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2023 ReportLEEDS GROUP PLC Annual Report and Accounts 2023 Contents Group Information and Advisors Strategic Report Chairman’s Statement Finance and Operating Review Governance Board of Directors Chairman’s Corporate Government Statement Corporate Governance Report Directors’ Report Independent Auditor’s Report FFinancial Statements 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 Appendix 1 - Five Year Summary of Results and Capital Employed Notice of Annual General Meeting 1 2 2 3 7 7 8 17 21 28 29 30 31 32 57 58 59 62 63 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 Director during the year Jörg Hemmers Principal activity Import, sale & distribution of fabric Wholly owned subsidiary companies of Hemmers to 1 January 2023: Stoff-Ideen-KMR GmbH ‘‘KMR’’ Twentestrasse 1 48527 Nordhorn Germany Director during the year Jörg Hemmers Principal activity Placed into insolvency during the year and, therefore, regarded as a discontinued operation Group Advisers Solicitors Financial Advisers Auditors Walker Morris LLP 33 Wellington Street Leeds LS1 4DL Cairn Financial Advisers LLP Ninth Floor 107 Cheapside London EC2V 6DN MHA Sixth Floor 2 London Wall Place London EC2Y 5AU Registrars* Principal Bankers Link Group Central Square 29 Wellington Street Leeds LS1 4DL Lloyds Bank 1 Lovell Park Road Leeds LS1 1 NS * Calls to the Link Group shareholder helpline 0871 664 0300 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. Or you can contact them by e mail shareholderenquiries@linkgroup.co.uk. 1 Strategic Report (continued) 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 2023, 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 • • • loss before tax loss per share working capital levels Group highlights • Group revenue for all operations in the year was £27,817,000 (2022: £29,590,000). • Group operating loss was £509,000 (2022: loss £2,990,000 which included an impairment charge of £1,662,000). • The interest charge was £384,000 (2022: £255,000) reflecting higher interest rates. • Group loss before tax was £893,000 (2022: loss £3,245,000). • The tax credit in the year was £53,000 (2022: charge £4,000). • Total loss per share was 3.1p (2022: loss per share 11.9p). Hemmers Hemmers is an international business engaged in designing, importing, warehousing and wholesaling of fabrics from its base in Germany. The markets in Germany and other European countries have over the past few years been affected by the Covid-19 pandemic and the conflict in Ukraine and more recently by high inflation and high interest rates. Management have made significant reductions in the cost base and will continue to align costs with sales levels and look to make efficiencies wherever they can to ensure Hemmers is as competitive as it can be in the marketplace. External sales increased slightly in the year to £24,290,000 (2022: £23,998,000). The gross contribution percentage increased to 35% (2022: 34%) and the gross profit increased to £5,156,000 (2022: £4,440,000). Hemmers reported a loss before interest of £248,000 (2022: loss £415,000). External interest has increased to £337,000 (2022: £162,000) due to increased interest rates. Hemmers bank debt, net of cash, increased in the year to £6,046,000 (2022: £5,643,000). The bank debt is secured on the assets of Hemmers. KMR On 7 October 2022, the German Courts accepted Hemmers’ management decision to place its subsidiary KMR into an insolvency process. As a result of the insolvency, an impairment charge of £1,662,000 was recognised in last year’s accounts with the assets relating to the KMR retail shops being written down to a £nil net book value. Full control passed to the insolvency administrator on 1 January 2023 and at that point KMR ceased to be a subsidiary within the Group. The results for KMR are only consolidated for the 7 months to 31 December 2022 and are reported as a discontinued operation in these financial statements. The loss for the 7-month period before interest for the year was £32,000 (2022: loss £2,277,000 for 12 months) and the loss after interest was £79,000 (2022: loss £2,370,000). During the year, KMR’s freehold property was sold for £521,000 realising a profit on sale of £139,000. The Group made a net gain of £138,000 on the transfer of its assets to the insolvency administrator. 3 Strategic Report (continued) Finance and Operating Review (continued) Business review (continued) Fixed Assets The net book amount of tangible fixed assets is £6,487,000 (2022: £7,335,000). Capital additions in the year amounted to £51,000 (2022: £447,000). During the year, KMR’s freehold property was sold for £521,000 realising a profit on sale of £139,000. The net book value of right-to-use assets is £207,000 (2022: £170,000). These relate to car leases, of which there were £142,000 additions during the year (2022: £45,000). Working Capital and Cash Flow Net debt decreased from £6,381,000 to £5,812,000 in the year. Net cash generated in the year at average exchange rates was £1,892,000 (2022: used £344,000). Working capital, which comprises inventories, trade and other receivables and trade and other payables, decreased in the year by £2,239,000 (2022: increased by £1,139,000) mainly due to lower levels of stock as there was no KMR stock this year. Loan repayments of £539,000 (2022: £708,000) have been made this year. There were no new loans taken out in the year (2022: £2,835,000). Lease liability repayments (including interest) of £698,000 (2022: £1,059,000) were 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 £738,000 as follows: At 31 May 2022 Loss after tax Translation differences At 31 May 2023 Net assets £000 11,177 (840) 102 10,439 Per share pence 40.9 (3.1) 0.4 38.2 Debt Profile The funding policy of the Group continues to match its funding requirements in a cost-effective fashion with an appropriate combination of short and longer-term debt. Property investments have been financed by long term loans at fixed interest rates between 1.05% and 1.65%. Working capital finance, when required, is via short term loans of three months currently attracting interest at rates of between 1.5% and 3%. Bank debt in the subsidiary is secured by charges on inventories, receivables and property and is without recourse to the Parent Company. 4 Strategic Report (continued) Finance and Operating Review (continued) Business review (continued) Principal risks and uncertainties The Board has identified the main categories of business risk in relation to the Group’s strategic aims and objectives, and has considered reasonable steps to prevent, mitigate and manage these risks. The principal risks identified are as follows: Funding risk The Group has a combination of short-term borrowing facilities and longer-term loan agreements secured on Group 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. Hemmers has 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 2023, this resulted in average availability of €8.4m (2022: €7.7m) with a range of €7.2m to €10.0m (2022: €6.5m to €8.8m) and minimum headroom of €1.0m (2022: €3.2m) in the year. In the forecast period to 31 May 2025, the estimated availability range is €7m to €8.8m and the minimum headroom €0.3m. The facility is committed until 31 May 2024. Hemmers also has another working capital facility of €1m secured on working capital which was fully drawn at the year end. The facilities are uncommitted, but the bank is obliged to give reasonable notice of any change. The Directors consider that there will be sufficient headroom available within the Hemmers working capital facility and, therefore, the Directors are of the opinion that it is appropriate to apply the going concern basis of preparation to the financial statements. However, the Directors acknowledge that the volatile global situation could have an impact on the future trading result of Hemmers and in turn could affect the ability of the Group to meet its forecasts and therefore comply with banking covenants in downside scenarios. In addition, the Group has borrowing facilities which are due for renewal within one year of the date of approval of these financial statements, which the Group relies on to operate as a going concern. The Directors will look to renew the existing facilities when they are due for renewal, although acknowledge the conditions noted above give rise to a material uncertainty around the going concern of the Group. 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. 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. Principal risks and uncertainties 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. 5 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 2020. 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’s main activity is as a textiles business which designs, sources, and sells fabric. It sources mainly from the Far East and sells mainly to the European market. To service these markets, the Group has invested significantly in recent years in warehousing and distribution facilities and in double folding plant and machinery to provide a complete, rapid response, in- house service. The Board continues to look at all available options to 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 announcements made on RNS and at the Annual General Meeting (‘AGM’) where the Board encourages investors to participate. The Company also maintains a website https://www.leedsgroup.plc.uk which contains information on the Group’s business, corporate information and specific disclosures required under AIM Rules and the QCA Code. In this way the Directors have developed a good understanding of the needs and expectations of all elements of the Company’s shareholder base. There have been no significant votes against resolutions at previous AGMs. As the companies within the Group expand, we continually review the risks and uncertainties facing the Group to ensure we identify any new key risks and how we implement appropriate action to manage these risks. 8 Corporate Governance Report (continued) 3 4 Take into account wider stakeholder and social responsibilities and their implications for long-term success Embed effective risk management, considering both opportunities and threats, throughout the organisation Fully compliant The Board recognises its responsibility under UK law to promote the success of the Group for the benefit of its stakeholders and understands that the business has a responsibility towards its stakeholders including shareholders, employees, customers, suppliers, regulators and to the local community. The Board sets standards across the Group and monitors these at regular Board meetings. The Board is very conscious that the tone and culture it sets impacts all aspects of the Group and the way employees behave and operate. The Board encourages open dialogue and commitment to providing the best service possible to the Group’s customers and considerate interactions with suppliers. The Company monitors feedback from all its stakeholders as reported by the Group companies and the Board uses this to develop future policy. Being a participant in the textile industry, the Board is keenly aware of environmental and labour considerations and is actively working to ensure that it is at the forefront of meeting the standard expected over the coming years. Fully compliant The Board has an active program of working with all the Group companies to assist with achieving goals and to discuss and resolve any issues that arise. The Board is responsible for the Group’s system of internal controls and for reviewing its effectiveness. The system is designed to manage, rather than eliminate, the risk of failure to achieve the Group’s strategic objectives and can only provide reasonable but not absolute assurance against material misstatement or loss. The Board monitors financial controls through the setting and approval of annual budgets throughout the Group and the regular review of monthly management accounts which are produced within three weeks of the month end. Each Group company has defined authorisation levels for expenditure, the placing of orders and signing authorities. The daily cash movements of the Group companies are reconciled and monitored by their finance departments. The Group’s cash flow is monitored by the Board. Each year on behalf of the Board, the Company Secretary attends audit review meetings at which the auditors present their findings including a comprehensive review of risks/potential risks which cover both financial and non-financial issues potentially affecting a Group company. Group Board meetings are held in Germany or via the internet and will involve Hemmers management for discussions on the performance of that subsidiary. 