: 28.5p).
Purchase of own shares
The Company purchased 30,000 of its own shares during the year as shown in note 24. At the forthcoming AGM, the
Company will be seeking to renew its authority to purchase up to 15% of the ordinary shares in issue, assuming the
remaining authority is fully utilised. Shares will only be purchased if the Board believes it can take advantage of stock
market conditions to enhance returns for the remaining shareholders.
Employees
The directors acknowledge that the employees of the Group are key to the success of the business. Employment policies
are in place to ensure there is adequate training and development plans in place for all employees aligned to personal
appraisal schemes. The directors encourage management feedback at all levels and seek to ensure employees are
informed on all matters affecting them through regular management and departmental meetings.
It is the Group’s policy to give fair and full consideration to all applications for employment having regard to their
aptitudes and abilities including disabled employees. Should an employee become disabled, the Group would, where
practicable, seek to continue and arrange appropriate training.
Financial risk management policies
The Group’s activities are exposed it to a variety of financial risks which are set out in note 3 to the consolidated
financial statements.
Future developments
The Group is focused on developing and improving the Hemmers business. The acquisition of KMR should bring
economies of scale and working synergies within the two companies. In order to concentrate on these two trading
companies, Chinoh-Tex, the Chinese subsidiary will be closed during the next financial year.
Post-Balance sheet events
Details of events which have occurred since 31 May 2019 and up to the date of this report are disclosed in note 28 to
the consolidated financial statements.
Going concern
The directors have prepared forecasts for the period to 30 November 2020, which demonstrate a positive cash flow.
Based on the forecasts, 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.
18
Directors’ Report (continued)
Directors’ responsibilities
The directors are responsible for preparing the annual report and the Group and parent company 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.
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; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business.
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.
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 4 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
Dawn Henderson
Company Secretary
11 November 2019
Old Mills
Whitehall Grove
Drighlington
Bradford, BD11 1BY
19
Independent Auditor’s Report to the Shareholders of Leeds Group plc
Opinion
We have audited the financial statements of Leeds Group plc (the ‘parent company’) and its subsidiaries (the ‘group’)
for the year ended 31 May 2019 which comprise the Consolidated Statement of Comprehensive Income, Consolidated
Statement of Financial Position, Consolidated Cash Flow Statement, Consolidated Statement of Changes in Equity,
Company Statement of Financial Position, Company Statement of Changes in Equity, Notes to the Consolidated
Financial Statements and Notes to the Financial Statements of the Company, including a summary of significant
accounting policies.
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 the preparation of the parent company financial statements is applicable law and
United Kingdom Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework
(United Kingdom Generally Accepted Accounting Practice).
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s
affairs as at 31 May 2019 and of the group’s loss 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 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We are independent of the group and the parent company in accordance with
the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to
you where:
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months from the date when the financial statements are authorised
for issue.
•
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed
in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
20
Independent Auditor’s Report to the Shareholders of Leeds Group plc
(continued)
Key audit matter
How our audit addressed the key audit matter
Carrying amount of inventories
As detailed
the
in note 16 of
consolidated financial statements, the
group has £11.8m (2018: £9.6m) of
inventories at the year end. This has
increased since the prior year following
the acquisition of the KMR business.
Given the nature of the business, these
inventories include items which may be
held in stock for a significant period
before being sold. This creates a risk
that certain items of inventory may not
sell at prices above cost. As detailed in
note 2 of the group financial statements,
management
an
assessment of the estimated provision
required to write down inventory to net
realisable value.
therefore makes
the
value
Given
of
significant
inventories on the group statement of
financial position, and the estimation in
valuation, we identified this as a key
audit matter.
in note 14 of
Acquisition accounting
the
As detailed
consolidated financial statements, in
July 2018 the group became 100%
owners of KMR, previously a joint
venture entity.
Accounting for this transaction required
judgements in relation to the fair value
of the group’s original share in the joint
venture,
the
consideration paid for the acquisition
and the total fair value of assets and
liabilities acquired.
fair value of
the
Given the level of judgments involved
and the potential impact on the group’s
Statement of Comprehensive Income
and Statement of Financial Position we
identified this as a key audit matter.
For both trading subsidiaries, management calculates an inventory
provision in respect of slow moving items. They identify these items
based on stock turnover seen in the current year, and apply
provisioning rates, based on turnover rates.
We confirmed that the policy remained consistent with the previous
year. Based on our knowledge of the business and discussions with
management we considered whether there were any changes to the
nature of the business that would render the provisioning policies no
longer appropriate but did not identify any such factors.
We tested the integrity of management’s provision calculations by
confirming they were using underlying data correctly and that the
calculations were performed accurately.
To gain assurance over the reasonableness of provisioning rates used
by management, we performed a retrospective review of prior year
inventory items sold at below cost to confirm that the methodology
adopted yielded an adequate provision.
For a sample of stock items, we reviewed the post year-end sales
prices achieved to assess the net realisable value of the inventory and
the adequacy of the provisions estimated by management.
Based on the procedures performed we found management’s
inventory provision assumptions and applications thereof to be
appropriate.
We confirmed that the company’s proposed accounting for the
transaction was in accordance with IFRS 3 Combinations.
We obtained the sale and purchase agreement to confirm the
elements of consideration transferred to obtain control. We
considered management’s judgement in respect of the fair value of
assets transferred.
We challenged management’s assumptions regarding the fair value
of their original investment and also challenged management’s key
judgments in respect of the fair value of the assets and liabilities
acquired. This included obtaining third party evidence to support the
valuation of the property held by the entity. Based on the procedures
performed we found the acquisition accounting and its associated
judgements to be appropriately calculated and disclosed.
21
Independent Auditor’s Report to the Shareholders of Leeds Group plc
(continued)
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to
reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality
level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and
the particular circumstances of their occurrence, when evaluating their effects on the financial statements as a whole.
The materiality for the group financial statements as a whole was set at £125,000 (2018: £210,000). This was
determined with reference to a benchmark of revenue, of which this represents 0.3% (2018: 0.5%), which, in light of
the losses achieved in the current year, we consider to be one of the principal considerations for members of the parent
company in assessing the financial performance of the business.
The materiality for the parent company financial statements was set at £50,000 (2018: £98,000). This was determined
with reference to a benchmark of 0.8% of net assets, which we consider to be the principal consideration for members
of the company.
Component materiality for the subsidiaries considered significant components was set at between £65,000 and £110,000
(2018: one significant component £195,000). This was determined on a consistent basis with group materiality,
representing between 0.3% and 0.7% of revenue (2018: one significant component 0.5%).
Performance materiality has been set at 75% (2018: 75%) of the above materiality figures. This has been assessed on
criteria such as historic adjustment levels, complexity and controls of the group.
We agreed with the Audit Committee that we would report to the Committee all individual audit differences in excess
of £5,000 (2018: £8,400). We also agreed to report differences below this threshold that, in our view, warranted
reporting on qualitative grounds.
An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding of the group and its environment, including the group’s
system of internal control, and assessing the risks of material misstatement in the financial statements at the group level.
This includes certain risks that arise in subsidiaries but have a potentially material impact at group level.
There are five components within the group, including the parent company. The group and parent company was subject
to a full scope audit by the group audit team. The two significant components, based in Germany, were subject to full
scope audits by a BDO member firm acting as component auditor. This work was subject to a high level of involvement
from the group engagement team, including most notably risk identification, setting of materiality and audit response.
The group team was involved in these audits from planning through to completion, through engagement with both
component management and component audit team at various meetings and performance of on-site review of
component auditor files.
For the remaining non-significant components, the group engagement team performed analytical review procedures
applying the group materiality level.
22
Independent Auditor’s Report to the Shareholders of Leeds Group plc
(continued)
Other information
The directors are responsible for the other information. The other information comprises the information included in
the Annual Report and Accounts 2019, other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether there is a material misstatement in the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
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; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in
the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
•
adequate accounting records have not been kept, 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.
