LEEDS
GROUP PLC
Annual Report andAccounts 2020
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
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8
9
18
22
27
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29
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31
59
60
61
64
65
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
* Liquidated prior to the year end
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
Cairn Financial Advisers LLP
62-63 Cheapside
London
EC2V 6AX
BDO LLP
29 Wellington Street
Leeds
LS1 4DL
Walker Morris LLP
33 Wellington Street
Leeds
LS1 4DL
Registrars*
Link Asset Services (Holdings Limited)
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Principal Bankers
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 a difficult year for the Group. Trading conditions have been challenging within both the wholesale and
retail textile markets due to increased competition and pressure on prices. In addition, the Covid-19 pandemic affected
trading for the last three months of the financial year.
As previously communicated on 31 March 2020, the Directors have implemented a number of cost cutting measures,
identified through a strategic review undertaken last year, to refocus on our core business and ensure that the Group
has the appropriate infrastructure and cost base aligned to its sales levels.
In last summer’s strategic review of the Chinoh-Tex Ltd (‘Chinoh-Tex’) business, it was concluded that the company
was not generating adequate profits and was no longer needed to support our procurement activities in China.
Therefore, a decision was taken in October 2019 to cease operations and close the company. Chinoh-Tex ceased
trading in November 2019 and the costs of closure have been included in the results for this year. The company was
formally liquidated prior to the year end.
Both Hemmers-Itex Textil Import Export GmbH (‘Hemmers’) and Stoff-Ideen-KMR GmbH (‘KMR’) businesses
were considerably restricted from March 2020 when the German government imposed a country wide lockdown in
response to the Covid-19 pandemic. Hemmer’s wholesale business was affected by the imposed lockdown and
KMR’s retail shops were closed from mid-March to mid-April 2020. Both businesses suffered significant sales
reductions in the final three months of the year, the effect of which could only be partly offset by the mitigating actions
taken by management and by government financial aid. Thus, both companies have experienced significant losses in
the financial year to 31 May 2020.
Even though the Covid-19 situation is still impacting the marketplace, sales levels for Hemmers and KMR in the first
few months of the new financial year have been better than expected. However, there is a risk that there may be
further local or country wide restrictions which would again affect trading. The impact of Covid-19 on the Group is
detailed further in the Finance and Operating Review and Directors’ Report. The Directors are confident that both
businesses are better prepared to mitigate this risk and should benefit again from any government financial support.
The Directors believe that the Group is now leaner and has a stronger management team with a revised customer
focused strategy. The group’s global wholesale business and retail trading in Germany should now be in a better
position to return to acceptable levels of profit in future years, provided there is a return to normal trading conditions
in the near future.
On behalf of shareholders, I want to thank the management and staff of Hemmers and KMR who have all continued
with their best efforts to work through difficult and challenging times.
Jan G Holmstrom
Non-Executive Chairman
21 October 2020
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 2020, 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 for the continuing operations in the year was £35,067,000 (2019: £38,905,000). Market conditions
for both trading subsidiaries have been challenging and Hemmers has faced intense competition both domestically
and internationally. The consequences of the Covid-19 pandemic affected both Hemmers and KMR severely in the
last three months of the financial year. Although the German government provided financial support, the reduced
sales figures did not produce enough contribution to cover the fixed overheads and therefore both Hemmers and KMR
made losses for the year. Thus, the Group’s operating loss from continuing activities was £1,756,000 (2019: loss
£1,053,000).
With the implementation of IFRS 16 with regard to accounting for leases, the Group has recognised all long-term
leases in the financial statements this year as right-of-use assets. The effect of this change in accounting has been that
long-term lease payments of £915,000 which would have previously been charged to the profit and loss account have
been removed and replaced by an additional depreciation charge of £865,000. There has also been an additional
interest charge of £86,000. The net effect of the implementation is a charge of £36,000.
The Group loss before tax from continuing activities was therefore £2,016,000 (2019: loss £1,281,000). The result for
last year included an impairment charge of £982,000 relating to the goodwill which arose on the acquisition of
Hemmers in 1999.
The tax charge in the year was £6,000 (2019: £41,000). The total loss per share was 8.6p (2019: 4.7p).
Hemmers-Itex
Hemmers is a global business engaged in designing, importing, warehousing and wholesaling of fabrics from
Germany. Sales for the year were significantly lower than last year at £27,060,000 (2019: £30,939,000). The market
in Germany has fallen considerably during the year and Hemmers has also been under increased price pressure from
competitors. Sales fell in the last three months of the year due to the effect of the Covid-19 pandemic. A strategic
sales review coupled with a comprehensive cost review was undertaken during the financial year to ensure the cost
base for Hemmers is aligned to the current market conditions. The gross contribution percentage decreased to 31%
(2019: 36%) due to the pressure on pricing through competition and that, together with the lower level of sales volume,
has resulted in a fall in gross contribution. Because of the fall in contribution, it was not sufficient to meet the fixed
overheads despite continued reduction in staff and wage costs and therefore, the company produced a loss excluding
the share of the joint venture of £1,593,000 (2019: profit £239,000).
Hemmers is now focused on growing its business domestically and internationally in its wholesale markets with a
more customer focused sales strategy. We are confident that Hemmers will be in a much better position to compete
in the global marketplace next year to regain lost market share.
Hemmers bank debt, net of cash, decreased in the year to £3,184,000 (2019: £4,197,000). This was due mainly to the
sale of a warehouse in Nordhorn for £744,000. The bank debt is secured on the assets of Hemmers.
3
Finance and Operating Review (continued)
KMR
KMR is a retail business trading in Germany. Sales were lower than last year at £8,007,000 (2019: £8,656,000),
although within the group accounts only eleven trading months were included last year as KMR became a subsidiary
in July 2019, previously it had been included in the accounts as a joint venture. The gross contribution percentage
increased slightly to 53% (2019: 50%). However, KMR was affected by the closure of all its retail shops for the last
three months of the year from March 2020 due to the effect of the Covid-19 pandemic. This lower level of trading,
despite financial support from the German government, has resulted in a loss for the year of £331,000 (2019: loss
£554,000). Improved working efficiencies have been implemented during the year including the introduction of new
working patterns resulting in reduced cost base. This should eliminate the losses going forward and provide a better
foundation for better results in the coming years.
KMR bank debt, net of cash, decreased in the year to £979,000 (2019: £1,738,000). This was due mainly to the sale
of land in Nürnberg for £552,000. The bank debt is secured on the assets of KMR.
Chinoh-Tex
Chinoh-Tex, the Chinese subsidiary of Hemmers, was not generating adequate profits despite actions taken to reduce
costs and, therefore, a decision was taken during the year to close the company. The costs of closure have been
included in the loss of £332,000 for the year (2019: profit £31,000). The company was formally liquidated prior to
the year end.
Fixed Assets
The net book amount of tangible fixed assets in the Consolidated Statement of Financial Position is £8,183,000 (2019:
£8,534,000). In accordance with the newly introduced IFRS 16 with regard to accounting for leases, right-of-use assets
with a net book value of £3,067,000 have been introduced in the accounts as fixed assets this year in addition to
finance leases of £29,000 already reflected in the financial statements in previous years.
Capital additions in the year amounted to £560,000 (2019: £550,000) and additional right-of-use leases of £258,000
included in the accounts. Two properties, included in the financial statements partly as fixed assets and partly as
investment properties, were sold during this year for sales proceeds of £1,296,000. These were included in the total
sales proceeds of £1,317,000 from the sale of assets realising a profit of £32,000.
Working Capital and Cash Flow
Net cash generated in the year was £34,000 (2019: £497,000), despite the loss produced in the year of £2,354,000.
Although the loss includes a depreciation and amortisation charge of £1,618,000. During the year, cash has been
generated from the sale of assets amounting to £1,317,000 with capital expenditure of £560,000. Working capital,
which comprises inventories, trade and other receivables and trade and other payables, decreased in the year by
£2,738,000 (2019: £1,031,000). Stock and debtor levels were lower at 31 May 2019 due to the reduced trading in
March to May as a result of the effects of the Covid-19 pandemic on trading. Loan repayments of £2,378,000 have
been made this year to reduce the total Group borrowing and lease liability repayments of £926,000 have been made
in the year.
The Group continues to carefully monitor its working capital requirements to ensure it operates within its current
banking facilities.
Net Asset Value
Net assets decreased in the year by £2,158,000 as follows:
At 31 May 2019
(Loss) after tax (including discontinued operations)
Translation differences
At 31 May 2020
4
Net assets
£000
17,741
(2,354)
196
15,583
Per share
pence
64.9
(8.6)
0.7
57.0
Finance and Operating Review (continued)
Debt Profile
The funding policy of the Group continues to be to match its funding requirement in trading subsidiaries in a cost-
effective fashion with an appropriate combination of short and longer-term debt. Property investments have been
financed partly by long term loans at fixed interest rates between 1.05% and 4.07%. Working capital finance, when
required, is via short term loans of three months currently attracting interest at rates of between 1.25% and 3%.
196Bank debt in the subsidiaries is secured by charges on inventories, receivables and property and is without recourse
to the Parent Company.
Impairment reviews
In accordance with IAS 36, annual impairment reviews are carried out for each cash-generating unit to which goodwill
is allocated. An impairment loss of £982,000 was recognised in the last financial period in respect of the goodwill
which arose on the acquisition of Hemmers in 1999.
Following the implementation of IFRS16, the right-of-use assets are now considered part of the cash generating units.
Although annual impairment reviews are not required on tangible assets, management have performed an impairment
review on these assets due to historic trading losses and the effects of the Covid-19 pandemic. Impairment tests have
been performed by assessing relevant cash flows of each cash generating unit and assessing this against the value of
assets relating to that specific cash generating unit. Following this review, no impairment charge has been recognised
during this financial year.
Principal risks and uncertainties
The Board has identified the main categories of business risk in relation to the Group’s strategic aims and objectives,
and has considered reasonable steps to prevent, mitigate and manage these risks. The principal risks identified are as
follows:
Funding risk
The Group has a combination of short-term borrowing facilities and longer-term loan agreements secured on Group
assets. The Group remains dependent upon the support of these funders and there is a risk that failure in a company
to meet banking covenants could have implications for the Group. Borrowing facilities are monitored regularly and
the facilities agreed are more than needed for the Group’s requirements. The Group has close working relationships
with their current funders but believe alternative banking funders could be secured if required.