9 Corporate Governance Report (continued) 5 Maintain the Board as a well- functioning, balanced team led by the chair Fully compliant The purpose of the Board is to ensure that the business is managed for the long- term benefit of all shareholders, whilst at the same time having regard for all stakeholders. The Board has a formal schedule of matters reserved for its decisions as set out in Principle 10 below. There are at least four full Board meetings spread across each year which tie in as far as possible with the Group’s financial reporting calendar. At least one meeting will be based at Hemmers. Additional meetings are held as required. The full Board is responsible and accountable to the shareholders for the management and success of the Group and to provide effective controls to assess and manage risks in the Company. The Board currently comprises the Non-Executive Chairman, two other Non- Executive Directors, one of whom is an independent non-executive director and one executive director who is managing director of the main operating business, Hemmers. The Non-Executive Directors are considered to be independent of the management. However, the Non-Executive Chairman and one other Non- Executive Director are representatives of significant shareholders and so do not meet the definition of Independent Non-Executive Director. Each is aware of his statutory responsibilities to act in the interests of all shareholders, and they consider their interests to be aligned to promote the long-term success of the Company. Thus, the Board only has one Independent Non-Executive Director rather than two as recommended by the QCA code. The Directors believe that the current Board structure has the necessary range of skills, objectivity and diversity to manage what is a simple structure business and that to increase the number of Independent Non-Executive Directors would add cost rather than benefit. The Board continually keeps this position under review and has identified triggers that it believes would lead to additional appointments. These include proposed diversification into new business areas; a significant acquisition; significant organic growth into new territories. The Board has established procedures to identify and monitor potential or actual conflicts of interest. The Board is supported by the Audit, Remuneration and Nominations Committees, each of which has access to information, resources and advice that it deems necessary, at the Company’s cost, to enable the committee to discharge its duties. The Committees’ Terms on Reference are posted on the AIM rule 26 page of Company’s website. 10 Corporate Governance Report (continued) 5 Maintain the Board as a well- functioning, balanced team led by the chair (continued) 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 2022/23, there were nine internet Board meetings and one other Board meetings which were attended by all Directors. There were two further internet Board Meeting where all Directors did not attend. In 2022/23 all non-executive Directors attended the two audit committee meetings and the one remuneration committee meeting. All Directors are subject to reappointment by shareholders at the first Annual General Meeting following their appointment and thereafter by rotation. The Directors spend such time as is necessary to ensure that their roles and duties are carried out effectively. 11 Corporate Governance Report (continued) 6 Ensure that between them the Directors have the necessary up- to-date experience, skills and capabilities Fully compliant The skills and experience of the Board are set out in their biographical details included within the Directors’ Report of the Company’s Annual Report. The experience and knowledge of each of the Directors gives them the ability to constructively challenge strategy and to scrutinise performance. The Board comprises Directors with a range of different skills including business and financial experience, IT experience and corporate finance experience. All the Directors have considerable experience within the textile and leather industry and therefore are well placed to offer challenge to the Executive Director and Senior management of the textile trading companies. In addition, the Company’s Non-Executive Directors have held senior executive positions for a number of years in UK plc companies and therefore are fully aware of their corporate responsibilities and the need to ensure compliance with the AIM regulatory requirements. The Directors of the Company and their responsibilities on the Board are: Role of the Non-Executive Chairman – Jan Holmstrom: The Non-Executive Chairman has overall responsibility for corporate governance and in promoting high standards throughout the Company. As well as leading and chairing the Board, the Non-Executive Chairman’s responsibilities are: • Committees are properly structured and operate with appropriate terms of reference; • The Company has a coherent strategy and sets objectives against this; and • There is effective communication between the Company and its shareholders. Jan Holmstrom has held a number of positions as Chairman of private and plc companies and has considerable textile and corporate finance experience. Role of the Group Finance Manager and Company Secretary – Dawn Henderson: The roles of Group Finance Manager and Company Secretary are combined. The Board acknowledges the QCA guidelines on this matter and consider the joint roles appropriate for the Company’s size. The Group Finance Manager is responsible for providing financial oversight of the Group, preparing the accounts, monitoring the performance of the Group companies and reporting on financial matters to the Board. Providing financial input on acquisitions. The Company Secretary is responsible for providing clear and timely information flow to the Board and its Committees and supports the Board on matters of corporate governance and risk. The Company Secretary has direct access to the Chairman on matters of Corporate Governance. Dawn Henderson is a qualified Chartered Accountant who qualified with KPMG in 1988. She has held various Finance Director and Company Secretary roles both within the private and plc environment. 12 Corporate Governance Report (continued) 6 Ensure that between them the Directors have the necessary up- to-date experience, skills and capabilities (continued) 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. Fully compliant 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. 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 behaviors 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 behaviors are deployed at Group company meetings. 13 Corporate Governance Report (continued) 9 Maintain Governance structures and processes that are fit for purpose and support good decision making by the Board 10 Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders Fully compliant The roles and responsibilities of each Director are set out in the response to Principle 6. The terms of reference of the Board committees are set out in response to Principle 5. There are a wide range of matters reserved for the Board. These include strategy, finance, corporate governance, approval of significant capital expenditure, appointment of key personnel and compliance with legal and regulatory requirements. The Company’s governance framework is reviewed to maintain the highest levels of business performance. Fully compliant The Board recognises that meaningful engagement with its shareholders is integral to the continued success of the Group. The Board are kept informed of the views of the shareholders through reports from the Independent Non- Executive Director and Company Secretary. The Board believes that the Annual Report, and the Interim Report published at the half-year, play an important part in presenting all shareholders with an assessment of the Group’s position and prospects. All reports and press releases are published on the Group’s website. The Annual General Meeting is the principal opportunity for private shareholders to meet and discuss the Group’s business with the Directors. There is an open question and answer session during which shareholders may ask questions both about the resolutions being proposed and the business in general. The Directors are also available after the meeting for an informal discussion with shareholders. The Committees of the Board have not published committee reports. They will consider whether to do so in the future. The Board is supported by the Audit and Remuneration Committees, each of which has access to information, resources and advice that it deems necessary, at the Company’s cost, to enable the Committee to discharge its duties. These duties are set out in the Terms of Reference which are available on the website. The Audit Committee The Audit Committee has met with the external auditors during the year to monitor progress and discuss any issues arising. The Remuneration Committee The Remuneration Committee reviews and determines on behalf of the Board and shareholders of the Company the pay, benefits and other terms of service of the executive Directors of the Company and the broad pay strategy with respect to senior Company employees. Remuneration Policy The objective of the Company’s remuneration policy is to develop remuneration packages which motivate Directors and support the business objectives in the short, medium and long term; to align the interests of executive Directors with the interests of long-term shareholders; encourage executives to operate within the risk parameters set by the Board and ensure that the Company can recruit and retain high quality executives through packages which are fair and attractive but not excessive. 