Responsibilities of directors
As explained more fully in the directors’ responsibilities set out on page 11, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
23
Independent Auditor’s Report to the Shareholders of Leeds Group plc
(continued)
Use of our report
This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
(Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Leeds
United Kingdom
11 November 2019
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
24
Consolidated Statement of Comprehensive Income
for the year ended 31 May 2019
Note
Year ended
31 May 2019
6
4
4
4
7
8
Revenue
Cost of sales
Gross profit
Distribution costs
Impairment of goodwill
Administrative expenses
Administrative costs
Other income
Operating (loss)/profit
Finance expense
Share of post-tax loss of joint venture
(Loss)/profit before tax
Tax charge
(Loss)/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
£000
41,271
(32,254)
9,017
(3,424)
(982)
(5,644)
(6,626)
11
(1,022)
(194)
(34)
(1,250)
(43)
(1,293)
55
55
Year ended
31 May 2018
£000
41,538
(32,526)
9,012
(2,722)
-
(5,188)
(5,188)
50
1,152
(160)
(107)
885
(340)
545
141
141
Total comprehensive (loss)/income for the year
attributable to the equity holders of the Parent
Company
(1,238)
686
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.
(Loss)/Earnings per share attributable to the equity holders of the Company
Note
Year ended
31 May 2019
Year ended
31 May 2018
Basic and diluted (loss)/earnings per share (pence)
9
(4.7p)
2.0p
The notes on pages 29 to 54 form part of these financial statements.
25
Consolidated Statement of Financial Position
at 31 May 2019
Company number 00067863
Assets
Non-current assets
Property, plant and equipment
Investment property
Intangible assets
Investment in joint venture
Total non-current assets
Current assets
Inventories
Trade and other receivables
Corporation tax recoverable
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
Provisions
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 2019
£000
31 May 2018
£000
11
12
13
15
16
17
19
21
8
20
21
23
24
24
24
8,534
1,009
72
-
9,615
11,760
4,382
733
1,065
17,940
27,555
(2,289)
-
(2,289)
(2,770)
(4,655)
(100)
(7,525)
(9,814)
7,755
564
1,057
734
10,110
9,621
6,252
386
572
16,831
26,941
(3,708)
(277)
(3,985)
(2,619)
(1,349)
-
(3,968)
(7,953)
17,741
18,988
3,792
600
(807)
2,545
11,611
17,741
3,792
600
(798)
2,490
12,904
18,988
The financial statements on pages 25 to 28 were approved and authorised for issue by the Board of Directors on 11
November 2019 and were signed on behalf of the Board by: -
Jan G Holmstrom
Chairman
The notes on pages 29 to 54 form part of these financial statements.
26
Consolidated Cash Flow Statement
for the year ended 31 May 2019
Note
Year ended
31 May 2019
£000
Year ended
31 May 2018
£000
Cash flows from operating activities
(Loss)/profit for the year
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of investment property
Amortisation of intangible assets
Finance expense
Impairment of goodwill
Net goodwill arising on acquisition
Movement in fair value of derivatives
Gain on sale of property, plant and equipment
Share of post-tax loss of joint venture
Tax charge
Cash flows from operating activities before
changes in working capital and provisions
Decrease in inventories
Decrease in trade and other receivables
Increase/(decrease) 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
Purchase of subsidiary net of cash
Proceeds from the sale of fixed assets
Net cash used in investing activities
Financing activities
Purchase of treasury shares
Bank borrowings repaid
Bank borrowings drawn down
Bank interest paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Translation (loss)/gain 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
11
12
13
7
4
14
18
15
8
16
17
20
8
11
14
24
21
21
7
19
19
The notes on pages 29 to 54 form part of these financial statements.
27
(1,293)
668
16
7
194
982
(7)
-
(5)
34
43
639
441
140
450
1,670
(430)
1,240
(550)
75
6
(469)
(9)
(1,358)
1,287
(194)
(274)
497
(4)
572
1,065
545
586
19
6
160
-
-
(48)
-
107
340
1,715
597
583
(835)
2,060
(411)
1,649
(400)
-
-
(400)
-
(2,102)
-
(160)
(2,262)
(1,013)
18
1,567
572
Consolidated Statement of Changes in Equity
for the year ended 31 May 2019
Share
capital
£000
Capital
redemption
reserve
£000
Treasury
share
reserve
£000
Foreign
exchange
reserve
£000
Retained
earnings
£000
Total
equity
£000
At 31 May 2017
3,792
600
(798)
2,349
12,359
18,302
Profit for the year
Other comprehensive income
Total comprehensive income
-
-
-
-
-
-
-
-
-
-
545
141
141
-
545
545
141
686
At 31 May 2018
3,792
600
(798)
2,490
12,904
18,988
Loss for the year
Other comprehensive income
Total comprehensive
income/(loss)
Transaction with
Shareholders:
Purchase of treasury shares
-
-
-
-
-
-
-
-
-
-
-
-
(1,293)
(1,293)
55
-
55
55
(1,293)
(1,238)
(9)
-
-
(9)
At 31 May 2019
3,792
600
(807)
2,545
11,611
17,741
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Share capital
The nominal value of issued ordinary shares in the Company.
Capital redemption reserve
Amounts transferred from share capital on redemption of issued shares.
Treasury share reserve
Cost of own shares held in treasury.
Foreign exchange reserve
Gains/losses arising on retranslation of the net assets of overseas
operations into sterling.
Retained earnings
Cumulative net gains/losses recognised in the consolidated statement
of comprehensive income after deducting the cost of cancelled treasury
shares.
The notes on pages 29 to 54 form part of these financial statements.
28
Notes
forming part of the financial statements for the year ended 31 May 2019
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.
Subsidiaries
Subsidiaries are entities controlled by the Group. 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 financial statements of subsidiaries are included
in the consolidated financial statements from the date on which control commences to the date on which control
ceases. All intercompany transactions, balances, income and expenses between Group companies are
eliminated on consolidation.
Business combinations
The acquisition method is used to account for all acquisitions. The cost of an acquisition is measured at the
fair values at the date of acquisition, which is the date on which control is transferred to the Group. The
consideration is calculated as the sum of the fair value of assets transferred and liabilities incurred.
The Group measures goodwill at the acquisition date as:
•
•
•
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interest of the acquiree: less
the net recognised amount of separately identifiable assets acquired, and liabilities assumed, measured
at their fair value.
When the excess is negative, a bargain price is recognised immediately in the profit and loss account.
Transaction costs that the Group incurs in connection with a business combination are expensed as incurred.
Going concern
The directors have, at the time of approving the financial statements, a reasonable expectation that the Company
and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus,
they continue to adopt the going concern bases of accounting in preparing the financial statements.
Changes in accounting policies
The directors have adopted the following accounting standards which became effective for periods beginning
on or after 1 January 2018:
IFRS 15, ‘Revenues from Contracts with Customers’ is effective for periods beginning on or after 1 January
2018. IFRS 15 introduces a five-step approach to the timing of revenue recognition based on performance
obligations in customer contracts. The effect of IFRS 15 has been assessed by the directors and they have
concluded that the adoption of the standard has not had any impact on the Group’s revenues, as the Group’s
revenues relates to the sale of fabric directly to retail stores and wholesale customers and thus revenue is
recognised at the point of sale. Previously revenue was recognised at the point of the transfer of the risks and
rewards of ownership. As this was also the point of sale, there has been no change to the point revenue has
been recognised.
There has been no financial impact of this accounting standard and therefore the 2018 comparative figures have
not been restated.
29
Notes
forming part of the financial statements for the year ended 31 May 2019
1
Accounting policies (continued)
Changes in accounting policies (continued)
IFRS 9 ‘Financial instruments’ replaces IAS 39 ‘Financial instruments: Recognition and Measurement’. The
standard is effective for accounting periods beginning on or after 1 January 2018. The standard covers three
elements:
–
Classification and measurement:
Changes to a more principle-based approach to classify financial assets as either held at amortised
cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss,
dependent on the business model and cash flow characteristics of the financial asset;
Impairment:
Moves to an impairment model based on expected credit losses based on a three-stage approach; and;
Hedge accounting:
The IFRS 9 hedge accounting requirements are designed to allow hedge accounting to be more closely
aligned with the Group’s underlying risk management.
–
–
The effect of IFRS 9 has been assessed by the directors and they have concluded that, since the Group does not
hold any complex financial instruments, all financial instruments will continue to be held at amortised cost. As
such, the adoption of the new standard has not had a material impact on the results or the financial position of
the Group. The approach to the measurement of impairment of trade receivables has changed, with the use of
the expected credit loss model, however, the directors consider the impact not to be material.