Market risk
There is always the ongoing threat of reduced market demand. This has been seen this year and the Group continues
to strive to combat the reduced demand by looking at other markets both domestically and internationally and looking
at expanding its product ranges for example introducing home furnishing products. The commercial risks of operating
in the highly competitive European fabric market are limited by the fact that Hemmers has a wide range of suppliers,
and no customer accounts for more than 5% of revenues.
Foreign exchange risk
Most fabric purchased by Hemmers is paid for in US dollars, while the Euro is the principal currency in which
Hemmers sells its product. The Euro/dollar rate is of greater significance to Leeds Group than the strength of Sterling.
The Hemmers management continue to manage this transactional currency risk by a combination of forward exchange
contracts with reputable banks and sales price increases where necessary.
Covid-19
During the year, the global Covid-19 situation which resulted in lockdowns across the world, has affected both
businesses. This affected the last three months of the year, March to May. KMR whose main business is retail shops
was required to close all its shops from mid-March to mid-April. The financial impact on all businesses was partly
mitigated by financial support from the German government. Financial support was provided to cover the wages of
staff unable to work due to the country wide lockdown. There is a risk that if infections of Covid-19 are not controlled
that a further country wide or local lockdown will be required. It is expected that in this event, Government support
would again be provided, and the management have looked at further measures to mitigate the risk having experienced
the first wave of the pandemic.
5
Finance and Operating Review (continued)
Principal risks and uncertainties (continued)
Brexit
Following the UK’s decision to leave the European Union (“EU”) by 31 December 2020, the economic environment
is still uncertain. This uncertainty continues as the UK looks to secure an acceptable deal to leave the EU. The threat
of no deal creates more uncertainty. However, the business of Leeds Group is conducted entirely by subsidiaries
incorporated in Germany, and their exports to the UK account for approximately 3% only of Group revenue. For this
reason, the Directors do not believe that a material risk to Leeds Group will arise from the terms on which the UK
will, in the future, have access to EU markets, and vice versa. Leeds Group has a loan denominated in euros which
does carry a currency risk and may be affected by Brexit, however, the Directors do not believe the impact would
have a material effect on the Group’s results as the subsidiary trades in Euros and the Directors consider this provides
a natural hedge.
The currency markets dislike the current air of uncertainty surrounding the current negotiations with regard to the UK
leaving the EU and sterling has weakened since the UK announced it was leaving the EU. This benefits Leeds Group
since, as the pound weakens, the value of the revenues, profits and net assets of foreign subsidiaries are increased in
sterling terms. This effect has been seen in both this year’s and last year’s accounts with translation gains in the
Statement of Financial Position of £196,000 (2019: £55,000).
Section 172 Report
Leeds Group is committed to acting ethically and with integrity throughout all its business dealings and relationships.
It is important to the company and its subsidiaries that trusted business relationships are established and maintained
with key stakeholders, customers and suppliers and that it invests in and supports all its employees equally.
The Directors have always acted in accordance with their lawful duties, which includes their duty to act in good faith
to promote the success of the Group for the benefits of its shareholders, having regard to its stakeholders and matters
set out in Section 172 (1) of the Companies Act 2006. Section 172 considerations are embedded throughout the
decision making of the Board. Issues, factors and risks which the Directors have considered when discharging their
duty under section 172 (1) are further detailed in the Chairman’s Statement, Directors’ Report and Corporate
Governance Report contained within these report and accounts.
During the year, as detailed in the Chairman’s Statement, the Directors took the decision to close Chinoh-Tex after
consultation with the employees affected and the closure was overseen by Jörg Hemmers, one of the Directors. He
also ensured the completion of the two property sales transacted in the year. The sale of the warehouse in Nordhorn
was agreed as Hemmers no longer required the warehouse space and external rentals could not be secured, therefore
the decision was taken to sell as it would also release cash to pay down the group debt. As part of the acquisition of
KMR in 2019, it had been agreed to sell the land at Nurnberg, adjacent to one of the KMR shops as it was a
development opportunity as part of the acquisition of the company. The Directors are now looking to focus on
developing the Hemmers and KMR businesses.
The two major shareholders are represented as non-executive members on the Board. The Board recognises the
importance of effective and transparent dialogue with shareholders and ensuring that non-management shareholders
understand and support the Group’s strategy and objectives. The Board meet quarterly on as formal basis, and ad hoc,
as necessary, throughout the year. The Board is more than happy to engage with shareholders at any time and answer
questions they may have. The AGM is a formal meeting at which to have this dialogue.
The Board looks to ensure the systems, processes and controls established to manage its businesses to the highest
standards. The supply chain is an integral part of trading business and it is of paramount importance that best practice
in terms of anti-bribery and modern slavery are adhered to. All employees have therefore completed training to ensure
this is in place. The Board receives updates from the management team at Hemmers as to the relationships with key
customers and suppliers. Hemmers management regularly engage in dialogue with key suppliers and customers. All
operational staff are based in Germany, based either at Nordhorn or work within one of the KMR retail shops. Regular
dialogue is maintained with all staff and meetings are held regularly to ensure staff understand the strategy and
positions of the businesses. Staff are encouraged to discuss any concerns or issues they may have with their line
manager or Hemmers management are always available to meet staff if necessary.
Jan G Holmstrom
Chairman
21 October 2020
6
Board of Directors
Jan G Holmstrom (Non-Executive Chairman) (Age 67)
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, Dravo Limited and a Non-Executive Director of International Fibres
Group (Holdings) Limited, UIM Property Limited and Browallia Holdings Limited. Jan joined the Board of Leeds
Group in November 2011 and was appointed Chairman in October 2014.
Jörg Hemmers (Executive Director) (Age 53)
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 69)
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 CEO of Catella AB, a public listed company and 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 62)
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 is now Finance Manager and Company Secretary of Xelect Limited
which supplies genetic consultancy services to the aquaculture sector. David joined the Board of Leeds Group in
October 2014. David remains an independent director as he has no business relationship with any other directors or
shareholders in Leeds Group.
7
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
21 October 2020
8
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 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. To service these
markets, the Group has invested significantly in recent years in warehousing
and distribution facilities and into double folding plant and machinery 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.
9
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.
10
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.
11
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 2019/20 all Directors attended the two Board meetings and six telephone
meetings.
In 2019/20 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.
12
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.
13
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 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.
14
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 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.
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
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
16
Corporate Governance Report (continued)
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 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.
10 Communicate
how the
company is
governed and
is performing
by maintaining
a dialogue
with
shareholders
and other
relevant
stakeholders
Jan G Holmstrom
Non-Executive Chairman
21 October 2020
17
Directors’ Report
The Directors present their annual report and the audited financial statements for the year ended 31 May 2020.
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. The Chinese subsidiary, Chinoh-Tex based in Shanghai was liquidated
during the year.
Results and dividend
The Consolidated statement of comprehensive income for the year is set out on page 27.
Given the results of the financial year, the Directors do not recommend the payment of a dividend in 2020 (2019:
£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 6 to the financial statements.
The Directors retiring by rotation are Johan Claesson and Jan Holmstrom 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 21 October
2020.
Substantial shareholdings
The following shareholders held interests of 3% or more of the issued share capital of the Company as at 21 October
2020:
% 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
29.20
24.64
10.31
25.25
21.31
8.91
18
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 2020 and 31
May 2019.
Leeds Group plc Ordinary shares of 12 pence each
The market value of Leeds Group shares between 1 June 2019 and 31 May 2020 ranged between 7.5p and 21.5p. The
average market value for the year was 16.7p, and at 31 May 2020 the market value was 10p (31 May 2019: 21p).
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.
Emissions
Quoted companies of any size are required to report under the Streamlined Energy and Carbon reporting unless
exemptions apply. If a UK Group and its UK subsidiaries do not consume more than 40,000 kWh of energy in a
reporting period, the Group is deemed to be a low energy user and is exempt from reporting. The group has not
consumed more than 40,000 kWh during the year to 31st May 2020 and is, therefore, exempt from reporting.
Financial risk management policies
The Group’s activities are exposed to a variety of financial risks which are set out in note 4 to the consolidated financial
statements.
Future developments
The Group is focused on developing and improving the Hemmers and KMR businesses, bringing economies of scale
within the two companies.
Going Concern
When considering its opinion about the application of the going concern basis of preparation of the financial
statements the Directors have given due consideration to:
• The performance of the Group in the last financial year and the robustness of forecasts for the next 24 months,
which return the Group to profit.
• The impact of the Covid-19 pandemic on the business, its suppliers and its customers.
• The financing facilities available to the Group and the circumstances in which these could be limited or
withdrawn.
Financial performance and forecasts
Having been consistently profitable the Group has been loss making in each of the last two years.
•
•
In the year to 31 May 2019, the Group reported a pre-tax loss from continuing operations of £1.3m after
writing off goodwill of £1.0m.
In the year to 31 May 2020, the Group reported a pre-tax loss from continuing operations of £2.0m.
Approximately £1.0m of this loss arose in the final quarter which was significantly impacted by the Covid-
19 restrictions discussed below. To address the poor underlying performance the Directors and management
restructured the business in the first half of the year to focus on profitable business streams and reduce its
operating costs. Restructuring costs of £0.4m were incurred in the financial year which will benefit results
going forward. Although loss making, the business was cash generative in the year with net debt reducing
by £2.4m, of which £1.3m resulted from the sale of investment properties.
19
Directors’ Report (continued)
Going Concern (continued)
Forecasts have been prepared for the 24-month period to 31 May 2022 which indicate a return to modest profit over
that period. These forecasts have been prepared in the knowledge of current Covid-19 conditions and assume that
there is no protracted period of total lockdown. At the end of the first quarter of the current financial year sales and
profit were ahead of forecast. The company has sensitised these forecasts for a reduction in revenues of 10% at both
Hemmers and KMR in the forecast period and an additional net €1 million profit reduction from a second period of
lockdown. The Directors are of the opinion that this is a reasonable worst case, and the currently available facilities
would be sufficient in this scenario.
Covid-19 Impact
Both Hemmers and KMR are located in Germany which has responded well to the outbreak. KMR was most directly
impacted by the measures put in place with all stores closed from the mid-March to the mid-April. Since reopening,
the stores have performed ahead of both last year and forecast. Hemmers saw significantly reduced demand during
March and April but like KMR, has traded strongly in the first quarter of the current year, ahead of last year and
forecast.