14 Corporate Governance Report (continued) 10 Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders (continued) 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 arrangements for senior management incentive • Delegation of the board’s powers • Agreeing membership and terms of reference of board committees and task forces • Establishment of managerial authority limits for smaller transactions • Matters referred to the board by the board committees 2. Strategic/Policy considerations Business strategy • • Diversification/retrenchment policy • Specific risk management policies including insurance, hedging, borrowing limits and corporate security • Agreement of codes of ethics and business practices • • Annual assessment of significant risks and effectiveness of internal Receipt and review of regular reports on internal controls controls Calling of shareholders’ meetings • • Avoidance of wrongful or fraudulent trading 3. Transactions • Acquisitions and disposals of subsidiaries or other assets over, say • • 5% of net assets/profits Investment and other capital projects over a similar level Substantial commitments including: i. Pension funding ii. Contracts in excess of one year’s duration iii. Giving securities over significant Company assets (including mortgages and charges over the Company’s property) Contracts not in the ordinary course of business • • Actions or transactions where there may be doubt over property • Approval of certain announcements, prospectuses, circulars and similar documents • Disclosure of Directors’ interests • Transactions with Directors or other related parties 15 Directors’ Report The Directors present their annual report and the audited financial statements for the year ended 31 May 2023. Principal activities Leeds Group plc has been established for more than a century and is incorporated in England and Wales under Company Number 0067863. 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. Results and dividend The consolidated statement of comprehensive income for the year is set out on page 28. Given the results of the financial year, the Directors do not recommend the payment of a dividend in 2023 (2022: £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. Mr Jörg Hemmers resigned as a director effective 1 January 2023. The Director retiring by rotation is Mr David Cooper who, being eligible, offers himself for re-appointment at the forthcoming Annual General Meeting. The Directors who held office at the end of the year had the following interests in the ordinary share capital of the Company: Number of shares Interest at end of year Beneficial Non-beneficial Interest at beginning of year Beneficial Non-beneficial Johan Claesson David Cooper Jan Holmstrom 7,978,050 - - - - - 7,978,050 - - - - - 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 23 October 2023. Substantial shareholdings The following shareholders held interests of 3% or more of the issued share capital of the Company as at 23 October 2023: Mr Johan Claesson and associates Mr Peter Gyllenhammar and associates Sunningdale Investments Ltd % of issued share capital 29.20 25.04 10.49 17 Directors’ Report (continued) Directors’ and officers’ liability insurance The Group maintains directors’ and officers’ liability insurance that gives appropriate cover for any legal actions brought against its directors or senior managers. This policy remained in force on the date on which the financial statements of the Group were approved by the Board. Political and charitable contributions The Group made no political contributions, nor any donations to UK charities in the years ended 31 May 2023 and 31 May 2022. Leeds Group plc Ordinary shares of 12 pence each The market value of Leeds Group shares between 1 June 2022 and 31 May 2023 ranged between 9.5p and 16p. The average market value for the year was 14p, and as at 31 May 2023 the market value was 12.5p (31 May 2022: 16p). 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 and large unquoted companies are required to report under the Streamlined Energy and Carbon reporting unless exemptions apply. The UK operations do not consume more than 40,000kWh of energy in a reporting period granting them low energy status, and the overseas subsidiaries are incorporated in Germany and therefore are exempt from disclosure. Furthermore, as an unquoted group, the Group and Company does not meet the definition of large in current and prior periods and therefore is exempt from Streamlined Energy and Carbon 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 Directors are committed to return its only subsidiary, Hemmers back to profitability but they will also continue to look at all options available to the Group to maximise shareholder value. 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 financing facilities available to the Group and the circumstances in which these could be limited or withdrawn. Financial performance and forecasts Forecasts have been prepared for the 24-month period to May 2025 which indicate a return to modest profit over that period. The Company has sensitised these forecasts for a reduction in revenues for Hemmers and the banking facilities remain adequate. The Directors are of the opinion that this is a reasonable worst case, and the currently available facilities would be sufficient in this scenario. For purposes of the going concern assessment, the Group make estimates of likely future cash flows which are based on assumptions given the uncertainties involved. The key assumptions include (i) No significant deterioration in general market conditions; (ii) No significant customer loss; (iii) No significant increase in raw material prices (iii) Continued support of lenders. These assumptions are made by management based on recent performance, external forecasts and management’s knowledge and expertise of the cashflow drivers. Management continually monitors the Group’s cash balances and forecasts cash flows, including stress testing in respect of the timing of those cash flows. 18 Directors’ Report (continued) Going Concern (continued) Financing facilities The operating business of the Group, Hemmers is 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 21. 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 2023, this resulted in average availability of €8.4m (2022: €7.7m) with a range of €7.2m to €10.0m (2022: €6.5m to €8.8m) and minimum headroom of €1.0m (2022: €3.2m) in the year. In the forecast period to 31 May 2025, the estimated availability range is €7m to €8.8m and the minimum headroom €0.3m. The covenants on this facility are an equity ratio which must exceed 50% of gross assets at the financial year end and profit for the previous six months to exceed €121,000. At 31 May 2023, the ratio was 52% and the previous six months profit was €347,000. The facility is committed until 31 May 2024. A further working capital facility of €1m secured on working capital which was fully drawn at the year end. The facilities are uncommitted, but the bank is obliged to give reasonable notice of any change. • A €3m Parent Company loan which is currently subordinated to the working capital facility. The Directors consider there will be sufficient headroom available in the Hemmers working capital facility and, therefore, the Directors are of the opinion that it is appropriate to apply the going concern basis of preparation to the financial statements. However, the Directors acknowledge that the volatile global situation could have an impact on the future trading result of Hemmers and in turn could affect the ability of the Group to meet its forecasts and therefore comply with banking covenants in downside scenarios. In addition, the Group has borrowing facilities which are due for renewal within one year of the date of approval of these financial statements, which the Group relies on to operate as a going concern. The Directors will look to renew the existing facilities when they are due for renewal, although acknowledge the conditions noted above give rise to a material uncertainty around the going concern of the Group. 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 and Parent Company financial statements in accordance with UK adopted International Financial Reporting Standards (‘UK adopted IFRS’) and in accordance with the Companies Act 2006. 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 Parent 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 properly prepared in accordance with UK adopted International Financial Reporting Standards in conformity with the Companies Act 2006, subject to any material departures disclosed and explained in the financial statements, including FRS101 Reduced Disclosure Framework: and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. • 19 Directors' Report (continued) Directors' responsibilities (continued) The Directors me responsible for keeping adequate accounting records that are sufFrcient 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 ofthe 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 Cornpanies Act 2006, Resolution 3 is to be proposed at the forthcoming Annual General Meeting for the re-appointuent of MHA as auditors of the Company following their appointrnent during the year by the Directors, 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. The Directors' report was approved by the Board on 23 October 2023 and signed on its behalf by: \-'r*-^-rs.=c4 Dawn Henderson Company Secretary Craven House 14 - l8 York Road Wetherby Leeds, LS226SL 20 Independent Auditor’s Report to the Shareholders of Leeds Group plc For the purpose of this report, the terms “we” and “our” denote MHA in relation to UK legal, professional and regulatory responsibilities and reporting obligations to the members of Leeds Group plc. For the purposes of the table on pages 23 to 24 that sets out the key audit matters and how our audit addressed the key audit matters, the terms “we” and “our” refer to MHA. The Group financial statements, as defined below, consolidate the accounts of Leeds Group plc and its subsidiaries (the “Group”). The “Parent Company” is defined as Leeds Group plc, as an individual entity. The relevant legislation governing the Company is the United Kingdom Companies Act 2006 (“Companies Act 2006”). Qualified opinion We have audited the financial statements of Leeds Group plc for the year ended 31 May 2023. The financial statements that we have audited comprise: the Consolidated Statement of Comprehensive Income the Consolidated Statement of Financial Position the Consolidated Cash Flow Statement the Consolidated Statement of Changes in Equity • • • • • Notes 32 to 56 to the consolidated financial statements, including significant accounting policies • • • Notes 59 to 61 to the Company financial statements, including significant accounting policies. the Company Statement of Financial Position the Company Statement of Changes in Equity and The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and UK adopted International Financial Reporting Standards (“UK adopted IFRS”).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, except for the effects of the matter described in the Basis of qualified opinion section of our report: • • • • 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 2023 and of the Group’s loss for the year then ended; the Group financial statements have been properly prepared in accordance with applicable law and United Kingdom adopted International Financial Reporting Standards (UK adopted IFRS); 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. Our opinion is consistent with our reporting to the Audit Committee. Basis for qualified opinion KMR Financial Information As disclosed in Note 7, KMR, one of the Group’s subsidiaries was placed into insolvency by management. Full control passed to the insolvency administrator on 1 January 2023 and therefore the financial results from KMR are consolidated up until 31 December 2022 as part of the Group Annual Report. Once the insolvency administrator took control of KMR, they were the only party who had access to the entity’s accounting records for the period from 1 June 2022 to 31 December 2022. As part of our audit, we were unable to obtain any audit evidence for the period that KMR was under the Group’s control. Consequently, in respect of discontinued operations we were unable to determine whether any adjustments to the Consolidated Statement of Comprehensive Income and Consolidated Cash Flow were necessary. 