There has been no financial impact of this accounting standard and therefore the 2018 comparative figures have
not been restated.
As of the date of these financial statements, the following standards were in issue but not yet effective. The
Group has not applied these standards in the preparation of these financial statements and has not adopted any
new or amended standards early.
IFRS 16, ‘Leases’ is effective for periods beginning on or after 1 January 2019. The first set of interim accounts
that will be prepared in accordance with IFRS 16 will be 30 November 2019. The impact of the new standard
will bring operating lease arrangements on the balance sheet, with the right of use asset and corresponding
financial liability recognised on transition. Within the income statement rent expenses will be replaced by
depreciation and interest expenses. This will result in a decrease in operating expenses and an increase in
finance costs.
The Group has a material operating lease commitment as set out in note 25 and therefore the adoption of the
standard is expected to have a material impact on the Financial Statements of the Group. The directors have
decided they will apply the modified retrospective approach and therefore at the date of initial application an
amount equal to the lease liability, using appropriate incremental borrowing rates, will be recognised as a right
to use asset. The portfolio of leases consists of vehicle leases and property leases. For low value and short-
term leases, the directors have decided to apply the exemptions.
Assuming the Group’s lease commitments remain at a similar level to those at 31 May 2019 and the incremental
borrowing rate is 3%, the effect of adopting IFRS 16 is expected to result in the recognition of right to use
assets and lease liabilities of approximately £3,160,000 as at 1 June 2019.
Instead of recognising operating lease expenses for its operating leases, the Group will instead recognise
interest on its lease liabilities and depreciation on its right to use assets. The overall impact on the financial
results to 31 May 2020 is expected to be an additional charge to the profit and loss of approximately by £25,000.
If incremental borrowing increased or decreased by 1% the impact on the right to use assets and lease liabilities
would be approximately £83,000 and the impact on profit would be approximately £7,000.
30
Notes
forming part of the financial statements for the year ended 31 May 2019
1
Accounting policies (continued)
Revenue
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and is shown
net of Value Added Tax. The sale of goods is recognised at the point of acceptance by the customer this
reflecting fulfilment of the sole performance obligation to the customer. Contracts with wholesale customers
are typically fixed price based on agreed amounts and invoiced upon despatch of the goods in line with the
standard terms and conditions of the Group. The Group’s standard payment terms are between 30 and 60 days
following the date of invoice. Contracts with retail customers are based on a fixed price at the point of sale.
There are no long-term or financing arrangements in place across the Group.
The Group is assessed operationally and financially under two revenue streams wholesale and retail revenue
as detailed above. The directors do not therefore consider there to be a lower relevant level of revenue
disclosure than that disclosed the segmental analysis in note 6. There are no material concentrations of revenue
by customers.
Exceptional items
The Group seeks to highlight certain items as exceptional operating income or costs. These are considered
exceptional due to their size or nature and may include items such as restructuring costs, material profit or loss
on the sale of fixed assets, impairment of assets or gains or losses arising on the acquisition or disposal of
subsidiaries or joint ventures. Management believe that separate disclosure of these type of items is relevant to
understanding the Group’s underlying financial performance
Segmental reporting
The Board considers that the Group’s business comprises three operating segments, namely Hemmers Europe,
KMR 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.
Dividends
Interim dividends are recognised when paid and final dividends are recognised when approved by the
shareholders at the AGM.
Goodwill
Goodwill arising an acquisition of subsidiary undertakings, representing the excess of the fair value of the
consideration given over the fair value of identifiable assets and liabilities acquired, is capitalised as an
intangible asset. On capitalisation the goodwill is allocated to a specific cash generating unit to which it relates.
The goodwill is tested for impairment on an annual basis at the end of the financial year by reference to the
cash generating unit and is carried at cost less accumulated impairment losses. Any impairment is recognised
immediately in the profit and loss account and is not subsequently reversed.
Other intangible assets
Intangible assets purchased separately, such as trademarks, are capitalised at cost and amortised on a straight-
line basis. This is charged to operating expenses over the asset’s useful of 20 years.
Property, plant and equipment
Other than freehold land, all items of property, plant and equipment are carried at cost less accumulated
depreciation and any recognised impairment loss. 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 equipment
8 - 33 years
5 - 15 years
31
Notes
forming part of the financial statements for the year ended 31 May 2019
1
Accounting policies (continued)
Investment property
The Group applies the cost model to investment property. Investment property comprises property held by the
Group not occupied by the its trading subsidiaries for the purpose of earning rental income to cover costs.
Investment property is stated at depreciated cost. Depreciation is provided on the property to write off the
carrying value on a straight-line basis over the expected useful life of 33 years. Freehold land held as an
investment is not depreciated.
Impairment of non-current assets
At each financial year end, the Group assesses whether there is an indication that’s its assets have been
impaired. If there is an indication that its assets have been impaired, the recoverable amount is determined in
order to determine the extent of the impairment. If it is not possible to estimate the recoverable amount of the
individual asset, the recoverable amount of the cash generating unit to which it relates is determined.
The recoverable amount is defined as the higher of the fair value less costs to sell and value in use at that date.
Value in use is calculated as the expected future cash flows discounted on a pre-tax basis, using a pre-tax
discount rate that reflects the current market assessments of the time value of money and the risks specific to
that assets or cash generating unit. If the recoverable amount of the asset is less than the carrying value, the
carrying value is reduced to its recoverable amount, that reduction is recognised as an impairment loss.
An impairment loss relating to an asset carried at cost less accumulated depreciation or amortisation is
recognised immediately in the profit and loss account. If an impairment loss subsequently reverses, the carrying
value of the asset is increased to the revised recoverable amount but limited to the carrying value that would
have been determined had no impairment been recognised in prior years. A reversal of an impairment loss is
recognised in the profit and loss account.
Leases
Payments made under an operating lease are charged to profit and loss on a straight-line basis over the lease
term.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. Assets held under finance lease are recognised as assets or the Group at
their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments.
The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation so as to
achieve a constant rate of interest on the remaining balance.
Finance charges are charged to the profit and loss, unless they are directly attributable to qualifying assets, in
which they are capitalised.
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.
Retirement benefits
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 or China where pension arrangements are provided by the state.
Taxation
The charge for taxation is based on the results for the year and takes into account deferred taxation.
32
Notes
forming part of the financial statements for the year ended 31 May 2019
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.
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.
33
Notes
forming part of the financial statements for the year ended 31 May 2019
1
Accounting policies (continued)
Financial assets and liabilities
IFRS 9’Financial Instruments’ outlines the principles an entity must apply to measure and recognise financial
assets and liabilities. The Group recognises financial assets and liabilities when it becomes a party to the terms
of the contract, which is the settlement date.
Financial assets
Financial assets that are held to collect are categorised as amortised cost under IFRS 9. This includes the
Group’s trade and other receivables and cash and cash equivalents.
The measurement of these financial assets held at amortised cost remains unchanged since the introduction of
IFRS 9.
Trade receivables
Trade receivables that do not contain a significant financing component and are recognised initially at fair
value and thereafter at amortised cost less provision for impairment. Impairment provisions for current and
non-current trade receivables are recognised based on a simplified approach within IFRS 9 using a provision
matrix in the determination of the lifetime expected credit losses. During this process the probability of the
non-payment of the trade receivable is assessed. This probability is then multiplied by the amount of the gross
trade receivables to determine the expected credit loss for the trade receivables. For trade receivables, which
are reported net, such provisions are recorded in separate provision account with the loss being recognised
within administration cost in the consolidated statement of comprehensive income. On confirmation that the
trade receivable will not be collected, the gross carrying value is written off against the associated provision.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and on short term deposit, together with other short term,
highly liquid investments that are readily convertible into known amounts of cash and which are subject to an
insignificant risk of change in value.
Financial liabilities
The classification and measurement of financial liabilities in accordance with IFRS 9 remains largely
unchanged. All financial liabilities are measured at amortised cost and include trade and other payables and
bank borrowings.
Trade and other payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest rate.
Borrowings
Borrowings, which comprise bank loans are initially recognised at fair value, net of transaction costs incurred.