Both businesses have been supported by the government employment scheme which reimburses the company for
payments to employees for any short time working. This scheme remains available through the forecast period. In
addition, KMR has negotiated rent reductions for its shops in the current financial year which are reflected in the
forecasts.
There has been no significant impact on our suppliers, most of whom are based in China and Turkey.
There has been no significant impact on our customers.
While there is clearly uncertainty about the future course of the pandemic, the Directors consider that with ongoing
government support it is well placed to trade through reasonably foreseeable scenarios.
Financing facilities
The operating businesses of the group are Hemmers and KMR, both located in Germany. The Parent Company, which
has no borrowing facilities, is located in the UK.
Hemmers has four sources of funding:
a) Term loans which have funded property purchases. These are repayable in instalments over the term as
detailed in note 23. They are secured over the associated properties and that security could be called in the
event that the business defaulted on repayment.
b) A maximum working capital facility of €11m, restricted to the borrowing base which is calculated as 70% of
eligible inventory and 80% of eligible debtors. In the financial year 2019/20 this resulted in average
availability of €8.8m with a range of €8.0m to €9.0m and minimum headroom of €4.7m in the year. In the
forecast period to 31 May 2022, the estimated availability range is €7.3m to €9.0m and the minimum
headroom €3.9m. The only covenant on this facility is an equity ratio which must exceed 30% of gross assets
at the financial year end. At 31 May 2020 the ratio was higher than 61%. The facility is uncommitted, but
the bank is obliged to give reasonable notice of any change.
c) An additional working capital facility of €0.5m.
d) A €3m Parent Company loan which is currently subordinated to the working capital facility.
KMR has a fixed working capital facility of €1.5m which was fully drawn at the year end. The covenants on this
facility are (i) an equity ratio which must exceed 35% of gross assets at the financial year end and (ii) the ratio of
working capital/bank facility should be a minimum 1.5x. At 31 May 2020 these ratios were 39.5% and 1.58. The
facility is uncommitted, but the bank is obliged to give reasonable notice of any change.
Considering the progress made to restructure the Group, the trading results in the first quarter of the current financial
year, the likely ongoing impact of the Covid-19 pandemic and the headroom available on the Hemmers working
capital facility, the Directors are of the opinion that it is appropriate to apply the going concern basis of preparation to
the financial statements.
20
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
21 October 2020
Craven House
14 – 18 York Road
Wetherby
Leeds,
LS22 6SL
21
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 2020 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 and notes to the financial
statements, 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 2020 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 judgement, 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.
22
Independent Auditor’s Report to the Shareholders of Leeds Group plc
(continued)
Key audit matters (continued)
Key audit matter
How our audit addressed the key audit matter
Carrying amount of inventories
As detailed in note 19 of the
consolidated financial statements, the
Group has £10.2m (2019: £11.8m) of
inventories at the year end.
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 3 of the Group financial
statements, management therefore
make an assessment of the estimated
provision required to write down
inventory to net realisable value.
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.
Given the significant value of
inventories on the Group statement of
financial position, and the estimation in
valuation, we identified this as a key
audit matter.
Going concern
In the latter stages of the financial year,
the Covid-19 pandemic had a
significant impact throughout Europe,
including Germany, the location of the
primary trading entities of the Group.
As a result of local government action,
the operations of both trading
subsidiaries were temporarily closed
and the Group’s trading subsidiaries
took advantage of the available local
government assistance schemes.
Management (including the Directors
and Audit Committee) have invested
significant time to consider the
potential implications of the ongoing
pandemic on the Group’s going
concern assessment.
We reviewed the mechanics of management’s provisioning calculation
and confirmed that the calculation remained consistent with the
previous year and in accordance with the requirements of the
applicable accounting standards. Based on our knowledge of the
business and discussions with management we considered whether
there were any changes to the nature of the business or potential
impacts of Covid-19 that would render the provisioning policies no
longer appropriate.
We tested the integrity of management’s provision calculations by
agreeing the stock turnover categorisation for each item on a sample
basis to sales data in the year, and reperforming the provisioning
calculation by turnover band to ensure this was accurate.
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.
Key observations:
Based on the procedures performed we found management’s inventory
provision assumptions and applications thereof to be appropriate.
We have obtained and reviewed management’s forecasts for the period
to 31 March 2022.
Our specific procedures included the following:
We checked the outcome of covenant tests during the year and assessed
whether it is still appropriate to classify amounts due to the bank as
non-current liabilities. We further considered the Group’s ability to
meet its loan covenants over the forecast period under management’s
base case and downside sensitivities.
We challenged management’s assumptions used in the forecast period
by considering available evidence, including the ability to grow
revenue, improve gross profit margin and manage costs within the
Group.
23
Independent Auditor’s Report to the Shareholders of Leeds Group plc
(continued)
Key audit matter
How our audit addressed the key audit matter
Going concern (continued)
Given the fundamental nature of the
going concern assumption to the
financial statements, and the level of
judgement required on the part of the
directors, we considered this to be a
key audit matter.
We considered the reasonableness of these assumptions in the context
of the trading performance of the Group in the period between the
statement of financial position date and the approval of the financial
statements.
We considered the latest position in relation to banking arrangements,
the maturity profile of the debt, and forecast covenant compliance and
considered the reasonableness of management’s assumptions of
ongoing access to financing facilities.
We discussed with management the impact of the Covid-19 pandemic
on the Group, specifically in relation to the ability to generate the
expected future revenues as set out in their forecasts, and mitigating
actions that could be taken.
We reviewed the disclosures made both in the front-end statements of
the Annual Report and in note 2 to the financial statements. We
assessed whether these adequately and completely disclose the basis of
the judgements taken and the view formed by management with
respect to the going concern basis of preparation.
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 £180,000 (2019: £125,000). This was
determined with reference to a benchmark of revenue, of which this represents 0.5% (2019: 0.3%), 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 Group.
The materiality for the Parent Company financial statements was set at £60,000 (2019: £50,000). This was determined
with reference to a benchmark of 0.9% of net assets (2019: 0.8%), which we consider to be the principal consideration
for members of the Parent Company.
Component materiality for the subsidiaries considered significant components was set at between £80,000 and
£170,000 (2019: between £65,000 and £110,000).
Performance materiality has been set at 70% (2019: 75%) of the above materiality figures. This has been assessed on
criteria such as historic adjustment levels, complexity and controls.
We agreed with the Audit Committee that we would report to the Committee all individual audit differences in excess
of £8,000 (2019: £5,000). We also agreed to report differences below this threshold that, in our view, warranted
reporting on qualitative grounds.
24
Independent Auditor’s Report to the Shareholders of Leeds Group plc
(continued)
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 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 local 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 the component audit team at various virtual meetings and through
remote review of component auditor files.
For the remaining non-significant components, the Group engagement team performed analytical review procedures,
in tandem with limited audit procedures on any significant transactions.
Other information
The directors are responsible for the other information. The other information comprises the information included in
the Annual Report and Accounts, 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 by the Parent Company, or returns adequate for our audit
have not been received from branches not visited by us; or
•
the Parent Company financial statements are not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
25
Independent Auditor’s Report to the Shareholders of Leeds Group plc
(continued)
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 21, 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.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s
report.
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.
Mark Langford (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Leeds, United Kingdom
21 October 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
26
Consolidated Statement of Comprehensive Income
for the year ended 31 May 2020
Note
Year ended
31 May 2020
£000
Year ended
31 May 2019
£000
7
5
5
9
10
8
Continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Impairment of goodwill
Administrative expenses
Administrative costs
Other income
(Loss) from operations
Finance expense
Share of post-tax (loss) of joint venture
(Loss) before tax
Tax charge
(Loss) from continuing operations
Discontinued operations
(Loss)/profit from discontinued operations
(Loss) for the year attributable to the equity
holders of the Parent Company
Other comprehensive income
Translation differences on foreign operations
Total comprehensive loss for the year attributable
to the equity holders of the Parent Company
35,067
(29,039)
38,905
(30,365)
6,028
(2,876)
-
(4,908)
(4,908)
-
(1,756)
(260)
-
(2,016)
(6)
(2,022)
8,540
(3,229)
(982)
(5,393)
(6,375)
11
(1,053)
(194)
(34)
(1,281)
(41)
(1,322)
(332)
29
(2,354)
(1,293)
196
55
(2,158)
(1,238)
There is no tax effect relating to other comprehensive income for the year. Amounts included in other
comprehensive income may be reclassified subsequently as profit or loss.
(Loss) per share attributable to the equity holders of the Company
Note
Year ended
31 May 2020
Year ended
31 May 2019
Basic and diluted total (loss)
per share (pence)
Basic and diluted (loss)
from continuing operations per share (pence)
11
11
(8.6)p
(7.4)p
(4.7)p
(4.8)p
The notes on pages 31 to 58 form part of these financial statements.
27
Consolidated Statement of Financial Position
at 31 May 2020
Note
31 May 2020
£000
31 May 2019
£000
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Investment property
Intangible assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Tax recoverable
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Non-current liabilities
Loans and borrowings
Lease liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Loans and borrowings
Lease liabilities
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
13
14
15
16
19
20
21
23
24
22
23
24
26
27
27
27
8,183
2,374
-
67
10,624
10,188
3,464
206
1,104
14,962
25,586
(1,950)
(1,478)
(3,428)
(2,877)
(2,671)
(927)
(100)
(6,575)
(10,003)
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)
15,583
17,741
3,792
600
(807)
2,741
9,257
15,583
3,792
600
(807)
2,545
11,611
17,741
The financial statements on pages 27 to 30 were approved and authorised for issue by the Board of Directors on
21 October 2020 and were signed on behalf of the Board by: -
Jan G Holmstrom
Chairman
The notes on pages 31 to 58 form part of these financial statements.