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 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 qualified opinion. 21 Independent Auditor’s Report to the Shareholders of Leeds Group plc (continued) Material uncertainty relating to going concern We draw your attention to note 2 in the financial statements which states that the Group and Parent Company incurred substantial losses during the year and that the Group and Parent Company’s operational existence is dependent on the continued support from the Group’s bank facilities and the eventual return to profitability. The impact of this together with other matters set out in the note, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and Parent Company’s ability to continue to adopt the going concern basis of accounting included: Our evaluation of the Directors’ assessment of the Group’s and the Parent Company’s ability to continue to adopt the going concern basis of accounting included: • The consideration of inherent risks to the Group’s operations and specifically its business model. • The evaluation of how those risks might impact on the Group’s available financial resources. • Review of the mathematical accuracy of the cashflow forecast model prepared by management and corroboration of key data inputs to supporting documentation for consistency of assumptions used with our knowledge obtained during the audit. • Challenging management for reasonableness of assumptions in respect of the timing and quantum of cash receipts and payments included in the cash flow model. • Holding discussions with management regarding future financing plans, corroborating these where necessary and assessing the impact on the cash flow forecast. • Review of the Group’s external debt exposure to determine if any future repayments have been included within the Group’s cash flow projections. • Holding discussions with management and completing reviews of any events after the reporting period to identify if these may impact on the Group’s ability to continue as a going concern. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Overview of our audit approach Scope 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. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. At the beginning of reporting period 31 May 2023, the Group consisted of 4 components: Leeds Group plc (standalone parent), Hemmers-Itex Textil Import Export GmbH (Hemmers), Stoff-Ideen KMR GmbH (KMR) and Leeds Properties GmbH. Two of the Group’s entities, KMR (liquidated) and Leeds Properties GmbH (dormant), were disposed during the year. For KMR we had intended to complete specified audit procedures for the period up until 31 December 2022 (the date of disposal), although due to difficulties obtaining information from the insolvency administrator, this was not possible. We therefore determined that the two remaining entities in the Group, being Leeds Group plc (standalone parent) and Hemmers are both significant components of the Group. The significant components were subject to full scope audits for the purposes of our audit report on the Group financial statements. Material subsidiaries were determined based on: financial significance of the component to the Group as a whole, and 1) 2) assessment of the risk of material misstatements applicable to each component. Our audit scope results in all major operations of the Group being subject to audit work. 22 Independent Auditor’s Report to the Shareholders of Leeds Group plc (continued) Overview of our audit approach (continued) Materiality Group 2023 2022 £278,000 £147,900 1.0% (2022: 0.5%) of total revenue Parent Company £41,900 £30,900 0.5% (2022: 0.5%) of gross assets Key audit matters Recurring • Inventory valuation Key audit matters In addition to the matter described in the basis for qualified opinion section, 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) that we identified. These matters included those matters 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. In addition to the matter described in the basis for qualified opinion section, we have determined the matter described below to be the key audit matter to be communicated in our report. Inventory Valuation Key audit matter description How the scope of our audit responded to the key audit matter The inventory held by the Group is a key and material area to the financial statements and accounts for a large amount of the Group’s current assets. Due to the nature of the Group’s operations and the reported stock error in the year, the inventory balance is inherently linked to both the purchases and the sales cycles. Typically, items of inventory can be held for significant periods of time before eventually being sold. Therefore, there is the risk that various items of inventory may be held at an amount which is above its net realisable value. Our audit work included, but was not restricted to the following: • Attending the year-end inventory counts on multiple sites including sample testing of inventory items recorded on inventory count sheets to physical inventory located in the warehouses and vice versa. Performing a reconciliation between the inventory report and the balance sheet amount including discussions with management regarding any discrepancies. • • Reviewing the inventory listing, as well as the inventory physically present in the warehouses for any slow-moving or obsolete inventory items which requires writing off or providing for. Performing substantive testing for a sample of inventory items held at the year end to the original purchase invoice and to related post year-end sales to ensure inventory is held at the lower of cost and net realisable value in the accounts. • • Reviewing managements provision calculation the calculations have been prepared with the requirements of the applicable accounting standards and are mathematically correct. to ensure that • Obtaining an understanding of management’s policy and methodology in • calculating the stock provision. Performing a review of the Group’s accounting policies, to confirm that these conform with the requirements of IFRS. 23 Independent Auditor’s Report to the Shareholders of Leeds Group plc (continued) Key audit matters (continued) Key observations During the year an inventory error was identified by management which was the result of a software issue. The issue arose as discrepancies identified in the stock count were not correctly reconciled on the system. This error has since been adjusted for by management. Except for the above, no issues were identified from the procedures performed over inventory valuation. Our application of materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Our definition of materiality considers the value of error or omission on the financial statements that, individually or in aggregate, would change or influence the economic decision of a reasonably knowledgeable user of those financial statements. 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 effect on the financial statements as a whole. Materiality is used in planning the scope of our work, executing that work and evaluating the results. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Overall materiality How we determined it Performance materiality How we determined it Rationale for the benchmark applied Group financial statements Parent Company financial statements £278,000 (2022: £147,900) £41,900 (2022: £30,900) 1.0% of total revenue (2022: 0.5% of total revenue) 0.5% of gross assets (2022: 0.5% of gross assets) £193,000 (2022: 103,500) £29,330 (2022: £21,600) 70% of overall materiality (2022: 70%) 70% of overall materiality (2022: 70%) is revenue Total the key measure considered by the users of the Group’s financial statements. Moreover, on an industry wide level within the consumer market, this materiality benchmark is consistent across other similar listed entities. The Parent Company is largely a holding company incurring limited costs and therefore gross assets the most appropriate has been considered benchmark for materiality. Therefore, we consider this to be the most appropriate benchmark for Group materiality. Overview of the scope of the Group and Parent Company audits Our assessment of audit risk, evaluation of materiality and our determination of performance materiality sets our audit scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. This assessment takes into account the size, risk profile, organisation / distribution and effectiveness of group-wide controls, changes in the business environment and other factors such as recent internal audit results when assessing the level of work to be performed at each component. 24 Independent Auditor’s Report to the Shareholders of Leeds Group plc (continued) Overview of the scope of the Group and Parent Company audits (continued) At the beginning of the financial year ending 31 May 2023, the Group consisted of 4 components, which are based in both the UK and Germany. The scope for these entities is presented in the table below. During the year, two of the companies were liquidated and we therefore determined that we needed to perform specified and analytical procedures on those entities to gain sufficient coverage. The coverage achieved by our audit procedures was: Number of components Revenue Gross assets Loss before tax Full scope audit Audit of specified balances, transaction classes or disclosures Analytical Procedures KMR – See basis for qualified opinion Total 2 0 1 1 4 88% 0% 0% 12% 100% 100% 0% 0% 0% 100% 91% 0% 0% 9% 100% The control environment We evaluated the design and implementation of those internal controls of the Group, including the Parent Company, which are relevant to our audit, such as those relating to the financial reporting cycle. Climate-related risks In planning our audit and gaining an understanding of the Group and Parent Company, we considered the potential impact of climate-related risks on the business and its financial statements. We have agreed with managements’ assessment that climate-related risks are not material to these financial statements. Reporting on other information The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information contained within the annual report. 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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. As described in the basis for qualified opinion section of our report, we were unable to obtain any audit evidence for the period that KMR was under the Group’s control. Consequently, we were unable to determine whether any adjustments to the results were necessary for the same reason. Strategic report and directors’ report Except for the possible effects of the matter described in the basis for qualified opinion section. 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. Except for the matter described in the basis for qualified opinion section of our report, in the light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. 25 Independent Auditor’s Report to the Shareholders of Leeds Group plc (continued) Matters on which we are required to report by exception Arising solely from the limitation on the scope of the work relating to KMR, referred to above: • we have not obtained all the information and explanations that we considered necessary for the purposes of our audit; and • we were unable to determine whether adequate accounting records have been kept. 