Borrowings are subsequently carried at amortised cost; any difference between proceeds (net of transaction
costs) and the redemption value is recognised in the consolidated statement of comprehensive income over the
period of the borrowings using the effective interest method.
Fess paid on the arrangement of the loan facilities and revolving credit facilities are recognised as transaction
costs over the life of the agreement.
34
Notes
forming part of the financial statements for the year ended 31 May 2019
1
Accounting policies (continued)
Share capital
The Group’s ordinary shares are classified as equity instruments.
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.
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.
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 intangible assets
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment loss. 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. A provision against the goodwill of £982,000 has been made during the year as it was considered
to be impaired as detailed in note 13.
(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. The values
of fixed asset are shown in note 11.
(iii) 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. The
values of stock are shown in note 16. A 1% increase in the inventory provision would equate to approx.
£126,000.
35
Notes
forming part of the financial statements for the year ended 31 May 2019
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 foreign exchange 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 current bank debt increased from £1,349,000 to £4,655,000 and the non-current
bank debt decreased from £3,708,000 to £2,289,000. 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.
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 payables
• Fixed rate bank loans
• Forward currency contracts
The Group had no forward contracts at either 31 May 2018 or 2019. All other financial assets and financial
liabilities are measured at amortised cost.
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
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 into contracts.
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.
36
Notes
forming part of the financial statements for the year ended 31 May 2019
3
Financial instruments - risk management (continued)
Credit risk (continued)
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 17 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 of 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.
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. There are no forward contracts outstanding at either year end.
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 £1,505,000 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
£1,837,000 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 21 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.
37
Notes
forming part of the financial statements for the year ended 31 May 2019
4
Operating (loss)/profit
Operating (loss)/profit is stated after charging:
Auditor’s fees
Statutory audit services
- Audit of the Parent Company and the consolidated accounts
- Audit of subsidiary companies
Non-audit related services
- Tax compliance
- Bank compliance
Total auditor’s fees
Staff costs
Depreciation
- Property, plant and equipment
- Investment property
Amortisation
Impairment of goodwill
Operating lease expense
- Plant and machinery
- Property
Operating lease income
- Property
Gain on disposal of property, plant and equipment
Gain on derivatives
Year ended
31 May 2019
Year ended
31 May 2018
£000
£000
34
60
7
3
104
21
34
7
-
62
8,788
6,496
668
16
7
982
159
1,178
11
5
-
586
19
6
-
168
94
50
-
48
5
Staff costs
The average monthly number of persons employed in the year by the Group (including directors) was as
follows:
Management
Sales and
customer service
Warehousing Administration
Group total
2019
2018
8
8
247
65
71
78
52
38
378
189
Staff costs, including directors, comprise
Wages, salaries and directors’ fees
Defined contribution pension cost
Employer’s national insurance contributions and
similar taxes
Year ended
31 May 2019
Year ended
31 May
£000
7,353
1
1,434
2018
£000
5,447
1
1,048
Total staff costs
8,788
6,496
38
Notes
forming part of the financial statements for the year ended 31 May 2019
5
Staff costs (continued)
Included in employer’s national insurance contributions and similar taxes are the amounts paid by Hemmers
to fund employees’ pension entitlements provided by the German state.
Executive director
Jörg Hemmers
Non -executive directors
Johan Claesson
David Cooper
Jan G Holmstrom
Salary &
Fees
Bonus
Taxes
£000
£000
£000
Year ended
31 May
Year ended
31 May
2019
£000
2018
£000
224
21
13
258
20
15
31
-
-
-
-
-
-
20
15
31
290
21
13
324
239
16
15
27
297
Jörg Hemmers is Managing Director of Hemmers, a wholly owned subsidiary of Leeds Group, and based in
Germany. No recharge of his salary is made to the Parent Company. The fees relating to Johan Claesson and
Jan Holmstrom are paid, respectively, to Johan & Marianne Claesson Aktiebolag and Somerset Aktiebolag
who invoice the Company for the services of these directors. Their costs include VAT unrecoverable in the
UK.
Outstanding share options granted to employees or directors at 31 May 2019 were nil (2018: 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 6.
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 2019
Year ended
31 May 2018
£000
290
21
13
324
£000
276
8
13
297
The Group’s trading businesses are Hemmers, and its two trading subsidiaries KMR and Chinoh-Tex.
Hemmers is incorporated in Germany and is engaged in the import and distribution of fabric from its principal
place of business in Nordhorn, Germany. KMR is also incorporated in Germany and is a retailer of fabric and
haberdashery, operating leased shops in various German cities. Chinoh-Tex 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 three
operating segments, namely Hemmers, KMR and Chinoh-Tex. These three segments report to the Board under
local GAAP, and the adjustments required to permit the Group to report under IFRS are made centrally.
The Parent Company is not in itself an operating segment, but its net costs are shown in order that the segmental
information presented to the Board can be reconciled to the Consolidated Statement of Comprehensive Income.
39
Notes
forming part of the financial statements for the year ended 31 May 2019
6
Segmental information (continued)
The following tables set out a segmental analysis of the Group’s operations.
Year ended
31 May 2019
Hemmers
KMR
£000
£000
Chinoh-
Tex
£000
Inter
segmental
£000
Total
Hemmers
£000
Parent
Company
£000
Goodwill
Impairment
£000
Total
Group
£000
External revenue
Inter-segmental
revenue
Cost of sales
Gross profit/(loss)
Distribution costs
Admin expenses
Other income
Operating
profit/(loss)
Finance expense
Internal interest
Share of JV loss
30,939
1,852
7,966
-
2,366
-
204 (2,056)
41,271
-
(25,911) (6,092)
(2,093)
1,842
(32,254)
-
-
-
-
-
41,271
-
-
(32,254)
6,880
1,874
(2,027) (1,202)
(4,231) (1,119)
-
11
477
(195)
(251)
-
(214)
-
193
-
9,017
(3,424)
(5,408)
11
-
-
(236)
-
-
-
(982)
-
9,017
(3,424)
(6,626)
11
633
(447)
31
(21)
196
(236)
(982) (1,022)
(155)
(239)
(34)
(39)
-
-
-
-
-
-
-
-
(194)
(239)
(34)
-
239
-
-
-
-
(194)
-
(34)
Profit/(loss) before tax
205
(486)
31
(21)
(271)
3
(982)
(1,250)
At 31 May 2019
Hemmers
KMR
£000
£000
Chinoh-
Tex
£000
Inter
segmental
£000
Total
Hemmers
£000
Parent
Company
£000
Total
Group
£000
Total assets
22,330
4,609
838
(331)
27,446
109
27,555
Total liabilities
(10,130)
(2,450)
(195)
-
(12,775)
2,961
(9,814)
Total net assets
12,200
2,159
643
(331)
14,671
3,070
17,741
Year ended
31 May 2018
Hemmers
£000
Chinoh-
Tex
£000
Inter
segmental
£000
Total
Hemmers
£000
Parent
Company
£000
Total
Group
£000
External revenue
Inter-segmental revenue
Cost of sales
38,299
1
(29,839)
3,239
556
(3,231)
-
(557)
544
41,538
-
(32,526)
-
-
-
41,538
-
(32,526)
Gross profit/(loss)
Distribution costs
Admin expenses
Other income
Operating profit/(loss)
Finance expense
Internal interest
Share of JV profit
8,461
(2,460)
(4,530)
50
1,521
(160)
(238)
(107)
564
(262)
(388)
-
(86)
-
-
-
(13)
-
-
-