28
Consolidated Cash Flow Statement
for the year ended 31 May 2020
Cash flows from operating activities
(Loss) for the year
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Depreciation of investment property
Amortisation of intangible assets
Finance expense – interest on bank loans
Finance expense – interest lease liabilities
Impairment of goodwill
Net goodwill arising on acquisition
Gain on sale of property, plant and equipment
Share of post-tax loss of joint venture
Tax charge
Cash flows (to)/from operating activities before
changes in working capital and provisions
Decrease in inventories
Decrease in trade and other receivables
Increase in trade and other payables
Cash generated from operating activities
Tax received/(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 generated/(used) in investing activities
Financing activities
Purchase of treasury shares
Bank borrowings repaid
Bank borrowings drawn down
Repayment of principal on lease liabilities
Repayment of interest on lease liabilities
Bank interest paid
Net cash (used) in financing activities
Net increase in cash and cash equivalents
Translation gain/(loss) on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
Year ended
31 May 2020
£000
Year ended
31 May 2019
£000
(2,354)
(1,293)
13
14
15
16
9
9
5
5
5
18
10
19
20
22
13
27
23
23
24
24
9
21
21
723
876
13
6
174
86
-
-
(32)
-
6
(502)
1,735
965
38
2,236
519
2,755
(560)
-
1,317
757
-
(2,378)
-
(840)
(86)
(174)
(3,478)
34
5
1,065
1,104
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
The notes on pages 31 to 58 form part of these financial statements.
29
Consolidated Statement of Changes in Equity
for the year ended 31 May 2020
Share
capital
£000
Capital
redemption
reserve
£000
Treasury
share
reserve
£000
Foreign
exchange
reserve
£000
Retained
earnings
£000
Total
equity
£000
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
(Loss) for the year
Other comprehensive income
Total comprehensive
income/(loss)
-
-
-
-
-
-
-
-
-
-
(2,354)
(2,354)
196
-
196
196
(2,354)
(2,158)
At 31 May 2020
3,792
600
(807)
2,741
9,257
15,583
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Share capital
The nominal value of issued ordinary shares in the Company.
Capital redemption reserve
Amounts transferred from share capital on redemption of issued shares.
Treasury share reserve
Cost of own shares held in treasury.
Foreign exchange reserve
Gains/(losses) arising on retranslation of the net assets of overseas
operations into sterling.
Retained earnings
Cumulative net gains/(losses) recognised in the consolidated statement
of comprehensive income after deducting the cost of cancelled treasury
shares.
The notes on pages 31 to 58 form part of these financial statements.
30
Notes
forming part of the financial statements for the year ended 31 May 2020
1
General information
Leeds Group plc is an AIM listed public company, limited by shares and incorporated in England and Wales
under the Companies Act and its number is 00067863. The address of the registered office is Craven House,
14-18 York Road, Leeds, Wetherby, LS22 6SL.
2
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
When considering its opinion about the application of the going concern basis of preparation of the financial
statements the Directors have given due consideration to:
• The performance of the Group in the last financial year and the robustness of forecasts for the next
24 months, which return the Group to profit.
• The impact of the Covid-19 pandemic on the business, its suppliers and its customers.
• The financing facilities available to the Group and the circumstances in which these could be limited
or withdrawn.
31
Notes
forming part of the financial statements for the year ended 31 May 2020
2
Accounting policies (continued)
Going Concern (continued)
Financial performance and forecasts
Having been consistently profitable the Group has been loss making in each of the last two years.
•
•
In the year to 31 May 2019, the Group reported a pre-tax loss from continuing operations of £1.3m
after writing off goodwill of £1.0m.
In the year to 31 May 2020, the Group reported a pre-tax loss from continuing operations of £2.0m.
Approximately £1.0m of this loss arose in the final quarter which was significantly impacted by the
Covid-19 restrictions discussed below. To address the poor underlying performance the Directors
and management restructured the business in the first half of the year to focus on profitable business
streams and reduce its operating costs. Restructuring costs of £0.4m were incurred in the financial
year which will benefit results going forward. Although loss making, the business was cash
generative in the year with net debt reducing by £2.4m, of which £1.3m resulted from the sale of
investment properties.
Forecasts have been prepared for the 24-month period to May 2022 which indicate a return to modest profit
over that period. These forecasts have been prepared in the knowledge of current Covid-19 conditions and
assume that there is no protracted period of total lockdown. At the end of the first quarter of the current
financial year sales and profit were ahead of forecast. The company has sensitised these forecasts for a
reduction in revenues of 10% at both Hemmers and KMR in the forecast period and an additional net €1
million profit reduction from a second period of lockdown. The Directors are of the opinion that this is a
reasonable worst case, and the currently available facilities would be sufficient in this scenario.
Covid-19 Impact
Both Hemmers and KMR are located in Germany which has responded well to the outbreak. KMR was most
directly impacted by the measures put in place with all stores closed from the mid-March to the mid-April.
Since reopening, the stores have performed ahead of both last year and forecast. Hemmers saw significantly
reduced demand during March and April but like KMR, has traded strongly in the first quarter of the current
year, ahead of last year and forecast.
Both businesses have been supported by the government employment scheme which reimburses the company
for payments to employees for any short time working. This scheme remains available through the forecast
period. In addition, KMR has negotiated rent reductions for its shops in the current financial year which are
reflected in the forecasts.
There has been no significant impact on our suppliers, most of whom are based in China and Turkey.
There has been no significant impact on our customers.
While there is clearly uncertainty about the future course of the pandemic, the Directors consider that with
ongoing government support it is well placed to trade through reasonably foreseeable scenarios.
32
Notes
forming part of the financial statements for the year ended 31 May 2020
2
Accounting policies (continued)
Financing facilities
The operating businesses of the group are Hemmers and KMR, both located in Germany. The Parent
Company, which has no borrowing facilities, is located in the UK.
Hemmers has four sources of funding:
• Term loans which have funded property purchases. These are repayable in instalments over the term
as detailed in note 23. They are secured over the associated properties and that security could be
called in the event that the business defaulted on repayment.
• A maximum working capital facility of €11m, restricted to the borrowing base which is calculated
as 70% of eligible inventory and 80% of eligible debtors. In the financial year 2019/20 this resulted
in average availability of €8.8m with a range of €8.0m to €9.0m and minimum headroom of €4.7m
in the year. In the forecast period to 31 May 2022, the estimated availability range is €7.3m to €9.0m
and the minimum headroom €3.9m. The only covenant on this facility is an equity ratio which must
exceed 30% of gross assets at the financial year end. At 31 May 2020 the ratio was higher than
61%. The facility is uncommitted, but the bank is obliged to give reasonable notice of any change.
• A further working capital facility of €0.5m.
• A €3m Parent Company loan which is currently subordinated to the working capital facility.
KMR has a fixed working capital facility of €1.5m which was fully drawn at the year end. The covenants on
this facility are (i) an equity ratio which must exceed 35% of gross assets at the financial year end and (ii)
the ratio of working capital/bank facility should be a minimum 1.5x. At 31 May 2020 these ratios were
39.5% and 1.58. The facility is uncommitted, but the bank is obliged to give reasonable notice of any change.
Considering the progress made to restructure the Group, the trading results in the first quarter of the current
financial year, the likely ongoing impact of the Covid-19 pandemic and the headroom available on the
Hemmers working capital facility, the Directors are of the opinion that it is appropriate to apply the going
concern basis of preparation to the financial statements.
Changes in accounting policies
The Directors have adopted the following accounting standards which became effective for periods beginning
on or after 1 January 2019:
IFRS 16, ‘Leases’ is effective for periods beginning on or after 1 January 2019. The impact of the new
standard has brought operating lease arrangements on the balance sheet, with the right of use asset and
corresponding financial liability recognised on transition. Within the income statement rental expense has
been replaced by depreciation and interest expenses. This has resulted in an increase in depreciation and
finance costs.
The Group has significant operating lease commitments and therefore the adoption of the standard has had a
material impact on the Financial Statements of the Group. The Directors have applied the modified
retrospective approach and therefore at the date of initial application an amount equal to the lease liability,
using appropriate incremental borrowing rates, has been recognised as a right-of-use asset. The weighted
average incremental borrowing rate of 3% has been used at the date of initial application. This has been
calculated as the net present value of the remaining lease payments. There has been no impact on the opening
reserves on the date of the initial application and in using the modified retrospective approach, the
comparative figures for last year have not been restated. The portfolio of leases consists of vehicle leases and
property leases. For short-term leases, the Directors have decided to apply the exemptions not to recognise
those leases as a right-of-use asset and a lease liability.
The effect of adopting IFRS 16 resulted in the recognition of right-of-use assets and lease liabilities of
£3,067,000 as at 1 June 2019. Instead of recognising operating lease expenses for its operating leases, the
Group has recognised interest on its lease liabilities and depreciation on its right-of-use assets. The overall
impact on the financial results to 31 May 2020 has resulted in an additional charge to the profit and loss of
£36,000.
33
Notes
forming part of the financial statements for the year ended 31 May 2020
2
Accounting policies (continued)
Changes in accounting policies (continued)
There are a number of standards, amendments to standards, and interpretations which have been issued by
the IASB that are effective in future accounting periods but not yet issued. These standards do not impact the
Group and will not impact the presentation of the financial statements in future reporting periods.
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 7. 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 two operating segments, Hemmers and KMR. 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
34
Notes
forming part of the financial statements for the year ended 31 May 2020
2
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 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 is its assets have been
impaired. If there is an indication that its assets have been impaired, the recoverable amount is determined
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
The Group has adopted IFRS 16 using the modified retrospective approach, with recognition of transitional
adjustments on 1 June 2019, without restatement of comparative figures. Lease liabilities are measured at
the present value of the contractual payments due to the lessor over the determined lease term, with the
discount rate applied being the incremental borrowing rate of the group. The incremental borrowing rate has
been determined with the use of existing ability of the group to obtain finance on similar security.
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives
received, and increased for:
•
•
•
lease payments made at or before commencement of the lease;
initial direct costs incurred; and
the amount of any provision recognised where the group is contractually required to dismantle,
remove or restore the leased asset.
On initial recognition, the carrying value of the lease liability also includes:
•
•
•
amounts expected to be payable under any residual value guarantee;
the exercise price of any purchase option granted in favour of the group if it is reasonably certain to
exercise that option; and
any penalties payable for terminating the lease, if the term of the lease has been estimated on the
basis of termination option being exercised.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate
on the balance outstanding and are reduced for lease payments made.
Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the
remaining economic life of the asset.
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
•
•
Leases of low value assets; and
Leases with a duration of 12 months or less.
Payments made under these leases are charged to profit and loss on a straight-line basis over the lease term.
35
Notes
forming part of the financial statements for the year ended 31 May 2020
2
Accounting policies (continued)
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.
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.
Taxation
The charge for taxation is based on the results for the year and takes into account deferred taxation.
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 a pension schemes in Germany where pension arrangements are provided by the state.
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.