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: • • • returns adequate for our audit have not been received by 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. Responsibilities of Directors As explained more fully in the Directors’ responsibilities statement, 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 Parent Company or to cease operations, or have no realistic alternative but to do so. Auditor 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 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 financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Extent to which the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment, forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we would become aware of it. Identifying and assessing potential risks arising from irregularities, including fraud The extent of the procedures undertaken to identify and assess the risks of material misstatement in respect of irregularities, including fraud, included the following: • We considered the nature of the industry and sector the control environment, business performance including remuneration policies and the Group’s, including the Parent Company’s, own risk assessment that irregularities might occur as a result of fraud or error. From our sector experience and through discussion with the Directors, we obtained an understanding of the legal and regulatory frameworks applicable to the Group focusing on laws and regulations that could reasonably be expected to have a direct material effect on the financial statements, such as provisions of the Companies Act 2006, UK tax legislation or those that had a fundamental effect on the operations of the Group. 26 Independent Auditor’s Report to the Shareholders of Leeds Group plc (continued) Identifying and assessing potential risks arising from irregularities, including fraud (continued) We enquired of the directors and management concerning the Group’s and the Parent Company’s policies and procedures relating to: - identifying, evaluating and complying with the laws and regulations and whether they were aware of any instances of non-compliance; - detecting and responding to the risks of fraud and whether they had any knowledge of actual or suspected - fraud; and the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations. We assessed the susceptibility of the financial statements to material misstatement, including how fraud might occur by evaluating management’s incentives and opportunities for manipulation of the financial statements. This included utilising the spectrum of inherent risk and an evaluation of the risk of management override of controls. We determined that the principal risks were related to posting inappropriate journal entries to increase revenue or reduce costs, creating fictitious transactions to hide losses or to improve financial performance, and management bias in any accounting. Audit response to risks identified In respect of the above procedures: we corroborated the results of our enquiries through our review of the minutes of the Group’s and the Parent Company’s board and audit committee meetings, inspection of legal documents and list of cases where applicable; audit procedures performed by the engagement team in connection with the risks identified included: - Holding discussions with management to ascertain any ongoing claims or issues during the year as well as a review of legal and professional expense codes. - Performing audit work over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business, and reviewing accounting estimates for bias. - Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations. - Challenging assumptions and judgements made by management in their significant accounting estimates. the Senior Statutory Auditor considered the experience and expertise of the engagement team to ensure that the team had the appropriate competence and capabilities; and we communicated relevant laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. 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. Andrew Moyser FCA FCCA (Senior Statutory Auditor) for and on behalf of MHA, Statutory Auditor London, United Kingdom 23 October 2023 MHA is the trading name of MacIntyre Hudson LLP, a limited liability partnership in England and Wales (registered number OC312313) 27 Consolidated Statement of Comprehensive Income for the year ended 31 May 2023 Note Year ended 31 May 2023 Discontinued £000 Continuing £000 Total £000 Discontinued £000 Year ended 31 May 2022 Continuing £000 Total £000 Revenue 8 3,527 24,290 27,817 5,592 23,998 29,590 Cost of sales Gross profit (3,249) (19,134) (22,383) (4,551) (19,570) (24,121) 278 5,156 5,434 1,041 4,428 5,469 Distribution costs (690) (1,513) (2,203) (1,082) (1,401) (2,483) Impairment of assets Gain on discontinued operations Administrative costs Total administrative costs Other income Loss from operations Finance expense Loss before tax 5 7 5 5 9 Tax credit/(charge) 10 Loss for the year attributable to the equity holders of the Parent Company Other comprehensive profit/(loss) Translation differences on foreign operations Total comprehensive loss for the year attributable to the equity holders of the Parent Company - 138 225 363 17 (32) (47) (79) - - - (1,662) - (1,662) - (4,274) 138 (4,049) (4,274) 154 (3,911) 171 - (606) (2,268) 32 (477) (509) (2,277) (337) (384) (93) - (3,855) (3,855) 115 (713) (162) - (4,461) (6,123) 147 (2,990) (255) (814) (893) (2,370) (875) (3,245) 53 53 - (4) (4) (79) (761) (840) (2,370) (879) (3,249) 15 87 102 (22) (113) (135) (64) (674) (738) (2,392) (992) (3,384) There is no tax effect relating to other comprehensive income/(loss) for the year. Amounts included in other comprehensive income/(loss) may be reclassified subsequently as profit or loss. Loss per share attributable to the equity holders of the Company Note Year ended 31 May 2023 Year ended 31 May 2022 Basic and diluted total loss per share (pence) 11 3.1p 11.9p The notes on pages 32 to 56 form part of these financial statements. 28 Consolidated Cash Flow Statement for the year ended 31 May 2023 Note Year ended 31 May 2023 Cash flows from operating activities Loss for the year Adjustments for: Government assistance credit Depreciation of property, plant and equipment Impairment of property, plant and equipment Depreciation of right-of-use assets Impairment of right-of-use assets Amortisation of intangible assets Finance expense – interest on bank loans Finance expense – interest lease liabilities Gain on sale of property, plant and equipment Loss on sale of right-of-use assets Gain on discontinued operations Tax (credit)/charge Cash from operating activities before changes in working capital and provisions Decrease/(increase) in inventories (Increase) in trade and other receivables (Decrease)/increase in trade and other payables Cash generated from/(used in) operating activities Tax (paid)/received Net cash flows generated from/(used in) operating activities Investing activities Purchase of property, plant and equipment Proceeds from the sale of fixed assets Net cash generated from/(used in) investing activities Financing activities Bank borrowings drawn Bank borrowing disposed of Bank borrowings repaid Repayment of principal on lease liabilities Repayment of interest on lease liabilities Bank interest paid Government assistance received Net cash (used in)/generated from financing activities Net increase/(decrease) in cash and cash equivalents Translation loss on cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents disposed of Cash and cash equivalents at the end of the year Cash on demand or on short term deposit Bank overdrafts Cash and cash equivalents at the end of the year The notes on pages 32 to 56 form part of these financial statements. 30 5 13 13 14 14 15 9 9 5 5 7 10 17 18 20 13 21 7 21 22 22 9 5 7 19 19 20 Year ended 31 May 2022 £000 (3,249) (119) 735 42 827 1,620 5 179 76 - - - 4 120 (1,818) (43) 722 (1,019) 114 (905) (447) - (447) 2,835 - (708) (983) (76) (179) 119 1,008 £000 (840) (59) 608 - 103 - 6 347 37 (142) 3 (138) (53) (128) 2,744 (404) (101) 2,111 (32) 2,079 (51) 521 470 - 868 (539) (661) (37) (347) 59 (657) 1,892 (3) 126 (1,781) (344) (2) 472 - 234 234 - 234 126 471 (345) 126 Consolidated Statement of Changes in Equity for the year ended 31 May 2023 At 31 May 2021 Loss for the year Other comprehensive loss Total comprehensive loss At 31 May 2022 Loss for the year Other comprehensive income Total comprehensive income/(loss) Share capital £000 Capital redemption reserve £000 Foreign exchange reserve £000 Retained earnings Total equity £000 £000 3,279 1,113 2,185 7,984 14,561 - - - - - - - (3,249) (3,249) (135) - (135) (135) (3,249) (3,384) 3,279 1,113 2,050 4,735 11,177 - - - - - - - (840) (840) 102 102 - 102 (840) (738) At 31 May 2023 3,279 1,113 2,152 3,895 10,439 The following describes the nature and purpose of each reserve within equity: Reserve Share capital Description and purpose The nominal value of issued ordinary shares in the Company. Capital redemption reserve Amounts transferred from share capital on redemption of issued shares. Treasury share reserve Cost of own shares held in treasury. Foreign exchange reserve Gains/(losses) arising on retranslation of the net assets of overseas operations into sterling. Retained earnings Cumulative net gains/(losses) recognised in the consolidated statement of comprehensive income after deducting the cost of cancelled treasury shares. The notes on pages 32 to 56 form part of these financial statements. 31 Notes forming part of the financial statements for the year ended 31 May 2023 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. The subsidiaries of the Group are set out on page 1 Group Information, the Directors Report and note 16. 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. The Group financial statements have been properly prepared in accordance with UK adopted International Financial Reporting Standards (UK adopted IFRS) and in accordance with the Companies Act 2006. 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 consolidated statement of comprehensive income. 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 to 31 May 2023, 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 financing facilities available to the Group and the circumstances in which these could be limited or withdrawn. Financial performance and forecasts Forecasts have been prepared for the 24-month period to May 2025 which indicate a return to modest profit over that period. The Company has sensitised these forecasts for a reduction in revenues for Hemmers and the banking facilities remain adequate. The Directors are of the opinion that this is a reasonable worst case, and the currently available facilities would be sufficient in this scenario. 32 Notes forming part of the financial statements for the year ended 31 May 2023 2 Accounting policies (continued) Going Concern (continued) Financial performance and forecasts (continued) For purposes of the going concern assessment, the Group make estimates of likely future cash flows which are based on assumptions given the uncertainties involved. The key assumptions include (i) No significant deterioration in general market conditions; (ii) No significant customer loss; (iii) No significant increase in raw material prices (iii) Continued support of lenders. These assumptions are made by management based on recent performance, external forecasts and management’s knowledge and expertise of the cashflow drivers. Management continually monitors the Group’s cash balances and forecasts cash flows, including stress testing in respect of the timing of those cash flows. Financing facilities The operating business of the Group is Hemmers which is 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 21. 