(13)
-
-
-
9,012
(2,722)
(4,918)
50
1,422
(160)
(238)
(107)
-
-
(270)
-
(270)
-
238
-
9,012
(2,722)
(5,188)
50
1,152
(160)
-
(107)
Profit/(loss) before tax
1,016
(86)
(13)
917
(32)
885
40
Notes
forming part of the financial statements for the year ended 31 May 2019
6
Segmental information (continued)
At 31 May 2018
Hemmers
£000
Chinoh-
Tex
£000
Inter
segmental
£000
Total
Hemmers
£000
Parent
Company
£000
Goodwill
£000
Total
Group
£000
Total assets
24,386
1,463
(37)
25,812
149
980
26,941
Total liabilities
(10,189)
(414)
-
(10,603)
2,927
(277)
(7,953)
Total net assets
14,197
1,049
(37)
15,209
3,076
703
18,988
Disaggregation of revenue is shown by destination as follows:
31 May 2019
£000
31 May 2018
£000
UK
Germany
Rest of EU
Total EU
Rest of Europe
Total Europe
North America
Asia
Oceania
South America
Africa
Total revenue
Other information:
Additions
Property, plant &
equipment
Depreciation
Property, plant &
equipment
Investment property
Amortisation
Intangible assets
1,403
27,053
9,048
37,504
2,285
39,789
334
173
775
143
57
1,365
23,410
11,899
36,674
2,598
39,272
712
363
956
232
3
41,271
41,538
Hemmers
£000
Year ended 31 May 2019
KMR
£000
Chinoh-Tex
£000
Year ended 31 May 2018
Group
£000
Hemmers
£000
Chinoh-Tex
£000
Group
£000
466
84
-
550
398
2
400
513
16
131
-
24
-
668
16
557
19
7
-
-
7
6
29
-
-
586
19
6
41
Notes
forming part of the financial statements for the year ended 31 May 2019
7
Finance income and expense
Finance expense
Interest paid on bank overdrafts and loans
Net finance expense recognised in comprehensive income
8
Tax charge
Current tax charge
Tax of overseas operations on profits for the year
Adjustments for under provision in prior years
Total current tax charge
Deferred tax credit for the year
Total tax charge
Year ended
31 May 2019
Year ended
31 May 2018
£000
£000
(194)
(194)
(160)
(160)
Year ended
31 May 2019
Year ended
31 May 2018
£000
£000
164
157
321
(278)
43
340
-
340
-
340
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:
(Loss)/profit before taxation
Expected tax charge based on the standard rate of
corporation tax in the UK of 19% (2018:19%)
Expenses not deductible for tax purposes
Unrelieved losses
Utilisation of past losses
Adjustments for under provision in prior years
Different tax rates applied in overseas jurisdictions
Total tax charge
Year ended
31 May 2019
Year ended
31 May 2018
£000
(1,250)
(238)
17
104
(3)
157
6
43
£000
885
168
20
43
-
-
109
340
The Group has UK capital losses carried forward of £13m and unrelieved UK trading losses of £1m. 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 sufficient profits to reverse these 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 2018
Credit to income statement
Effect of movements in foreign exchange rates
Liability at 31 May 2019
42
Deferred tax
£000
277
(278)
1
-
Notes
forming part of the financial statements for the year ended 31 May 2019
9
(Loss)/Earnings per share and Net asset per share
Earnings per share
Year ended
31 May 2019
Year ended
31 May 2018
Numerator
(Loss)/profit for the year from continuing operations, being the earnings
used in earnings per share
£(1,293,000)
£545,000
Denominator
Weighted average number of shares used in earnings per share (excluding
treasury shares)
27,330,788
27,350,843
Basic and diluted (loss)/earnings per share
(4.7)p
2.0p
Since there are no outstanding share options, there is no difference between basic and diluted earnings per
share.
Net assets per share
Numerator
Net assets
Denominator
Number of shares (excluding treasury shares)
Net assets per share
10 Dividend
Year ended
31 May 2019
Year ended
31 May 2018
£17,741,000
£18,988,000
27,320,843
27,350,843
64.9p
69.4p
The directors have not proposed a dividend in respect of the year ended 31 May 2019 nor for the year ended 31
May 2018.
11 Property, plant and equipment
Cost
Balance at 31 May 2017
Freehold land and
buildings
£000
Plant and
equipment
£000
Total
£000
7,943
2,573
10,516
Additions
Effect of movements in foreign exchange rates
13
66
387
23
400
89
Balance at 31 May 2018
8,022
2,983
11,005
Acquisition of subsidiary
Additions
Disposals
Effect of movements in foreign exchange rates
406
31
-
50
443
519
(78)
17
849
550
(78)
67
Balance at 31 May 2019
8,509
3,884
12,393
43
Notes
forming part of the financial statements for the year ended 31 May 2019
11 Property, plant and equipment (continued)
Accumulated depreciation
Balance at 31 May 2017
Depreciation charge for the year
Effect of movements in foreign exchange rates
Freehold land
and buildings
£000
Plant and
equipment
£000
922
261
5
1,722
325
15
Balance at 31 May 2018
1,188
2,062
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange rates
261
-
5
407
(77)
13
Total
£000
2,644
586
20
3,250
668
(77)
18
Balance at 31 May 2019
1,454
2,405
3,859
Net book amount
At 31 May 2017
At 31 May 2018
At 31 May 2019
12 Investment property
7,021
6,834
7,055
851
921
1,479
7,872
7,755
8,534
Freehold land and buildings
£000
Cost
Balance at 31 May 2017
Effect of movements in foreign exchange rates
Balance at 31 May 2018
Effect of movements in foreign exchange rates
Acquisition of subsidiary
Balance at 31 May 2019
Accumulated depreciation
Balance at 31 May 2017
Depreciation charge for the year
Effect of movements in foreign exchange rates
Balance at 31 May 2018
Depreciation charge for the year
Effect of movements in foreign exchange rates
Balance at 31 May 2019
Net book amount
At 31 May 2017
At 31 May 2018
At 31 May 2019
44
580
3
583
4
458
1,045
-
19
-
19
16
1
36
580
564
1,009
Notes
forming part of the financial statements for the year ended 31 May 2019
13
Intangible assets
Balance at 31 May 2017
Amortisation
Effect of movements in foreign exchange rates
Balance at 31 May 2018
Amortisation
Impairment loss
Effect of movements in foreign exchange rates
Balance at 31 May 2019
Goodwill
£000
Trademarks
£000
972
-
8
980
-
(982)
2
-
83
(6)
-
77
(7)
-
2
72
Total
£000
1,055
(6)
8
1,057
(7)
(982)
4
72
Goodwill arose in 1999 on the acquisition of the cash-generating unit Hemmers, whose recoverable amount has
been determined from value-in-use calculations based on budgeted cash flows. Principal assumptions underlying
this calculation are the achievement of improved profit in 2020 reflecting planned volume growth and the cost
savings flowing from capital expenditure in previous years, and thereafter an annual growth rate into perpetuity
of 2% in revenue, profits and working capital reflecting the expected long term growth rate of the sector.
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. Following the reduced trading performance of Hemmers this year and the expected time for the
company to improve trading to achieve previous levels of income the forward cash flows are considerably
reduced than those of previous figures used in past years. On this basis, the recoverable amount of the cash-
generating unit does not exceed the carrying value, and therefore the directors consider that a provision for
impairment is required.
14 Subsidiaries
The subsidiaries of Leeds Group which have been included in these consolidated statements, are as follows:
Name
Country of
incorporation Nature of business
* Hemmers-Itex Textil Import Export GmbH.
* Leeds Property GmbH.
** Chinoh-Tex Ltd.
** KMR GmbH.
Germany
Germany
China
Germany
Import, sale, and distribution of textiles
Property investment
Textile trading
Retail trading
* Wholly owned subsidiaries of Leeds Group.
** Wholly owned subsidiaries of Hemmers.
The registered addresses of these subsidiaries are shown on page 1.
On 5 July 2018 Hemmers became 100% owners of KMR following the buyout of our joint venture partner. KMR
is a retailer of fabric and haberdashery, operating shops located throughout Germany. The consideration was
€500,000 (£440,000) comprising €250,000 (£220,000) paid in cash and the balance being three shops at a value
of €250,000 (£220,000). Hemmers invested a further €370,000 (£326,000) in the company during the period.
The joint venture investment was accounted for in the consolidated financial statements of Leeds Group using
the equity accounting method and at 5 July 2018, was held at a carrying value of 697,000 as shown in note 15.