36
Notes
forming part of the financial statements for the year ended 31 May 2020
2
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 a 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.
Fees paid on the arrangement of the loan facilities and revolving credit facilities are recognised as transaction
costs over the life of the agreement.
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.
37
Notes
forming part of the financial statements for the year ended 31 May 2020
2
Accounting policies (continued)
Provisions
Provisions are recognised for liabilities of uncertain timing or amount that have arisen as a result of past
transactions and are discounted at a pre-tax rate reflecting current market assessments of the time value of
money and the risks specific to the liability. Where a customer has the right to return 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.
3
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 to calculate the present
value of the cash flows. A goodwill provision, once made, may not be reversed.
(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 13.
(iii) Impairment of right-of-use assets
The values of right-of-use assets are shown in note 14. Impairment tests have been performed by
assessing relevant cash flows of each cash generating unit and assessing this against the value of assets
relating to that specific cash generating unit.
(iv) Inventory
The Company reviews the net realisable value of, and demand for, its inventory on a regular basis to
provide assurance that recorded inventory is stated at the lower of cost or net realisable value. Factors
that could impact estimated demand and selling prices include competitor actions, supplier prices and
economic trends. The values of stock are shown in note 19. A 1% increase in the inventory provision
would equate to approx. £110,000.
(v) Right-to-use assets
The Group has entered into a number of leases that contain 12 month rolling contracts. At the end of
the period, both the lessee and the lessor have the right to terminate the lease without the consent of the
other party. There is inherent judgement required in determining the enforceable period of these leases
in determining whether they result in short term leases and therefore being able to apply the i short term
lease exemptions.
In determining the incremental borrowing rate used in IFRS 16 lease calculations, there is inherent
estimation required to ensure that the incremental borrowing rate suffices that of similar security. The
method of determining the incremental borrowing rate of the Group looks at the existing facility
arrangements and historic ability of the Group to borrow at this level.
38
Notes
forming part of the financial statements for the year ended 31 May 2020
4
Financial instruments - risk management
The Group is exposed through its operations to the following financial risks:
• Credit risk
• Liquidity risk
• Market risk in the form of foreign exchange 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 reduced from £4,655,000 to £2,671,000 and the non-current
bank debt decreased from £2,289,000 to £1,950,000.
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 2019 or 2020. 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.
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.
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 25 to the financial statements.
39
Notes
forming part of the financial statements for the year ended 31 May 2020
4
Financial instruments - risk management (continued)
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.
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, 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 whose functional currencies are the Euro. 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. 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, all other variables held constant, would have resulted in an estimated decrease of £1,126,000 in the
reported net asset value of the Group. A 10% weakening of Sterling against the Euro at the date of the
statement of financial position, on the same basis, would have resulted in an estimated increase of £1,438,000
in the reported net asset value of the Group.
Capital policy
The Group’s capital comprises equity as shown in the Consolidated Statement of Financial Position plus net
debt. 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.
40
Notes
forming part of the financial statements for the year ended 31 May 2020
5
Operating (loss)
Operating (loss) 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
- Bank compliance
Total auditor’s fees
Staff costs
Depreciation
- Property, plant and equipment
- Right-of-use assets
- Investment property
Amortisation
Impairment of goodwill
Operating leases
Short term lease expense
Operating lease income
- Property
Gain on disposal of property, plant and equipment
Year ended
31 May 2020
Year ended
31 May 2019
£000
£000
70
47
3
120
8,480
723
876
13
6
-
-
341
-
32
34
60
3
97
8,788
668
-
16
7
982
1,337
-
11
5
6
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
2020
2019
8
8
226
247
63
71
46
52
343
378
Staff costs, including Directors, comprise
Year ended
31 May 2020
Year ended
31 May 2019
Wages, salaries and Directors’ fees
Defined contribution pension cost
Employer’s national insurance contributions
and similar taxes
Total staff costs
£000
7,107
1
1,372
8,480
£000
7,353
1
1,434
8,788
41
Notes
forming part of the financial statements for the year ended 31 May 2020
6
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
Taxes
Year ended
31 May
Year ended
31 May
£000
£000
2020
£000
2019
£000
219
19
15
31
284
11
230
-
-
-
19
15
31
11
295
258
20
15
31
324
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 2020 were nil (2019: 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 7.
Salary and fees
Bonuses
Employer’s national insurance contributions and similar taxes
Total remuneration of key management personnel
7
Segmental information
Year ended
31 May 2020
Year ended
31 May 2019
£000
284
-
11
295
£000
290
21
13
324
The Group’s trading businesses are now Hemmers, and its trading subsidiary KMR. 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. Hemmers liquidated its Chinese subsidiary, Chinoh-Tex, in
2020 and that has been treated as a discontinued activity.
The chief operating decision maker is the Board, which considers that the Hemmers business comprises two
operating segments, namely Hemmers and KMR. These two segments report to the Board under local GAAP,
and the adjustments required to permit the Group to report under IFRS are made centrally.
The 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.
42
Notes
forming part of the financial statements for the year ended 31 May 2020
7
Segmental information (continued)
The following tables set out a segmental analysis of the Group’s operations.
Year ended
31 May 2020
Hemmers
KMR
£000
£000
Inter
segmental
£000
Parent
Company
£000
Continuing
operations
£000
Discontinued
operations
£000
Total
Group
£000
External revenue
Inter-segmental revenue
Cost of sales
27,060
1,563
8,007
5
(24,468) (5,930)
-
(1,681)
1,472
-
-
-
35,067
(113)
(28,926)
Gross profit/(loss)
Distribution costs
Admin expenses
Other income
Operating (loss)
Finance expense
Internal interest
4,155
2,082
(1,628) (1,312)
(988)
(3,913)
-
88
(1,298)
(147)
(148)
(218)
(113)
-
(Loss) before tax
(1,593)
(331)
(209)
64
233
(88)
-
-
-
-
-
-
(240)
-
(240)
-
148
6,028
(2,876)
(4,908)
-
(1,756)
(260)
-
488
113
(697)
(96)
(51)
(185)
-
(332)
-
-
35,555
-
(29,623)
5,932
(2,927)
(5,093)
-
(2,088)
(260)
-
(92)
(2,016)
(332)
(2,348)
At 31 May 2020
Hemmers
KMR
£000
£000
Inter
segmental
£000
Parent
Company
£000
Continuing
operations
£000
Discontinued
operations
£000
Total
Group
£000
Total assets
16,998
5,745
(218)
3,061
25,586
Total liabilities
(5,769)
(4,151)
-
(83)
(10,003)
Total net assets
11,229
1,594
(218)
2,978
15,583
-
-
-
25,586
(10,003)
15,583
Year ended
31 May 2019
Hemmers
KMR
£000
£000
Inter
segmental
£000
Parent
Company
£000
Continuing
operations
£000
Discontinued
operations
£000
Total
Group
£000
External revenue
Inter-segmental revenue
Cost of sales
30,939
1,852
7,966
-
(25,911) (6,092)
-
(2,056)
1,842
-
-
-
38,905
(204)
(30,161)
2,366
204
(2,093)
41,271
-
(32,254)
Gross profit/(loss)
Distribution costs
Admin expenses
Other income
6,880
1,874
(2,027) (1,202)
(4,231) (1,119)
-
11
Operating profit/(loss)
Finance expense
Internal interest
Share of JV (loss)
633
(155)
(239)
(34)
(447)
(39)
-
-
(214)
-
193
-
(21)
-
-
-
-
-
(1,218)
-
(1,218)
-
239
-
8,540
(3,229)
(6,375)
11
(1,053)
(194)
-
(34)
477
(195)
(251)
-
31
-
-
-
9,017
(3,424)
(6,626)
11
(1,022)
(194)
-
(34)
Profit/(loss) before tax
205
(486)
(21)
(979)
(1,281)
31
(1,250)
43
Notes
forming part of the financial statements for the year ended 31 May 2020
7
Segmental information (continued)
At 31 May 2019
Hemmers
KMR
£000
£000
Inter
segmental
£000
Parent
Company
£000
Continuing
operations
£000
Discontinued
operations
£000
Total
Group
£000
Total assets
22,330
4,609
(331)
109
26,717
838
27,555
Total liabilities
(10,130)
(2,450)
-
2,961
(9,619)
(195)
(9,814)
Total net assets
12,200
2,159
(331)
3,070
17,098
643
17,741
Disaggregation of revenue is shown by destination as follows:
31 May 2020
£000
31 May 2019
£000
Germany
Austria
UK
Holland
France
Rest of EU
Total EU
Switzerland
Rest of Europe
Total Europe
North America
Asia
Oceania
South America
Africa
Total revenue
Non-current assets are all derived in Germany.
Other information:
Year ended 31 May 2020
Hemmers
KMR
£000
£000
Discontinued
activities
£000
Group
£000
25,207
1,496
1,170
1,164
744
3,505
33,286
1,367
483
35,136
89
13
244
21
-
27,053
1,643
1,403
1,362
1,245
4,798
37,504
1,308
977
39,789
334
173
775
143
57
35,503
41,271
Hemmers
KMR
Year ended 31 May 2019
Discontinued
activities
£000
£000
£000
Group
£000
Additions
Property, plant
& equipment
Right-of-use
assets
Depreciation
Property, plant
& equipment
Right-of-use
assets
Investment
property
Amortisation
Intangible assets
556
4
105
153
-
-
560
258
466
84
-
-
-
-
550
-
543
179
1
723
513
131
24
668
112
764
13
6
-
-
-
-
-
876
13
6
-
16
7
-
-
-
-
-
-
-
16
7
44
Notes
forming part of the financial statements for the year ended 31 May 2020
8
Discontinued operation
Chinoh-Tex was liquidated prior to the year end. The losses associated with the closure have been included
in the profit and loss account for the year and are as follows:
Turnover
Cost of sales
Gross (loss)
Distribution costs
Admin expenses
Operating (loss)
Year ended
31 May 2020
£000
601
(697)
(96)
(51)
(185)
(332)
Included above is an amount of £25,000 which relates to the write off debtors which could not be recovered
at the date of liquidation.