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 2023, this resulted in average availability of €8.4m (2022: €7.7m) with a range of €7.2m to €10.0m (2022: €6.5m to €8.8m) and minimum headroom of €1.0m (2022: €3.2m) in the year. In the forecast period to 31 May 2025, the estimated availability range is €7m to €8.8m and the minimum headroom €0.3m. The covenants on this facility are an equity ratio which must exceed 50% of gross assets at the financial year end and profit for the previous six months to exceed €121,000. At 31 May 2023, the ratio was 52% and the previous six months profit was €347,000. The facility is committed until 31 May 2024. A further working capital facility of €1m secured on working capital which was fully drawn at the year end. The facilities are uncommitted, but the bank is obliged to give reasonable notice of any change. A €3m Parent Company loan which is currently subordinated to the working capital facility. The Directors consider there will be sufficient headroom available in the Hemmers working capital facility and, therefore, the Directors are of the opinion that it is appropriate to apply the going concern basis of preparation to the financial statements. However, the Directors acknowledge that the volatile global situation could have an impact on the future trading result of Hemmers and in turn could affect the ability of the Group to meet its forecasts and therefore comply with banking covenants in downside scenarios. In addition, the Group has borrowing facilities which are due for renewal within one year of the date of approval of these financial statements, which the Group relies on to operate as a going concern. The Directors will look to renew the existing facilities when they are due for renewal, although acknowledge the conditions noted above give rise to a material uncertainty around the going concern of the Group. Changes in accounting policies The following standards will be effective for financial years beginning on or after 1 January 2023. • Amendments to IFRS 17 Insurance Contracts (issued in December 2021) The amendments added a transition option that permits an entity to apply an optional classification overlay in the comparative period(s) presented on initial application of IFRS 17. The classification overlay applies to all financial assets, including those held in respect of activities not connected to contracts within the scope of IFRS 17. It allows those assets to be classified in the comparative period(s) in a way that aligns with how the entity expects those assets to be classified on initial application of IFRS 9. The classification can be applied on an instrument-by-instrument basis. 33 Notes forming part of the financial statements for the year ended 31 May 2023 2 Accounting policies (continued) Changes in accounting policies (continued) • Amendments to IAS 1 Presentation of Financial Statements The amendments clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date (e.g., the receipt of a waver or a breach of covenant). The amendments also clarify what IAS 1 means when it refers to the 'settlement' of a liability. The amendments could affect the classification of liabilities, particularly for entities that previously considered management's intentions to determine classification and for some liabilities that can be converted into equity. • Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors The amendments define what is 'material accounting policy information' and explain how to identify when accounting policy information is material. They further clarify that immaterial accounting policy information does not need to be disclosed. If it is disclosed, it should not obscure material accounting information. To support this amendment, the IASB also amended IFRS Practice Statement 2 Making Materiality Judgements to provide guidance on how to apply the concept of materiality to accounting policy disclosures. • Amendments to IAS 12 Income Taxes The amendments require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. They will typically apply to transactions such as leases of lessees and decommissioning obligations and will require the recognition of additional deferred tax assets and liabilities. The amendment should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, entities should recognise deferred tax assets (to the extent that it is probable that they can be utilised) and deferred tax liabilities at the beginning of the earliest comparative period for all deductible and taxable temporary differences associated with right-of-use assets and lease liabilities; and decommissioning, restoration and similar liabilities, and the corresponding amounts recognised as part of the cost of the related assets. The cumulative effect of recognising these adjustments is recognised in retained earnings, or another component of equity, as appropriate. • Amendments to IFRS 10 Consolidated financial statements and IAS 28 Investments in associates and joint ventures The amendments clarify the accounting treatment for sales or contribution of assets between an investor and its associates or joint ventures. They confirm that the accounting treatment depends on whether the non-monetary assets sold or contributed to an associate or joint venture constitute a business (as defined in IFRS 3 Business Combinations). Where the non-monetary assets constitute a business, the investor will recognise the full gain or loss on the sale or contribution of assets. If the assets do not meet the definition of a business, the gain or loss is recognised by the investor only to the extent of the other investor's interests in the associate or joint venture. The Group does not expect these amendments will have a material impact on its financial statements. The following standards will be effective for financial years beginning on or after 1 January 2024. • Amendments to IFRS 16 Finance leases The amendments require a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a way that it does not recognise any amount of the gain or loss that relates to the right of use it retains. • Amendments to IAS 1 Non-current liabilities with covenants The amendments will provide additional information about liabilities arising from loan arrangements for which an entity's right to defer settlement of those liabilities for at least twelve months after the reporting period is subject to the entity complying with conditions specified in the loan arrangement (liabilities with covenants). The Group does not expect these amendments will have a material impact on its financial statements. 34 Notes forming part of the financial statements for the year ended 31 May 2023 2 Accounting policies (continued) Revenue Revenue comprises the fair value of the consideration received or receivable for the sale of goods and is shown net of Value Added Tax. Revenue 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 8. There are no material concentrations of revenue by customers. Dividends Interim dividends are recognised when paid and final dividends are recognised when approved by the shareholders at the AGM. Segmental reporting The Board considers that the Group’s business comprised 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. Government grants The Group was eligible for two types of grants provided by the German government in response to the global Covid-19 pandemic. One related to income provided to support the payroll of the employees in both Hemmers and KMR. The other related to compensation paid/receivable to KMR and Hemmers for the reduction in turnover experienced as result of the pandemic together with additional allowances for the part recovery of lost margin on certain seasonal products that were not able to be sold due to the trading interruption of certain lockdowns. Both sources of grant have been shown as other income rather than reducing the related expense or increasing the turnover figures. Goodwill Goodwill arising on 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 consolidated statement of comprehensive income 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 Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted where appropriate. Any gain or loss on disposal of property, plant and equipment is recognised in the consolidated statement of comprehensive income. 35 Notes forming part of the financial statements for the year ended 31 May 2023 2 Accounting policies (continued) 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 consolidated statement of comprehensive income. 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 consolidated statement of comprehensive income. Leases The Group has adopted IFRS 16 using the modified retrospective approach, with recognition of transitional adjustments on 1 June 2020, 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. Payments made under these leases are charged to profit and loss on a straight-line basis over the lease term. 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. Discontinued operation A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co- ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the statement of profit or loss. 36 Notes forming part of the financial statements for the year ended 31 May 2023 2 Accounting policies (continued) Deferred taxation Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs from its tax base, except for differences arising on: • • • the initial recognition of goodwill; the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the date of the statement of financial position and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either: • • the same taxable Group company; or different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered. Taxation Taxation comprises current and deferred tax. It is recognized in profit or loss except to the extent it relates to a business combination or items directly in equity or other comprehensive income (IAS12:58). Employee 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 scheme 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. 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 consolidated statement of comprehensive income 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. 37 Notes forming part of the financial statements for the year ended 31 May 2023 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. Financial asset 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 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. Current borrowings are secured against working capital rather than being a factored agreement that relinquishes control of the assets to the bank. 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. 38 Notes forming part of the financial statements for the year ended 31 May 2023 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. Key areas of estimation uncertainty 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: Impairment of Property, Plant and Equipment The Company reviews its property, plant and equipment as at each reporting date for indicators of impairment. Given that Hemmers has incurred a loss in the current and previous financial year, management have undertaken an impairment assessment using their judgement and do not deem that an impairment is required. 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 17. A 1% increase in the inventory provision would equate to approx. £89,000. 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. 