45
Notes
forming part of the financial statements for the year ended 31 May 2019
14 Subsidiaries (continued)
Accounting for the step acquisition of KMR requires the directors to fair value the original 50% joint venture
investment, with the resulting loss debited to the profit and loss in administrative costs as follows:
As at 5 July 2018:
Fair value share of original joint venture
Carrying value of investment in consolidated financial statements
Loss on fair valuing of joint venture investment
€000
£000
650
792
142
572
697
125
Upon obtaining 100% control of the KMR entity, the cost of the investment for the purposes of determining the
goodwill is calculated as follows:
Fair value share of original 50% joint venture
Fair value of the consideration paid to obtain control
Cost of investment
The net assets of the newly acquired subsidiary are as follows:
Fair value of net assets as at 5 July 2018:
Fixed assets
Investment property
Stock
Cash
Debtors
Creditors
Loans
€000
650
500
£000
572
440
1,150
1,012
€000
£000
520
965
3,138
335
259
(1,731)
(2,186)
849
458
2,762
295
228
(1,524)
(1,924)
Fair value of assets acquired
1,300
1,144
The directors consider that the book values of the new assets acquired approximate to the fair value of the new
assets and that there are no separately identifiable intangible assets.
Goodwill on consolidation is calculated as follows:
Cost of investment
Fair value of net assets acquired
Negative goodwill arising on consolidation
€000
1,150
1,300
150
£000
1,012
1,144
132
This negative goodwill is credited to the profit and loss in administrative costs. The net goodwill charge is £7,000.
The cash flow effect of the step acquisition is as follows:
Cash
Cost of purchase
Net cash effect
46
€000
£000
335
(250)
85
295
(220)
75
Notes
forming part of the financial statements for the year ended 31 May 2019
15 Investment in joint venture
At 31 May 2017
Share of post-tax profit of year ended 31 May 2018
Effect of movements in foreign exchange rates
At 31 May 2018
Share of post-tax profit of year ended 31 May 2019
Effect of movements in foreign exchange rates
Sale of joint venture
At 31 May 2019
Summarised accounts of KMR:
All values translated at closing rates.
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Interest
Tax
Profit after tax
Non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Corporation tax
Total assets
Non-current loans and borrowings
Trade and other payables
Current loans and borrowings
Total liabilities
Net assets
Year ended
31 May
£000
832
(107)
9
734
(34)
(3)
(697)
-
Unaudited
Year ended
31 May 2019
£000
Unaudited
Year ended
31 May 2018
£000
-
-
9,287
(6,712)
-
-
-
-
-
-
2,575
(1,282)
(1,458)
(44)
(1)
(210)
31 May 2019
£000
31 May 2018
£000
-
-
-
-
-
-
-
-
-
-
-
1,541
2,992
54
186
126
4,899
(1,310)
(1,274)
(615)
(3,199)
1,895
As detailed in note 14, the joint venture in KMR was terminated on 5 July 2018 and at that date KMR became a
wholly owned subsidiary of Hemmers.
47
Notes
forming part of the financial statements for the year ended 31 May 2019
16 Inventories
Total gross value of goods and goods for resale
Less provision
Finished goods and goods for resale
31 May 2019
£000
31 May 2018
£000
12,580
(820)
11,760
10,209
(588)
9,621
The amount of inventories recognised as an expense during the year was £26,618,000 (2018: £25,918,000).
17 Trade and other receivables
Trade receivables
Other receivables
Prepayments
Total trade and other receivables
31 May 2019
£000
31 May 2018
£000
3,445
762
175
4,382
5,117
989
146
6,252
All amounts are anticipated to be receivable in the short term. The carrying value of trade receivables is
considered to be a reasonable approximation of fair value.
18 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.
Last year a forward contract was taken out to hedge the loan from the Parent Company to Hemmers. There was
no movement in the year. (2018: credit £48,000). As at 31 May 2019, there were no forward contracts in place.
19 Cash and cash equivalents
31 May 2019
£000
31 May 2018
£000
Cash on demand or on short-term deposit
1,065
572
Cash held by the Parent Company is deposited with Bank of Scotland, earning interest at variable rates. Cash
held by subsidiaries is the excess of property related loans drawn down over amounts spent to date and working
capital required. In the opinion of the directors, the carrying value of cash and cash equivalents approximates to
its fair value.
20 Trade and other payables
Trade payables
Other tax and social security taxes
Accruals
Other payables
Total trade and other payables
31 May 2019
£000
31 May 2018
£000
1,641
66
374
689
2,770
1,526
67
430
596
2,619
All amounts are anticipated to be payable in the short term. The carrying values are considered to be a
reasonable approximation of fair value.
48
Notes
forming part of the financial statements for the year ended 31 May 2019
21 Borrowings
The book value of loans and borrowings are as follows:
Current
Secured bank loans
Non - current
Secured bank loans
Total loans and borrowings
31 May 2019
£000
31 May 2018
£000
4,655
2,289
6,944
1,349
3,708
5,057
Current loans and borrowings
At 31 May 2019 current loans and borrowings of £4,655,000 (2018: £1,349,000) comprise short term loans of
£3,220,000 and instalments due on long term loans detailed below of £1,435,000. The interest rate on the short-
term loans range from 1.25% to 2.5% (2018: 2.5%) and these loans are secured on the inventories and trade
receivables of Hemmers and KMR. The short-term loans are drawn down by Hemmers against short term
borrowing facilities of €11,000,000 and by KMR against short term borrowing facilities of €1,500,000. Neither
the Parent Company nor any of its subsidiaries other than Hemmers and KMR 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. In 2016 further loans were drawn down and, in the year ended 31 May 2017, a further
loan was assumed from Kreissparkasse to finance the purchase of a further leased warehouse adjacent to the
original warehouse.
The Group’s loans and borrowings are within the accounts of Hemmers, Leeds Properties and KMR. They are
denominated in Euros, and their principal terms are as follows:
Amounts outstanding at 31 May 2019 were:
Repayment
Profile
Final repayment
date
31 May 2019
£000
31 May 2018
£000
Fixed
Interest
Rate
4.07%
3.40%
1.65%
1.05%
Loan 1
Loan 2
Loan 3
Loan 4
Non-current loans
Equal monthly instalments
Single bullet repayment
Equal quarterly instalments
Equal quarterly instalments March 2026
September 2027
March 2020
September 2025
493
-
1,350
446
2,289
554
1,054
1,586
514
3,708
31 May 2019
£000
31 May 2018
£000
5,057
7,087
1,932
1,292
(1,363)
26
-
-
(2,102)
72
6,944
5,057
The changes in liabilities arising from financing activities were:
At the start of the year
Cash items
Borrowings acquired
Borrowings drawn down
Borrowings repaid
Exchange
At the end of the year
49
Notes
forming part of the financial statements for the year ended 31 May 2019
22 Financial instruments
The financial assets of the Group are categorised as follows:
At amortised cost
Trade receivables
Cash and cash equivalents
The financial liabilities of the Group are categorised as follows:
At amortised cost
Trade payables
Accruals
Other payables
Current bank borrowings
Non-current bank borrowings
Financial risk management
Overview
31 May 2019
£000
31 May 2018
£000
3,445
1,065
4,510
5,117
572
5,689
31 May 2019
£000
31 May 2018
£000
1,641
374
689
4,655
2,289
9,648
1,526
430
496
1,349
3,708
7,509
The Group is exposed through its operations to the following financial risks:
• Credit risk
• Market risk in the form of foreign exchange risk
• Liquidity risk
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments.
The Group’s risk management is coordinated by the directors who focus on securing the Group’s short to
medium-term cash flow through regular review of all the operating activities of each of the businesses.
The most significant financial risks to which the Group is exposed are described as follows:
Credit risk
The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance
sheet date as follows:
Trade receivables
31 May 2019
£000
31 May 2018
£000
3,445
3,445
5,117
5,117
The Group has adopted the IFRS 9 simplified approach to measuring expected credit losses using expected loss
rates and a provision matrix. The provision matrix is based on the Group’s historical default rates over the
expected life of the trade receivables adjusted for forward looking estimates. There has been no impact of the
change to IFRS 9 and the provision calculated under the expected loss model is not significantly different.