9
Finance expense
Year ended
31 May 2020
Year ended
31 May 2019
£000
£000
86
174
260
-
194
194
Year ended
31 May 2020
Year ended
31 May 2019
£000
£000
6
-
6
-
6
-
6
164
157
321
(278)
43
(2)
41
Finance expense
Interest paid on lease liabilities
Interest paid on bank overdrafts and loans
Finance expense recognised in comprehensive income
10
Tax charge
Current tax charge
Tax of overseas operations on profit/(losses) for the year
Adjustments for under provision in prior years
Total current tax charge
Deferred tax (credit) for the year
Total tax charge
Tax charge on discontinued operations
Tax charge on continuing operations
45
Notes
forming part of the financial statements for the year ended 31 May 2020
10 Tax charge (continued)
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation
tax in the UK applied to the profit for the year are as follows:
Year ended
31 May 2020
Year ended
31 May 2019
£000
£000
(Loss) before taxation from all operations
(2,348)
(1,250)
Expected tax charge based on the standard rate of
corporation tax in the UK of 19% (2019:19%)
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
(446)
62
378
-
-
12
6
(238)
17
104
(3)
157
6
43
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.
11 (Loss) per share and Net asset per share
(Loss) per share
Numerator
Total (loss) for the year
Denominator
Weighted average number of shares (excluding treasury shares)
Year ended
31 May 2020
Year ended
31 May 2019
£(2,354,000)
£(1,293,000)
27,320,843
27,330,788
Basic and diluted (loss) per share
(8.6)p
(4.7)p
Numerator
(Loss)/profit for the year from continuing operations
Denominator
Weighted average number of shares (excluding treasury shares)
£(2,0222,000)
£(1,322,000)
27,320,843
27,330,788
Basic and diluted (loss)/profit from continuing operations per share
(7.4)p
(4.8)p
Numerator
(Loss)/profit for the year from discontinued operations
Denominator
Weighted average number of shares (excluding treasury shares)
£(332,000)
£29,000
27,320,843
27,330,788
Basic and diluted (loss)/profit from discontinued operations per share
(1.2)p
0.1p
Since there are no outstanding share options, there is no difference between basic and diluted earnings per
share.
46
Notes
forming part of the financial statements for the year ended 31 May 2020
11
(Loss) per share and Net asset per share (continued)
Net assets per share
Numerator
Net assets
Denominator
Number of shares (excluding treasury shares)
Net assets per share
12 Dividend
Year ended
31 May 2020
Year ended
31 May 2019
£15,583,000
£17,741,000
27,320,843
27,320,843
57.0p
64.9p
The Directors have not proposed a dividend in respect of the year ended 31 May 2020 nor for the year ended
31 May 2019.
13 Property, plant and equipment
Cost
Balance at 31 May 2018
Acquisition of subsidiary
Additions
Disposals
Effect of movements in foreign exchange rates
Balance at 31 May 2019
Additions
Disposals
Transferred to right-of use assets
Effect of movements in foreign exchange rates
Balance at 31 May 2020
Accumulated depreciation
Balance at 31 May 2018
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange rates
Balance at 31 May 2019
Depreciation charge for the year
Disposals
Transferred to right-of use assets
Effect of movements in foreign exchange rates
Freehold land and
buildings
£000
Plant and
equipment
£000
Total
£000
8,022
2,983
11,005
406
31
-
50
8,509
28
(295)
-
145
8,387
443
519
(78)
17
849
550
(78)
67
3,884
12,393
532
(296)
(63)
81
560
(591)
(63)
226
4,138
12,525
1,188
2,062
3,250
261
-
5
1,454
261
(18)
-
33
407
(77)
13
2,405
462
(274)
(34)
53
Balance at 31 May 2020
1,730
2,612
Net book amount
At 31 May 2018
At 31 May 2019
At 31 May 2020
6,834
7,055
6,657
921
1,479
1,526
47
668
(77)
18
3,859
723
(292)
(34)
86
4,342
7,755
8,534
8,183
Notes
forming part of the financial statements for the year ended 31 May 2020
14 Right-of-use assets
Cost
Introduced at 1 June 2019
Transferred from other assets
Additions
Modification
Effect of movements in foreign exchange rates
Balance at 31 May 2020
Accumulated depreciation
Transferred from other assets
Depreciation charge for the year
Effect of movements in foreign exchange rates
Balance at 31 May 2020
Net book amount
At 31 May 2020
15
Investment properties
Cost
Balance at 31 May 2018
Effect of movements in foreign exchange rates
Acquisition of subsidiary
Balance at 31 May 2019
Disposal
Effect of movements in foreign exchange rates
Balance at 31 May 2020
Accumulated depreciation
Balance at 31 May 2018
Depreciation charge for the year
Effect of movements in foreign exchange rates
Balance at 31 May 2019
Depreciation charge for the year
Disposal
Balance at 31 May 2020
Net book amount
At 31 May 2018
At 31 May 2019
At 31 May 2020
48
Leasehold land
and buildings
£000
Plant and
equipment
£000
2,873
-
153
(138)
52
2,940
-
762
21
783
194
63
105
-
6
368
34
114
3
151
Total
£000
3,067
63
258
(138)
58
3,308
34
876
24
934
2,157
217
2,374
Freehold land and buildings
£000
583
4
458
1,045
(1,036)
(9)
-
19
16
1
36
13
(49)
-
564
1,009
-
Notes
forming part of the financial statements for the year ended 31 May 2020
16
Intangible assets
Balance at 31 May 2018
Amortisation
Impairment loss
Effect of movements in foreign exchange rates
Balance at 31 May 2019
Amortisation
Effect of movements in foreign exchange rates
Balance at 31 May 2020
Goodwill
£000
Trademarks
£000
980
-
(982)
2
-
-
-
-
77
(7)
-
2
72
(6)
1
67
Total
£000
1,057
(7)
(982)
4
72
(6)
1
67
Goodwill of £982,000 which arose in 1999 on the acquisition of the cash-generating unit Hemmers was deemed
to be fully impaired in the last financial year.
17 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.
** KMR GmbH.
Germany
Germany
Germany
Import, sale, and distribution of textiles
Property investment
Retail trading
* Wholly owned subsidiaries of Leeds Group.
** Wholly owned subsidiaries of Hemmers.
The registered addresses of these subsidiaries are shown on page 1.
18 Investment in joint venture
At 31 May 2018
Share of post-tax (loss) for year ended 31 May 2019
Effect of movements in foreign exchange rates
Sale of joint venture
At 31 May 2019 and 2020
19 Inventories
Total gross value of goods and goods for resale
Less provision
Finished goods and goods for resale
31 May
£000
734
(34)
(3)
(697)
-
31 May 2020
£000
31 May 2019
£000
10,970
(782)
10,188
12,580
(820)
11,760
The amount of inventories recognised as an expense during the year was £23,973,000 (2019: £26,618,000).
49
Notes
forming part of the financial statements for the year ended 31 May 2020
20 Trade and other receivables
Trade receivables
Other receivables
Prepayments
Total trade and other receivables
31 May 2020
£000
31 May 2019
£000
2,765
544
155
3,464
3,445
762
175
4,382
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.
21 Cash and cash equivalents
31 May 2020
£000
31 May 2019
£000
Cash on demand or on short-term deposit
1,104
1,065
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.
22 Trade and other payables
Trade payables
Other tax and social security taxes
Accruals
Other payables
Total trade and other payables
31 May 2020
£000
31 May 2019
£000
1,378
303
675
521
2,877
1,641
66
374
689
2,770
All amounts are anticipated to be payable in the short term. The carrying values are considered to be a
reasonable approximation of fair value.
23 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 2020
£000
31 May 2019
£000
2,671
1,950
4,621
4,655
2,289
6,944
The carrying values are considered to be a reasonable approximation of fair value.
50
Notes
forming part of the financial statements for the year ended 31 May 2020
23 Borrowings (continued)
Current loans and borrowings
At 31 May 2020 current loans and borrowings of £2,671,000 (2019: £4,655,000) comprise short term loans of
£2,290,000 and instalments due on long term loans detailed below of £381,000. The interest rate on the short-
term loans range from 1.25% to 3% (2019: 1.25% to 2.5%) and these loans are secured on the inventories and
trade receivables of Hemmers and KMR. The short-term loans are drawn down by Hemmers against short
term borrowing facilities of €11.5m and by KMR against short term borrowing facilities of €1.5m. Neither the
Parent Company nor any of its subsidiaries other than Hemmers and KMR have borrowing facilities. The bank
facilities are reviewed annually and are now in place for the forthcoming year.
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 and 2017 further loans were drawn down to finance developments at
Nordhorn.
The Group’s loans and borrowings are within the accounts of Hemmers and KMR. They are denominated in
Euros, and their principal terms are as follows:
Amounts outstanding at 31 May 2020 were:
Repayment
profile
Final repayment
date
31 May 2020
£000
31 May 2019
£000
Fixed
interest
rate
4.07%
1.65%
1.05%
Loan 1
Loan 2
Loan 3
Non-current loans
Equal monthly instalments
Equal quarterly instalments
Equal quarterly instalments March 2026
September 2027
September 2025
436
1,124
390
1,950
493
1,350
446
2,289
31 May 2020
£000
31 May 2019
£000
6,944
5,057
-
-
(2,378)
55
1,932
1,287
(1,358)
26
4,621
6,944
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
The changes in lease liabilities are shown in note 24.
51
Notes
forming part of the financial statements for the year ended 31 May 2020
24 Lease liabilities
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
•
•
Leases of low value assets; and
Leases with a duration of 12 months or less.
Payments made under these leases are charged to profit and loss on a straight-line basis over the lease term.
The lease liabilities recognised in the financial statements include 10 retail store leases located in Germany and
21 motor vehicle leases, all of which are subject to fixed payments.
The book value of lease liabilities are as follows:
Current
Secured lease liabilities
Non - current
Secured lease liabilities
Total lease liabilities
31 May 2020
£000
927
1,478
2,405
The majority of the retail stores are leased over a 12-month period and have, therefore, been accounted for by
recognising a right-of-use asset and a lease liability. Some stores are on 12 month rolling contracts and
management have considered IFRS 16 requirements and IFRIC agenda decision on the assessment of a lease
term regarding cancellable and renewable leases. These contracts ultimately have a termination option at the
end of the existing lease that both the lessor and lessee can exercise without the express permission or consent
of the other party, and without a significant penalty of termination in which case, management have taken the
decision that this is the enforceable period of the lease and those that have a lease term of less than 12 months
have had the practical expedient of short term lease accounting applied.