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 2022 or 2023. All other financial assets and financial liabilities are measured at amortised cost. 39 Notes forming part of the financial statements for the year ended 31 May 2023 4 Financial instruments - risk management (continued) 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. 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. 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 23 to the financial statements. Market risk Market risk arises from the Group’s use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk). (i) Cash flow interest rate risk The Group manages its cash flow interest rate risk by borrowing at fixed interest rates wherever possible. Working capital is financed by short or medium-term bank debt at fixed rates, leaving a small residual overdraft at variable rates. The borrowings of overseas subsidiaries are denominated in Euros, their functional currency, to avoid those subsidiaries being exposed to unnecessary foreign exchange risk. Bank borrowings or cash deposits of the Parent Company are denominated in Sterling. 40 Notes forming part of the financial statements for the year ended 31 May 2023 4 Financial instruments - risk management (continued) (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 £830,000 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 £844,000 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. 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 Total auditor’s fees Staff costs Depreciation - Property, plant and equipment - Right-of-use assets Impairment - Property, plant and equipment - Right-of-use assets Amortisation of trademarks Gain/(loss) on disposal of - Property, plant and equipment - Right-of-use assets Other income: Government grants relating to Covid-19 pandemic: Grant received as compensation for reduced trading Other income Total other income Year ended 31 May 2023 Year ended 31 May 2022 £000 £000 88 64 5 157 5,954 608 103 - - 6 142 (3) 59 112 171 75 52 4 131 6,984 735 827 42 1,620 5 - - 119 28 147 41 Notes forming part of the financial statements for the year ended 31 May 2023 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 2023 2022 6 7 108 189 44 51 35 39 193 286 Staff costs, including Directors, comprise Wages, salaries and Directors’ fees Defined contribution pension cost Employer’s national insurance contributions and similar taxes Total staff costs Year ended 31 May 2023 Year ended 31 May 2022 £000 5,033 2 919 5,954 £000 5,824 1 1,159 6,984 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. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the subsidiary companies and the Group. The remuneration of key personnel are as follows: Salary and fees Employer’s national insurance contributions and similar taxes Total remuneration of key management personnel Year ended 31 May 2023 Year ended 31 May 2022 £000 644 49 693 £000 629 52 681 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. Jörg Hemmers resigned as a director of the Company effective 1 January 2023. The fees relating to Johan Claesson and Jan Holmstrom are paid, respectively, to Johan & Marianne Claesson and Somerset AB who invoice the Company for the services of these Directors. Directors’ remuneration is as follows: Salary & Fees £000 Taxes Year ended 31 May £000 2023 £000 Salary & Fees £000 Taxes Year ended 31 May £000 2022 £000 Executive director Jörg Hemmers to 1 January 2023 Non - executive Directors Johan Claesson David Cooper Jan G Holmstrom 134 15 15 25 189 8 - - - 8 142 216 14 230 15 15 25 15 15 25 - - - 15 15 25 197 271 14 285 Outstanding share options granted to employees or Directors at 31 May 2023 were nil (2022: nil). 42 Notes forming part of the financial statements for the year ended 31 May 2023 7 Discontinued operations On 7 October 2022, the German Courts accepted Hemmers’ management decision to place its subsidiary KMR into an insolvency process. The insolvency process is ongoing although full control passed to the insolvency administrator on 1 January 2023 and at that point KMR ceased to be a subsidiary within the Group. The gain has arisen due to the assets being transferred to the insolvency administrator and any IFRS adjustments reversed. There was no tax impact on the gain which arose on transfer. Fixed assets Current assets less current liabilities Finance lease liability Provision Cash Loan Net cash effect KMR balance sheet at insolvency date £000 (136) 254 - - 118 (1,781) 868 (913) IFRS adj £000 133 (213) 1,360 (347) 933 - - - Total £000 (3) 41 1,360 (347) 1,051 (1,781) 868 (913) (Loss)/gain on transfer (795) 933 138 8 Segmental information The Group’s trading businesses during the year were 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 was also incorporated in Germany and was a retailer of fabric and haberdashery, operating leased shops in various German cities until its insolvency on 7 October 2022 and is regarded as a discontinued operation in these financial statements. 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. The following tables set out a segmental analysis of the Group’s operations. Year ended 31 May 2023 Discontinued operations KMR Continuing operations Hemmers Inter segmental £000 Parent Company £000 £000 £000 Total Group £000 External revenue Inter-segmental revenue Cost of sales 3,527 3 (3,252) 24,290 416 (19,550) - (419) 419 - - - 27,817 - (22,383) Gross profit Distribution costs Admin expenses Other income Operating loss Finance expense Internal interest Loss before tax 278 (690) 363 17 (32) (47) - 5,156 (1,513) (4,171) 280 (248) (337) (208) - - 127 (127) - - (229) - 5,434 (2,203) (3,911) 171 - - - (229) - 208 (509) (384) - (79) (793) - (21) (893) 43 Total Group £000 18,391 (7,952) Total Group £000 29,590 - (24,121) 5,469 (2,483) (6,123) 147 (2,990) (255) - Notes forming part of the financial statements for the year ended 31 May 2023 8 Segmental information (continued) At 31 May 2023 Total assets Total liabilities Total net assets Discontinued operations KMR Continuing operations Hemmers £000 £000 - - - 15,572 (7,852) 7,720 Adj £000 Parent Company £000 2,819 (100) - - - 2,719 10,439 Year ended 31 May 2022 Discontinued operations KMR Continuing operations Hemmers Inter segmental £000 Parent Company £000 £000 £000 External revenue Inter-segmental revenue Cost of sales 5,592 - (4,551) 23,998 1,069 (20,627) - (1,069) 1,057 Gross profit/(loss) Distribution costs Admin expenses Other income Operating loss Finance expense Internal interest 1,041 (1,082) (2,268) 32 (2,277) (93) - 4,440 (1,401) (3,763) 309 (415) (162) (204) (12) - 194 (194) (12) - - - - - - - (286) - (286) - 204 Loss before tax (2,370) (781) (12) (82) (3,245) At 31 May 2022 Total assets Total liabilities Discontinued operations KMR Hemmers Continuing operations £000 £000 2,819 (3,540) 17,392 (8,091) Total Group £000 Parent Company £000 Adj £000 (123) - 2,811 (91) 22,899 (11,722) Total net (liabilities)/assets (721) 9,301 (123) 2,720 11,177 44 Notes forming part of the financial statements for the year ended 31 May 2023 8 Segmental information (continued) Disaggregation of revenue is shown by destination as follows: Discontinued operations £000 31 May 2023 Continuing operations £000 Total Group £000 Discontinued operations £000 31 May 2022 Continuing operations £000 3,527 - - - - 3,527 - - - 3,527 - - - 13,935 1,130 1,128 1,052 4,206 21,451 1,524 750 416 24,141 72 62 15 17,462 1,130 1,128 1,052 4,206 24,978 1,524 750 416 27,668 72 62 15 5,592 - - - - 5,592 - - - 5,592 - - - 13,754 891 917 1,227 3,956 20,745 1,524 1,169 363 23,801 46 47 104 Total Group £000 19,346 891 917 1,227 3,956 26,337 1,524 1,169 363 29,393 46 47 104 Germany France Austria Holland Rest of EU Total EU Switzerland UK Rest of Europe Total Europe Oceania North America Asia Total revenue 3,527 24,290 27,817 5,592 23,998 29,590 Non-current assets are all derived in Germany. Other information: Additions Property, plant & equipment Right-of-use assets Depreciation Property, plant & equipment Right-of-use assets Impairment Property, plant & equipment Right-of-use assets Amortisation Intangible assets 9 Finance expense Year ended 31 May 2023 Year ended 31 May 2022 Hemmers £000 KMR £000 Group £000 Hemmers £000 KMR £000 Group £000 51 142 608 103 - - 6 - - - - - - - 51 142 608 103 - - 6 447 45 689 121 - - 5 - 182 46 706 447 227 735 827 42 1,620 42 1,620 - 5 Finance expense Interest paid on lease liabilities Interest paid on bank overdrafts and loans Finance expense recognised in comprehensive income 45 Year ended 31 May 2023 Year ended 31 May 2022 £000 £000 37 347 384 76 179 255 Notes forming part of the financial statements for the year ended 31 May 2023 10 Tax (credit)/charge Current tax (credit)/charge Tax of overseas operations on losses for the year Adjustments for over provision in prior years Total tax (credit)/charge Year ended 31 May 2023 Year ended 31 May 2022 £000 £000 (53) - (53) 4 - 4 The Group has UK capital losses carried forward of £13m and unrelieved UK trading losses of £0.4m. No recognition has been made of deferred tax assets in respect of these losses carried forward as the Directors believe it unlikely that there will be sufficient profits to reverse these differences in the foreseeable future. The reasons for the difference between the actual tax (credit)/charge for the year and the standard rate of corporation tax in the UK applied to the profit for the year are as follows: Loss before taxation from all operations Expected tax credit based on the standard rate of corporation tax in the UK of 19% (2022:19%) Expenses not deductible for tax purposes Income adjustments not subject to tax Unrelieved losses Total tax (credit)/charge 11 Loss per share and Net asset per share Year ended 31 May 2023 Year ended 31 May 2022 £000 (893) (170) 459 (346) 4 (53) £000 (3,245) (617) 605 - 16 4 Loss per share Numerator Total loss for the year Denominator Weighted average number of shares Year ended 31 May 2023 Discontinued Continuing Total operations operations Group £79,000 £761,000 £840,000 27,320,843 27,320,843 27,320,843 Basic and diluted loss per share 0.3p 2.8p 3.1p Loss per share Numerator Total loss for the year Denominator Weighted average number of shares Year ended 31 May 2022 Discontinued Continuing Total Operations operations Group £2,370,000 £879,000 £3,249,000 27,320,843 27,320,843 27,320,843 Basic and diluted loss per share 8.7p 3.2p 11.9p 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 2023 11 Loss per share and Net asset per share (continued) Net assets per share Numerator Net assets Denominator Number of shares Net assets per share 12 Dividend Year ended 31 May 2023 Year ended 31 May 2022 £10,439,000 £11,177,000 27,320,843 27,320,843 38.2p 40.9p The Directors have not proposed a dividend in respect of the year ended 31 May 2023 or 31 May 2022. 13 Property, plant and equipment Freehold land and buildings £000 Plant and equipment £000 Cost Balance at 31 May 2021 Additions Disposals Effect of movements in foreign exchange rates Balance at 31 May 2022 Additions Reclassification Disposals Effect of movements in foreign exchange rates Balance at 31 May 2023 Accumulated depreciation Balance at 31 May 2021 Depreciation charge for the year Impairment Disposals Effect of movements in foreign exchange rates Balance at 31 May 2022 Depreciation charge for the year Reclassification Disposals Effect of movements in foreign exchange rates Balance at 31 May 2023 Net book amount At 31 May 2021 At 31 May 2022 At 31 May 2023 Any loans secured on these assets are set out on note 21. 