50
Notes
forming part of the financial statements for the year ended 31 May 2019
22 Financial instruments (continued)
At 31 May 2019 £1,234,000 (2018: £1,582,000) of the Group’s trade receivables were past due. An expected
loss provision of £728,000 (2018: £708,000) is held to mitigate the exposure to bad and doubtful debts. The
ageing of the Group’s trade receivables is as follows:
Overdue up to 3 months
Overdue by 3 to 6 months
Overdue by 6 to 12 months
Overdue by more than 12 months
Total past due trade receivables
Total receivables not yet past due
Total gross receivables
Expected credit loss
Total trade receivables (note 17)
31 May 2019
£000
31 May 2018
£000
410
78
45
701
1,234
2,939
4,173
(728)
3,445
609
128
160
685
1,582
4,243
5,825
(708)
5,117
The ageing profile above is the profile used by management to review debts however it is the expected credit
loss model which is used to calculate the provision. The expected loss provision for trade receivables is as
follows:
As at 31 May 2019
Overdue
up to 3
months
Overdue
by 3 to 6
months
Overdue
by 6 to 12
months
Overdue
by more than
12 months
31 May
2019
£000
Not due
Expected loss rate
1%
Gross carrying amount
2,939
3%
410
Loss provision
(29)
(16)
Net carrying value
2,910
394
7%
10%
96%
78
45
701
4,173
(5)
73
(5)
40
(673)
(728)
28
3,445
As at 31 May 2018
Overdue
up to 3
months
Overdue
by 3 to 6
months
Overdue
by 6 to 12
months
Overdue
by more than
12 months
31 May
2018
£000
Not due
Expected loss rate
1%
Gross carrying amount
4,243
4%
609
Loss provision
(42)
(24)
Net carrying value
4,201
585
7%
10%
90%
128
160
685
5,825
(9)
119
(16)
144
(617)
(708)
68
5,117
A reconciliation of the movement in the impairment loss for trade receivables is shown below:
Expected credit loss provision as at 31 May
Amount charged
Amount released
Effect of movements in foreign exchange rates
Expected credit loss provision as at 31 May
51
31 May 2019
£000
31 May 2018
£000
708
35
(19)
4
728
975
(38)
(238)
9
708
Notes
forming part of the financial statements for the year ended 31 May 2019
22 Financial instruments (continued)
Foreign currency
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 2019
£000
31 May 2018
£000
3,799
184
340
59
4,382
5,243
433
471
105
6,252
The carrying values of the Group’s trade and other payables are denominated in the following currencies:
Euro
Chinese Yuan
US Dollar
Sterling
Total trade and other payables
All the groups external loans are denominated in Euros.
Liquidity risk
31 May 2019
£000
31 May 2018
£000
2,150
195
364
61
2,770
1,903
416
250
50
2,619
The Group manages its liquidity needs very carefully on a short and medium terms basis. Longer term needs are
monitored as part of the Group’s budgetary process.
The Group’s financial liabilities have contractual maturities which are summarised below:
As at 31 May 2019
Amounts due in
Less than
1 year
£000
Trade payables
Accruals
Other payables
Current bank borrowings
Non-current bank borrowings
1,641
374
689
4,655
-
2 to 5
years
£000
-
-
-
-
2,289
Total
£000
1,641
374
689
4,655
2,289
As at 31 May 2018
Amount due in
2 to 5
years
£000
Less than
1 year
£000
1,526
430
496
1,349
-
-
-
-
-
3,708
Total
£000
1,526
430
496
1,349
3,708
Net carrying value
7,359
2,289
9,648
3,801
3,708
7,509
52
Notes
forming part of the financial statements for the year ended 31 May 2019
23
Provisions
Provision at 31 May 2018
Debit to income statement
Provision at 31 May 2019
Tax
£000
-
100
100
A provision has been made for additional tax which may fall due following a prior year tax assessment in
Germany.
24
Share capital
Issued and fully paid
2019
Number
2019
£000
2018
Number
At beginning and end of the year
31,600,000
3,792
31,600,000
2018
£000
3,792
At 31 May 2019, no options over ordinary shares of the Company were outstanding (2018: nil). The are no rights,
preferences or restrictions attached to the ordinary shares. 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 2018
Shares purchased in the year
Shares purchased as at 31 May 2019
Number of
shares
9,247,760
30,000
9,277,760
Cost
£000
1,847
9
1,856
Shares cancelled as at 31 May 2018 and 2019
(4,998,603)
(1,049)
Shares held in treasury at 31 May 2019
Shares held in treasury at 31 May 2018
4,279,157
4,249,157
807
798
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.
53
Notes
forming part of the financial statements for the year ended 31 May 2019
25 Leases
The Group holds operating leases in respect of shops, motor vehicles and plant and machinery used in Germany.
The Group also occupies a warehouse and office premises in China under an operating lease which will expire
in December 2019.
The total future values of minimum lease payments in respect of all operating leases are due as follows:
Within one year
Within two to five years
After five years
Total future values of minimum lease payments
31 May 2019
£000
31 May 2018
£000
1,129
2,240
264
3,633
209
149
-
358
The Group holds an investment property which is leased to external tenants. The total future values of minimum
lease payments in respect of this operating lease is due as follows:
Within one year
26 Commitments
31 May 2019
£000
31 May 2018
£000
-
6
At 31 May 2019 capital commitments authorised and committed amounted to £353,000 (2018: nil). There were
no amounts authorised but not committed (2018: £nil).
27 Related party transactions
Whilst KMR was a joint venture, the Company paid £15,000 (2018: £192,000) in respect of warehouse rent and
management fees to Hemmers during the year. The directors consider that this transaction was made on an arm’s
length basis.
28 Post balance sheet event
On 28 August 2019, Chinoh-Tex was placed into liquidation by Hemmers, its parent company. This was accepted
by the Chinese authorities on 4 September 2019. The liquidation will be completed by 31 December 2019 and the
costs of liquidating the company are expected to amount to £345,000 comprising redundancy costs, professional
fees and bad debts that may arise. There will be lease costs incurred amounting to £33,000 which are included in
note 25 above. The directors do not consider there is any impairment to the assets of Chinoh-Tex as at 31 May
2019.
54
Company Statement of Financial Position at 31 May 2019
Prepared under FRS 101 "Reduced Disclosure Framework"
Company number 00067863
Note
31 May 2019
£000
31 May 2018
£000
Assets
Non-current assets
Investments in subsidiary undertakings
Amounts receivable from subsidiary undertakings
Total non-current assets
Current assets
Trade and other receivables
Cash at bank and in hand
Liabilities
Current liabilities
Trade and other payables
Total current assets
TOTAL NET ASSETS
Capital and reserves
Share capital
Capital redemption reserve
Treasury share reserve
Retained earnings
TOTAL EQUITY
4
5
5
6
7
3,370
3,022
6,392
15
94
109
(61)
48
3,370
2,977
6,347
9
140
149
(50)
99
6,440
6,446
3,792
600
(807)
2,855
6,440
3,792
600
(798)
2,852
6,446
The profit after tax of the company for the year was £3,000 (2018: loss of £32,000).
The financial statements on pages 55 to 56 were approved and authorised for issue by the Board of Directors on
11 November 2019 and were signed on behalf of the Board by: -
Jan G Holmstrom
Chairman
The notes on pages 57 to 59 form part of these financial statements.
55
Company Statement of Changes in Equity
for the year ended 31 May 2019
At 31 May 2017
Loss for the year
At 31 May 2018
Profit for the year
Transaction with Shareholders:
Purchase of treasury shares
Share
capital
£000
Capital
redemption
reserve
£000
Treasury
share
reserve
£000
Retained
earnings
Total
equity
£000
£000
3,792
600
(798)
2,884
6,478
-
-
-
(32)
(32)
3,792
600
(798)
2,852
6,446
-
-
-
-
-
(9)
3
-
3
(9)
At 31 May 2019
3,792
600
(807)
2,855
6,440
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Share capital
The nominal value of issued ordinary shares in the Company.
Capital redemption reserve
Amounts transferred from share capital on redemption of issued shares.
Treasury share reserve
Cost of own shares held in treasury.
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 57 to 59 form part of these financial statements.
56
Notes
forming part of the financial statements of the Company for the year ended 31 May 2019
1 Accounting policies
Basis of preparation
These financial statements have been prepared in accordance with FRS 100 and FRS 101, and the Company takes
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.
Investments
Investments in subsidiary undertakings are stated at cost less any impairment for permanent diminution in value.
Impairment of intercompany receivables
At each financial year end, the Company assesses whether there is an indication that’s its assets have been
impaired. If there is an indication that its assets have been impaired, the recoverable amount is determined in order
to determine the extent of the impairment. If it is not possible to estimate the recoverable amount of the individual
asset, the recoverable amount of the cash generating unit to which it relates is determined.