The lease liability is calculated as the present value of payments over the lease term, discounted at an
incremental borrowing rate to the Group. The Group has applied a practical expedient to apply a single discount
rate to a portfolio of leases of similar characteristics. The incremental borrowing rate is determined by utilising
existing facility agreements and the historic ability of the group to lend against a portfolio of assets of similar
security to the portfolio of leases.
A number of stores have also had rent negotiations during the year due directly to the Covid-19 situation.
Management have been able to renegotiate rent reductions for a number of store leases. The rent reductions
continue to the end of the term of the leases but have not fundamentally changed the nature or scope of the
lease other than an agreed reduction in rental payments. In May 2020, the IASB issued an amendment to IFRS
16 which provides lessees with an immediate relief from the requirement to assess whether Covid-19 related
rent concessions are a lease modification. Unfortunately, the group's rent concession agreements fail this relief
test as it did not satisfy the criteria for being Covid-19 related rent concessions because all the concessions
extend past June 2021. As such, the rent reductions agreed are accounted for as a lease modification on the
date of agreement of the reduction not the date of reduced payments. On the date of deemed modification
agreement, the lease liability is remeasured using the discount rate applicable on the modification date, with
the right-of-use asset being adjusted by the same amount. There is no P&L impact on modification, other than
the future reduction of both interest and depreciation. A small portion of stores have been modified post year
end the impact is not material to disclose the value as a post balance sheet event.
52
Notes
forming part of the financial statements for the year ended 31 May 2020
24 Lease liabilities (continued)
At 31 May 2020, the lease liabilities are shown as follows:
Up to 1 year
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
The movement in the lease liability is as follows:
Land and
buildings
£000
Motor
vehicles
£000
Right-of-use leases introduced at 1 June 2019 (note 14)
Right-of-use lease transferred at 1 June 2019
2,873
-
194
24
Lease liability as at 1 June 2019
Right-of-use lease additions (note 14)
Interest expenses (note 9)
Lease payments
Modifications
Foreign exchange movements
2,873
153
78
(807)
(138)
31
218
105
8
(119)
-
3
At the end of the year
2,190
215
31 May 2020
£000
927
636
678
163
2,405
Total
£000
3,067
24
3,091
258
86
(926)
(138)
34
2,405
The following table reconciles the minimum lease commitments disclosed in the Group's financial statements
as at 31 May 2019 to the amount of lease liabilities recognised on 1 June 2019:
Minimum operating lease commitment at 31 May 2019 (note 28)
Short-term leases not recognised under IFRS 16
Effect of termination options/extensions/term judgements
Undiscounted lease payments
Discount effect using the incremental borrowing rate at 1 June 2019
Lease liabilities for leases classified as operating type under IAS 17
Leases previously classified as finance type under IAS 17
Lease liability as at 1 June 2019
1 June 2019
£000
3,633
(330)
183
3,487
(419)
3,067
24
3,091
53
Notes
forming part of the financial statements for the year ended 31 May 2020
25
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
Current lease liabilities
Non-current lease liabilities
Financial risk management
Overview
31 May 2020
£000
31 May 2019
£000
2,765
1,104
3,869
3,445
1,065
4,510
31 May 2020
£000
31 May 2019
£000
1,378
675
521
2,671
1,950
927
1,478
9,600
1,641
374
689
4,655
2,289
-
-
9,648
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 2020
£000
31 May 2019
£000
2,765
3,445
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.
54
Notes
forming part of the financial statements for the year ended 31 May 2020
25 Financial instruments (continued)
Credit risk (continued)
At 31 May 2020 £465,000 (2019: £1,234,000) of the Group’s trade receivables were past due. An expected
loss provision of £260,000 (2019: £728,000) 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 20)
31 May 2020
£000
31 May 2019
£000
268
47
-
150
465
2,560
3,025
(260)
2,765
410
78
45
701
1,234
2,939
4,173
(728)
3,445
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 2020
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
2020
£000
Not due
Expected loss rate
3%
Gross carrying amount
2,562
10%
266
Loss provision
(78)
(27)
Net carrying value
2,484
239
10%
0%
100%
47
-
150
3,025
(5)
42
-
-
(150)
(260)
-
2,765
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
The situation with regard to the Covid-19 pandemic has not significantly affected the expected credit model as
a large proportion of the debts are covered by debt insurance which has mitigated this risk.
55
Notes
forming part of the financial statements for the year ended 31 May 2020
25 Financial instruments (continued)
Credit risk (continued)
A reconciliation of the movement in the impairment loss for trade receivables is shown below:
Expected credit loss provision at start of period
Amount charged
Amount utilised
Effect of movements in foreign exchange rates
Expected credit loss provision at end of period
Foreign currency
31 May 2020
£000
31 May 2019
£000
728
61
(542)
13
260
708
35
(19)
4
728
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 2020
£000
31 May 2019
£000
2,629
-
76
60
2,765
3,799
184
340
59
4,382
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.
31 May 2020
£000
31 May 2019
£000
2,355
-
439
83
2,877
2,150
195
364
61
2,770
56
Notes
forming part of the financial statements for the year ended 31 May 2020
25 Financial instruments (continued)
Liquidity risk
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 2020
Amounts due in
Less than
1 year
£000
2 to 5
years
£000
After
5 years
£000
Trade payables
Accruals
Other payables
Current bank borrowings
Non-current bank borrowings
Current lease liabilities
Non - current lease liabilities
1,378
675
521
2,671
-
927
-
-
-
-
-
1,950
-
1,315
-
-
-
-
-
-
163
As at 31 May 2019
Amount due in
2 to 5
years
£000
Less than
1 year
£000
Total
£000
1,641
374
689
4,655
-
-
-
-
-
-
-
2,289
-
-
1,641
374
689
4,655
2,289
-
-
Total
£000
1,378
675
521
2,671
1,950
927
1,478
Net carrying value
6,172
3,265
163
9,600
7,359
2,289
9,648
26
Provisions
Provision as at 31 May 2019 and 2020
Tax
£000
100
A provision was made in 2019 for additional tax which may fall due following a prior year tax assessment in
Germany.
57
Notes
forming part of the financial statements for the year ended 31 May 2020
27
Share capital
Issued and fully paid
2020
Number
2020
£000
2019
Number
At beginning and end of the year
31,600,000
3,792
31,600,000
2019
£000
3,792
At 31 May 2020, no options over ordinary shares of the Company were outstanding (2019: 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 and 2020
Number of
shares
9,247,760
30,000
9,277,760
Cost
£000
1,847
9
1,856
Shares cancelled as at 31 May 2019 and 2020
(4,998,603)
(1,049)
Shares held in treasury at 31 May 2019 and 2020
4,279,157
807
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.
28 Leases
The Group holds operating leases in respect of retail stores and motor vehicles used in Germany.
The total future values of minimum lease payments in respect of all operating leases are due as follows:
Not later than one year
Later than one year and not later than five years
Total future values of minimum lease payments
29
Commitments
31 May 2019
£000
1,229
2,504
3,633
At 31 May 2020, there were £110,000 capital commitments authorised and committed (2019: £353,000). There
were no amounts authorised but not committed (2019: £nil).
30 Related party transactions
Whilst KMR was a joint venture in 2019, the Company paid £15,000 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.
58
Company Statement of Financial Position at 31 May 2020
Prepared under FRS 101 "Reduced Disclosure Framework"
Company number 00067863
Note
31 May 2020
£000
31 May 2019
£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
2,699
6,069
13
349
362
(83)
279
6,348
3,792
600
(807)
2,763
6,348
3,370
3,022
6,392
15
94
109
(61)
48
6,440
3,792
600
(807)
2,855
6,440
The loss of the company for the year was £92,000 (2019: profit £3,000).
The financial statements on pages 59 to 60 were approved and authorised for issue by the Board of Directors on
21 October 2020 and were signed on behalf of the Board by: -
Jan G Holmstrom
Chairman
The notes on pages 61 to 63 form part of these financial statements.
59
Company Statement of Changes in Equity
for the year ended 31 May 2020
At 31 May 2018
Profit for the year
Transaction with Shareholders:
Purchase of treasury shares
At 31 May 2019
(Loss) for the year
Share
capital
£000
Capital
redemption
reserve
£000
Treasury
share
reserve
£000
Retained
earnings
Total
equity
£000
£000
3,792
600
(798)
2,852
6,446
-
-
-
-
-
(9)
3
-
3
(9)
3,792
600
(807)
2,855
6,440
-
-
-
(92)
(92)
At 31 May 2020
3,792
600
(807)
2,763
6,348
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 61 to 63 form part of these financial statements.
60
Notes
forming part of the financial statements of the Company for the year ended 31 May 2020
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 is its assets have been
impaired. If there is an indication that its assets have been impaired, the recoverable amount is assessed 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. The requirement for a provision is assessed 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.
61
Notes
forming part of the financial statements of the Company for the year ended 31 May 2020
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 loss for the year for the Company dealt with in the consolidated financial
statements of the Company was £92,000 (2019: profit £3,000).
The remuneration of the Auditors is disclosed in note 5 to the consolidated financial statements.
3 Staff costs
The average number of persons employed in the year by the Company (including Directors) was 4 (2019: 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 2020
Year ended
31 May 2019
£000
£000
108
1
2
111
108
1
3
112
The remuneration of the Directors is disclosed in note 6 to the consolidated financial statements. Outstanding
share options granted to employees or Directors at 31 May 2020 were nil (2019: nil).
4 Investments in subsidiary undertakings
At 31 May 2020 and 31 May 2019
Cost
£000
3,370
Accumulated
impairment
£000
Net carrying
amount
£000
-
3,370
Details of subsidiary undertakings are given on the Group Information page 1 and in note 17 to the consolidated
financial statements.
62
Notes
forming part of the financial statements of the Company for the year ended 31 May 2020
5 Trade and other receivables
Prepayments and accrued income
Amounts receivable from subsidiary undertakings
Total trade and other receivables
31 May 2020
£000
31 May 2019
£000
13
2,699
2,712
15
3,022
3,037
No impairment loss was recognised in the year in respect of amounts receivable from subsidiary undertakings.
(2019: £nil). The amounts receivable from subsidiary undertaking relates to long term loans with details as
follows:
Fixed
Interest
Rate
Repayment
Profile
31 May 2020
£000
31 May 2019
£000
Loan 1
Loan 2
8%
8%
Repayable on demand
Repayable on demand
2,699
-
2,650
372
6 Trade and other payables
Accruals and deferred income
Total trade and other payables
7 Share capital
Issued and fully paid
31 May 2020
£000
31 May 2019
£000
83
83
2020
Number
2020
£000
2019
Number
61
61
2019
£000
3,792
At beginning and end of the year
31,600,000
3,792
31,600,000
At 31 May 2020, no options over ordinary shares of the Company were outstanding (2019: nil).
Details of the shares held in treasury are disclosed in note 27 to the consolidated financial statements.
8 Commitments
There were no contracted capital commitments for the Company in either period.
63
Five Year Summary of Results and Capital Employed
Year ended
31 May
2020
£000
Year ended
31 May
2019
£000
Year ended
31 May
2018
£000
Year ended
31 May
2017
£000
Year ended
31 May
2016
£000
35,555
(29,623)
41,271
(32,254)
41,538
(32,526)
41,053
(32,468)
36,272
(28,563)
5,932
(8,020)
9,017
(9,057)
9,012
(7,860)
8,585
(7,008)
7,709
(6,165)
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
(2,088)
(260)
-
-
(40)
(194)
(34)
(982)
(Loss)/profit before tax
Tax charge
(2,348)
(6)
(1,250)
(43)
1,152
(160)
(107)
-
885
(340)
1,577
(162)
1,544
(88)
33
-
51
-
1,448
(334)
1,507
(468)
(Loss)/profit after tax
(2,354)
(1,293)
545
1,114
1,039
Assets
Non-current assets
Current assets
10,624
14,962
9,615
17,940
10,110
16,831
10,339
18,756
7,359
15,156
Total assets
25,586
27,555
26,941
29,095
22,515
Non-current liabilities
Current liabilities
(3,428)
(6,575)
(2,289)
(7,525)
(3,985)
(3,968)
(4,259)
(6,534)
(4,073)
(2,930)
Total liabilities
(10,003)
(9,814)
(7,953)
(10,793)
(7,003)
Total net assets
15,583
17,741
18,988
18,302
15,512
Financed by
Total equity
Key Statistics
15,583
17,741
18,988
18,302
15,512
Basic and diluted (loss)/earnings per
share
(8.6p)
(4.7p)
2.0p
4.1p
3.8p
Net assets per share
57.0p
64.9p
69.4p
66.9p
56.5p
64
Notice of Annual General Meeting
The one hundred and twentieth annual general meeting of the Leeds Group plc (the Company) will be held at 12
noon on 23 November 2020 for the following purposes:
To consider and, if thought fit, pass the following resolutions which will be proposed as ordinary resolutions:
1.
2.
3.
4.
5.
To receive the report of the Directors, the financial statements for the year ended 31 May 2020 and the report
of the auditors thereon.
To re-appoint Mr Johan Claesson as a director.
To re-appoint Mr Jan Holmstrom as a director.
To re-appoint BDO LLP as auditors of the Company from the conclusion of this meeting until the conclusion
of the next general meeting at which the financial statements are laid before the Company.
To authorise the Directors to fix the auditor's 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 resolution 7 will be proposed as a special resolution:
6.
7.
That, the Directors of the Company ("Directors") be and hereby are generally and unconditionally authorised
for the purposes of section 551 of the Companies Act 2006 (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 (being approximately one third of the
existing issued share capital of the Company). 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 of shares or grant of Rights already made or to be made
pursuant to such authorities.
That, subject to the passing of resolution 6, the Directors of the Company ("Directors") be and hereby are
empowered pursuant to sections 570 and 573 of the Companies Act 2006 (the "Act") to allot equity securities
(within the meaning of section 560 of the Act) wholly for cash pursuant to the authority conferred by resolution
6 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, up to an aggregate nominal amount of £189,000 (being
approximately 5 per cent. of the existing issued share capital of the Company.
65
Notice of Annual General Meeting (continued)
Special business (continued)
The powers 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.
For the purpose of this resolution 7:
a)
b)
references to an "allotment of equity securities" shall include a sale of treasury shares; and
the nominal amount of any securities shall be taken to be, in the case of rights to subscribe for or convert
any securities into shares of the Company, the nominal amount of such shares which may be allotted
pursuant to such rights.
By Order of the Board
Dawn Henderson
Company Secretary
Craven House
14-18 York Road
Wetherby
Leeds
LS22 6SL
21 October 2020
66
Notice of Annual General Meeting (continued)
Notes
1.
2.
3.
4.
5.
6.
Shareholders of the Company are entitled to attend, speak and vote, either in person or by proxy, at general
meetings of the Company. However, in light of the UK Government’s current guidance on public
gatherings due to the Covid-19 pandemic, for this year's annual general meeting, the Board has
concluded that shareholders cannot be permitted to attend the annual general meeting in person and so
it will take place as a closed meeting. The annual general meeting will be held by electronic means. It is
strongly advised that shareholders appoint the Chairman of the annual general meeting as their proxy
to vote in accordance with their instructions.
This the formal notification to members of the annual general meeting, its date and time, and the matters to be
considered. If you are in doubt as to what action to take you should consult an independent adviser.
Resolutions 1 to 6 (inclusive) will be proposed as ordinary resolutions. A simple majority (being more than
50 per cent.) of votes cast must be in favour of each such resolution in order for it to be passed. Resolution 7
will be proposed as a special resolution. A special resolution requires 75 per cent. or more of votes cast to be
in favour of the resolution in order for it to be passed. Resolutions 6 and 7 are items of special business.
Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001 (as amended), only those
shareholders registered in the register of members of the Company at 8.30pm on 19 November 2020 as holders
of ordinary shares of 12p each in the capital of the Company shall be entitled to 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 vote at the meeting.
A member entitled to 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 but will need to participate in the annual general meeting in order to represent the member. Members
are strongly urged to register their votes in advance by appointing the Chairman of the annual general
meeting as their proxy (and not any other person). It is not recommended that any other person is
appointed as a proxy as they will not be able to attend the annual general meeting and the vote will not
be counted.
A member can vote either by logging on to www.signalshares.com and following the instructions; in the case
of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the
procedures set out in note 6; or by requesting a hard copy form of proxy directly from the registrars, Link Asset
Services on Tel: 0371 664 0300 or email Link at shareholderenquiries@linkgroup.co.uk.
To submit a proxy electronically using the link www.signalshares.com you will need to log into your Signal
Shares account, or register if you have not previously done so. To register you will need your Investor Code
which is detailed on your share certificate. need help with voting online, please contact our Registrar, Link
Asset Services, on Tel: 0371 664 0300. Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are
open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales. During this
challenging time, extra pressure is being put on telephone services and it may just take a little longer to get
through than normal. Or email Link at shareholderenquiries@linkgroup.co.uk.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment
service may do so for the annual general meeting (and any adjournment of it) by using the procedures described
in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST
members who have appointed (a) voting service provider(s), should refer to their CREST sponsor or voting
service provider(s), who will be able to take the appropriate action on their behalf.
67
Notice of Annual General Meeting (continued)
Notes (continued)
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate
CREST message ("CREST Proxy Instruction") must be properly authenticated in accordance with Euroclear
UK & Ireland Limited's ("Euroclear") specifications, and must contain the information required for such
instruction, as described in the CREST Manual. The message, regardless of whether it constitutes the
appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in
order to be valid, be transmitted so as to be received by the Company's agent (ID RA10) by 12 noon on 19
November 2020. For this purpose, the time of receipt will be taken to be the time (as determined by the
timestamp applied to the message by the CREST Application Host) from which the Company's agent is able
to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change
of instructions to proxies appointed through CREST should be communicated to the appointee through other
means.
CREST members and, where applicable, their CREST sponsors, or voting service providers should note that
Euroclear does not make available special procedures in CREST for any particular message. Normal system
timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal
member, or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor
or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted
by means of the CREST system by any particular time. In this connection, CREST members and, where
applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the
CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation
35(5)(a) of the Uncertificated Securities Regulations 2001 (as amended).
In the case of joint holders, where more than one of the joint holders’ purports to appoint a proxy, only the
appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in
which the names of the joint holders appear in the Company’s register of members in respect of the joint
holding (the first-named being the most senior).
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 submitted electronically using the Signal Shares system; CREST
system; or lodged at the Registrars of the Company, Link Asset Services, FREEPOST SAS, 34 Beckenham
Road, Beckenham, BR3 9ZA not later than 12 noon on 19 November 2020.
Completion and return of a form of proxy would not ordinarily preclude a member from subsequently attending
and voting at the meeting. However, as the annual general meeting is being held as a closed meeting, this year
members will not be able to attend.
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 8 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 a hard-copy proxy form and would like to change the
instructions using another hard-copy proxy form, please contact Link Asset Services, FREEPOST SAS, 34
Beckenham Road, Beckenham, BR3 9ZA.
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.
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
FREEPOST SAS, 34 Beckenham Road, Beckenham, BR3 9ZA no later than 12 noon on 19 November 2020.
If you attempt to revoke your proxy appointment but the revocation is received after the time specified then,
subject to paragraph 8 above, your proxy appointment will remain valid.
68
7.
8.
9.
10.
11.
Notice of Annual General Meeting (continued)
Notes (continued)
12. As at 21 October 2020 (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 21 October 2020 are 27,320,843.
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.
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 2020. 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 63 of this document.
Resolution numbers 2 and 3
At each annual general meeting, one third of the Directors of the Company for the time being (other than those
appointed since the last annual general meeting) are required to retire. If the number of relevant Directors is not a
multiple of three, the number nearest to but not less than one third of the Directors are required to retire. Any retiring
director is eligible for re-appointment. At this annual general meeting, Mr Johan Claesson and Mr Jan Holmstrom are
the Directors subject to retirement by rotation. Resolutions 2 and 3 propose the re-appointment of Mr Claesson and
Mr Holmstrom, respectively.
Resolution number 4
The auditors of the Company must be re-appointed at each meeting at which the financial statements are presented.
Resolution 4 proposes the re-appointment of BDO LLP, who have indicated their willingness to be so re-appointed.
Resolution number 5
Resolution 5 follows past practice in giving the Directors authority to agree the auditor’s remuneration.
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 and is in substitution for, all existing like authorities.
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.
69
LEEDS
GROUP PLC
Registered in England and Wales
Registered Number 00067863
Registered Office
Craven House
14 - 18 York Road
Wetherby
Leeds
LS22 6SL
Tel: 01937 547877
Email: admin@leedsgroup.plc.uk
Website: www.leedsgroup.plc.uk