The recoverable amount is defined as the higher of the fair value less costs to sell and value in use at that date.
Value in use is calculated as the expected future cash flows discounted on a pre-tax basis, using a pre-tax discount
rate that reflects the current market assessments of the time value of money and the risks specific to that assets or
cash generating unit. If the recoverable amount of the asset is less than the carrying value, the carrying value is
reduced to its recoverable amount, that reduction is recognised as an impairment loss.
An impairment loss relating to an asset carried at cost less accumulated depreciation or amortisation is recognised
immediately in the profit and loss account. If an impairment loss subsequently reverses, the carrying value of the
asset is increased to the revised recoverable amount but limited to the carrying value that would have been
determined had no impairment been recognised in prior years. A reversal of an impairment loss is recognised in
the profit and loss account.
Financial assets and liabilities
IFRS 9’Financial Instruments’ outlines the principles an entity must apply to measure and recognise financial assts
and liabilities. The Group recognises financial assets and liabilities when it becomes a party to the terms of the
contract, which is the settlement date.
Financial assets
Financial assets that are held to collect are categorised as amortised cost under IFRS 9. This includes the Group’s
trade and other receivables and cash and cash equivalents. The measurement of these financial assets held at
amortised cost remains unchanged since the introduction of IFRS 9.
Amounts receivable from subsidiary undertakings
Amounts receivable from subsidiary undertakings are initially measured at fair value and subsequently measured
at amortised cost. Impairment provisions are recognised based on the general approach within IFRS 9, which
requires an assessment of whether there has been a significant increase in credit risk since initial recognition of
the facility. Assessment of the requirement of a provision made based on 12-month expected credit losses, or
lifetime credit losses, as appropriate.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and on short term deposit, together with other short term, highly
liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant
risk of change in value.
57
Notes
forming part of the financial statements of the Company for the year ended 31 May 2019
1 Accounting policies (continued)
Financial liabilities
The classification and measurement of financial liabilities in accordance with IFRS 9 remains largely unchanged.
All financial liabilities are measured at amortised cost and include trade and other payables and bank borrowings.
Trade and other payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest rate.
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
Interim dividends are recognised when paid and final dividends are recognised when approved by the shareholders
at the AGM.
2 Statement of Comprehensive Income
A separate statement of comprehensive income 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 £3,000 (2018: loss £32,000).
The remuneration of the Auditors is disclosed in note 4 to the consolidated financial statements.
3 Staff costs
The average number of persons employed in the year by the Company (including directors) was 4 (2018: 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 2019
Year ended
31 May 2018
£000
£000
108
1
3
112
100
1
3
107
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 2019 were nil (2018: nil).
4 Investments in subsidiary undertakings
Cost
£000
Accumulated
impairment
£000
Net carrying
amount
£000
At 31 May 2019 and 31 May 2018
3,370
-
3,370
Details of subsidiary undertakings are given on the Group Information page 1 and in note 14 to the consolidated
financial statements.
58
Notes
forming part of the financial statements of the Company for the year ended 31 May 2019
5 Trade and other receivables
Prepayments and accrued income
Amounts receivable from subsidiary undertakings
Total trade and other receivables
31 May 2019
£000
31 May 2018
£000
15
3,022
3,037
9
2,977
2,948
No impairment loss was recognised in the year in respect of amounts receivable from subsidiary undertakings.
(2018: £nil). The amounts receivable from subsidiary undertaking relates to long term loans with details as
follows:
Fixed
Interest
Rate
Repayment
Profile
31 May 2019
£000
31 May 2018
£000
Loan 1
Loan 2
8%
8%
Repayable on demand
Repayable on demand
2,650
372
2,635
342
6 Trade and other payables
Accruals and deferred income
Total trade and other payables
7 Share capital
Issued and fully paid
31 May 2019
£000
31 May 2018
£000
61
61
2019
Number
2019
£000
2018
Number
50
50
2018
£000
3,792
At beginning and end of the year
31,600,000
3,792
31,600,000
At 31 May 2019, no options over ordinary shares of the Company were outstanding (2018: nil).
Details of the shares held in treasury are disclosed in note 23 to the consolidated financial statements.
8 Commitments
The Company holds no assets under finance leases and has no commitments under operating leases.
There were no contracted capital commitments for the Company in either period.
59
Five Year Summary of Results and Capital Employed
Year ended
31 May
2019
£000
Year ended
31 May
2018
£000
Year ended
31 May
2017
£000
Year ended
31 May
2016
£000
Year ended
31 May
2015
£000
41,271
(32,254)
41,538
(32,526)
41,053
(32,468)
36,272
(28,563)
34,859
(27,066)
9,017
(9,057)
9,012
(7,860)
8,585
(7,008)
7,709
(6,165)
7,793
(6,171)
(40)
(194)
(34)
(982)
(1,250)
(43)
1,152
(160)
(107)
-
885
(340)
1,577
(162)
1,544
(88)
1,622
(64)
33
-
51
-
13
-
1,488
(334)
1,507
(468)
1,571
(518)
Results
Revenue
Cost of sales
Gross profit
Operating expenses
(Loss)/profit from operations
(excluding impairment charges)
Net finance expense
Share of post-tax (loss)/profit of
joint venture
Impairment of goodwill
(Loss)/profit before tax
Tax charge
(Loss)/profit after tax
(1,293)
545
1,114
1,039
1,053
Assets
Non-current assets
Current assets
9,615
17,940
10,110
16,831
10,339
18,756
7,359
15,156
3,115
15,344
Total assets
27,555
26,941
29,095
22,515
18,459
Non-current liabilities
Current liabilities
(2,289)
(7,525)
(3,985)
(3,968)
(4,259)
(6,534)
(4,073)
(2,930)
(909)
(3,728)
Total liabilities
(9,814)
(7,953)
(10,793)
(7,003)
(4,637)
Total net assets
17,741
18,988
18,302
15,512
13,822
Financed by
Total equity
Key Statistics
17,741
18,988
18,302
15,512
13,822
Basic and diluted (loss)/earnings per
share
(4.7p)
2.0p
4.1p
3.8p
3.8p
Net assets per share
64.9p
69.4p
66.9p
56.5p
50.2p
60
Notice of Annual General Meeting
The one hundred and nineteenth annual general meeting of the Leeds Group plc (“the Company”) will be held at 12
noon on 12 December 2019 at the offices of Leeds Group plc, Old Mills, Whitehall Grove, Drighlington, Bradford,
BD11 1BY 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 2019 and the report of
the auditors thereon.
To re-appoint Mr Dave Cooper as a director.
To re-appoint Mr Jörg Hemmers 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 685,000 being
2.26 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 had not expired.
61
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
£1,093,000. 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 7.1 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
Dawn Henderson
Company Secretary
Old Mills
Whitehall Grove
Drighlington
Bradford
BD11 1BY
11 November 2019
62
Notice of Annual General Meeting (continued)
Notes
1.
2.
3.
4.
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 close of business on 10 December 2019 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.
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, Link Asset Services, PXS,
34 Beckenham Road, Beckenham, BR3 4TU not later than 12 noon on 10 December 2019.
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 Link 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 Link 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 Link Asset Services at PXS, 34 Beckenham
Road, Beckenham, BR3 4TU no later than 12 noon on 10 December 2019. 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
63
Notice of Annual General Meeting (continued)
Notes (continued)
8.
9.
As at 11 November 2019 (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 4,279,157 shares held in treasury, representing approximately 13.45 per cent of the total
issued share capital. Thus, the total voting rights in the Company as at 11 November 2019 are 27,320,843.
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.
64
Explanation of resolutions
Resolution number 1
The directors must present to shareholders the report of the directors and the financial statements for the year ended 31
May 2019. That report and those financial statements, and the report of the Company's auditors on those financial
statements, are set out on pages 1 to 59 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 David Cooper and Mr Jörg Hemmers are the directors subject
to retirement by rotation. Resolutions numbers 2 and 3 propose the re-appointment of Mr Cooper and Mr Hemmers
respectively.
Resolution number 4
The auditors of the Company must be re-appointed at each meeting at which the financial statements 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 685,000 ordinary shares, being
approximately 2.26 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 £1,093,000 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.
65
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