47 8,081 3 (16) (87) 7,981 3 (272) (420) 94 7,386 1,906 240 - (16) (20) 2,110 225 (227) (38) 25 2,095 6,175 5,871 5,291 4,130 444 (366) (49) 4,159 48 272 (833) 54 3,700 2,555 495 42 (366) (31) 2,695 383 227 (833) 32 2,504 1,575 1,464 1,196 Total £000 12,211 447 (382) (136) 12,140 51 - (1,253) 148 11,086 4,461 735 42 (382) (51) 4,805 608 - (871) 57 4,599 7,750 7,335 6,487 Notes forming part of the financial statements for the year ended 31 May 2023 14 Right-of-use assets Leasehold land and buildings £000 Plant and equipment £000 4,167 182 (34) - (46) 4,269 - (4,358) 89 - 1,962 706 1,620 - (19) 4,269 - (4,358) 89 - 2,205 - - 457 45 - (116) (6) 380 142 (200) 4 326 209 121 - (116) (4) 210 103 (197) 3 119 248 170 207 Total £000 4,624 227 (34) (116) (52) 4,649 142 (4,558) 93 326 2,171 827 1,620 (116) (23) 4,479 103 (4,555) 92 119 2,453 170 207 Trademarks £000 58 (5) (1) 52 (6) - 46 Cost Balance at 31 May 2021 Additions Modification Disposals Effect of movements in foreign exchange rates Balance at 31 May 2022 Additions Disposals Effect of movements in foreign exchange rates Balance at 31 May 2023 Accumulated depreciation Balance at 31 May 2021 Depreciation charge for the year Impairment Disposals Effect of movements in foreign exchange rates Balance at 31 May 2022 Depreciation charge for the year Disposals Effect of movements in foreign exchange rates Balance at 31 May 2023 Net book amount At 31 May 2021 At 31 May 2022 At 31 May 2023 15 Intangible assets Balance at 31 May 2021 Amortisation Effect of movements in foreign exchange rates Balance at 31 May 2022 Amortisation Effect of movements in foreign exchange rates Balance at 31 May 2023 48 Notes forming part of the financial statements for the year ended 31 May 2023 16 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. ** KMR GmbH. Germany Germany Import, sale, and distribution of textiles Retail trading – placed into insolvency and therefore discontinued during the year * Wholly owned subsidiaries of Leeds Group. ** Wholly owned subsidiaries of Hemmers. The registered addresses of these subsidiaries are shown on page 1. 17 Inventories Total gross value of goods and goods for resale Less provision Finished goods and goods for resale 31 May 2023 £000 31 May 2022 £000 8,908 (690) 8,218 12,785 (791) 11,994 The amount of inventories recognised as an expense during the year was £16,293,000 (2022: £19,255,000). 18 Trade and other receivables Trade receivables (note 23) Other receivables Prepayments Total trade and other receivables 31 May 2023 £000 31 May 2022 £000 2,424 608 167 3,199 2,160 557 147 2,864 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. Trade receivables are stated net of a provision of £159,000 (2022: £39,000). See Note 23 for further details. 19 Cash on demand or on short term deposit Total cash on demand or on short term deposit 234 471 Cash held by the Parent Company is deposited with Bank of Scotland, earning interest at variable rates. In the opinion of the Directors, the carrying value of cash and cash equivalents approximates to its fair value. 31 May 2023 £000 31 May 2022 £000 49 Notes forming part of the financial statements for the year ended 31 May 2023 20 Trade and other payables Bank overdrafts Trade payables Other tax and social security taxes Accruals Other payables Total trade and other payables 31 May 2023 £000 31 May 2022 £000 - 753 38 379 183 1,353 345 1,823 362 398 137 3,065 All amounts are anticipated to be payable in the short term. The carrying values are considered to be a reasonable approximation of fair value. 21 Borrowings The book value of loans and borrowings are as follows: Current Secured bank loans Non - current Secured bank loans Total loans and borrowings 31 May 2023 £000 31 May 2022 £000 5,502 544 6,046 5,671 836 6,507 The carrying values are considered to be a reasonable approximation of fair value. Current loans and borrowings At 31 May 2023 current loans and borrowings of £5,502,000 (2022: £5,671,000) comprise short term loans of £5,201,000 (2022: £5,373,000) and instalments due on long term loans detailed below of £301,000 (2022: £298,000). The interest rate on the short-term loans ranges from 1.5% to 3% (2022: 1.25% to 3%) and these loans are secured on working capital of Hemmers. The short-term loans are drawn down by Hemmers against short-term borrowing facilities of up to a maximum of £10.3m (€12m). At 31 May 2023, the total borrowing facility available totalled £7.1m (€8.2m) of which £5.2m (€6m) has been utilised including any overdrafts, therefore the headroom within the facility was £1.9m (€2.2m). Neither the Parent Company nor its subsidiary Hemmers have any other borrowing facilities. The bank borrowing facilities are reviewed annually every May and remain in place for Hemmers for the forthcoming year. Non-current loans and borrowings Non-current loans were drawn down in 2016 and 2017 to finance developments at the Hemmers warehouses in Nordhorn. The Group’s loans and borrowings are within the accounts of Hemmers. They are denominated in Euros, and their principal terms are as follows: Fixed Interest rate Repayment profile Final repayment date 31 May 2023 £000 31 May 2022 £000 Loan 1 Loan 2 1.65% 1.05% Equal quarterly instalments Equal quarterly instalments March 2026 September 2025 Non-current loans 358 186 544 590 246 836 50 Notes forming part of the financial statements for the year ended 31 May 2023 21 Borrowings (continued) The changes in liabilities arising from financing activities were: At the start of the year Cash items Borrowings drawn Borrowings repaid Exchange At the end of the year The changes in lease liabilities are shown in note 22. 22 Lease liabilities 31 May 2023 £000 31 May 2022 £000 6,507 - (539) 78 6,046 4,424 2,835 (708) (44) 6,507 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 2022 financial statements included 17 retail store leases located in Germany and 18 motor vehicle leases, all of which were subject to fixed payments. During the year, 9 car leases were terminated and 8 new car leases were taken out. The shop leases liabilities as at 31 December 2022 were written off following the insolvency process of KMR. The book value of lease liabilities are as follows: Current Secured lease liabilities Non - current Secured lease liabilities Total lease liabilities 31 May 2023 £000 31 May 2022 £000 97 112 209 885 1,165 2,050 The majority of the retail shops were leased over a 12-month period and have, therefore, been accounted for by recognising a right-of-use asset and a lease liability. All these leases have now been terminated as a result of the insolvency process of KMR. 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. 51 Notes forming part of the financial statements for the year ended 31 May 2023 22 Lease liabilities (continued) At 31 May 2023, 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: At the start of the year Right-of-use lease additions (note 14) Interest expenses (note 9) Lease payments Leases written back (note 7) Foreign exchange movements 31 May 2023 £000 31 May 2022 £000 97 81 31 - 885 400 610 155 209 2,050 Land and buildings £000 Motor vehicles £000 Total £000 1,879 - 29 (585) (1,360) 37 171 142 8 (113) - 1 2,050 142 37 (698) (1,360) 38 At the end of the year - 209 209 23 Financial instruments The financial assets of the Group are categorised as follows: At amortised cost Trade receivables Other receivables Cash and cash equivalents The financial liabilities of the Group are categorised as follows: At amortised cost Bank overdrafts Trade payables Accruals Other payables Current bank borrowings Non-current bank borrowings Current lease liabilities Non-current lease liabilities 52 31 May 2023 £000 31 May 2022 £000 2,424 608 234 3,266 2,160 557 471 3,188 31 May 2023 £000 31 May 2022 £000 - 753 379 183 5,502 544 97 112 7,570 345 1,823 398 137 5,671 836 885 1,165 11,260 Notes forming part of the financial statements for the year ended 31 May 2023 23 Financial instruments (continued) Financial risk management Overview 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 2023 £000 31 May 2022 £000 2,424 2,160 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. At 31 May 2023 £519,000 (2022: £366,000) of the Group’s trade receivables were past due. An expected loss provision of £159,000 (2022: £139,000) 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 18) 31 May 2023 £000 31 May 2022 £000 410 3 - 106 519 2,064 2,583 (159) 2,424 238 37 26 65 366 1,933 2,299 (139) 2,160 53 Notes forming part of the financial statements for the year ended 31 May 2023 23 Financial instruments (continued) Credit risk (continued) 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: Total £000 2,583 (159) Total £000 2,299 (139) 106 (106) 65 (65) As at 31 May 2023 Overdue up to 3 months Overdue by 3 to 6 months Overdue by 6 to 12 months Overdue by more than 12 months Not due Expected loss rate 0% Gross carrying amount 2,064 12% 410 100% 100% 100% 3 - Loss provision - (50) (3) - Net carrying value 2,064 360 - - - 2,424 As at 31 May 2022 Overdue up to 3 months Overdue by 3 to 6 months Overdue by 6 to 12 months Overdue by more than 12 months Not due Expected loss rate 0% Gross carrying amount 1,933 5% 238 100% 100% 100% 37 26 Loss provision - (11) (37) (26) Net carrying value 1,933 227 - - - 2,160 A large proportion of the debts are covered by debt insurance. 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 released Amount utilised Effect of movements in foreign exchange rates Expected credit loss provision at end of period 31 May 2023 £000 31 May 2022 £000 139 34 - (15) 1 159 106 36 - (2) (1) 139 54 Notes forming part of the financial statements for the year ended 31 May 2023 23 Financial instruments (continued) Foreign currency risk The carrying values of the Group’s trade and other receivables are denominated in the following currencies: Euro US Dollar Sterling Total trade and other receivables 31 May 2023 £000 31 May 2022 £000 3,180 3 16 3,199 2,832 16 16 2,864 The carrying values of the Group’s trade and other payables are denominated in the following currencies: Euro US Dollar Sterling Total trade and other payables All the Group’s external loans are denominated in Euros. 31 May 2023 £000 31 May 2022 £000 1,215 - 100 1,315 1,882 386 90 2,358 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 2023 Amounts due in After 2 to 5 5 years years £000 £000 Less than 1 year £000 Less than 1 year £000 Total £000 As at 31 May 2022 Amount due in After 5 years £000 2 to 5 years £000 Total £000 Bank overdrafts Trade payables Accruals Other payables Current bank borrowings Non-current bank borrowings Current lease liabilities Non - current lease liabilities - 753 379 183 - - - - - - - - - 753 379 183 345 1,823 398 137 - - - - 5,502 - - 97 544 - - 112 - - - - 544 97 112 5,502 5,671 - - 885 836 - - - - - - - - 345 1,823 398 137 5,671 836 885 - 1,010 155 1,165 Net carrying value 6,914 656 - 7,570 9,259 1,846 155 11,260 55 Notes forming part of the financial statements for the year ended 31 May 2023 24 Provisions Provision as at 31 May 2022 Amount released Amount provided Provision as at 31 May 2023 £000 100 (100) 344 344 A provision was made in 2020 amounting to £100,000 for additional tax which may fall due following a prior year tax assessment in Germany. This has now been agreed and paid, and therefore, the provision has been released. A provision has been made in 2023 amounting to £344,000 relating to a guarantee made by Hemmers to KSK Bank in relation to a loan due from KMR. The amount of £344,000 is still outstanding after monies paid to KSK by the insolvency administrator and may not be made from funds remaining in the insolvency. 25 Share capital Issued and fully paid At beginning of the period Cancellation of treasury shares 2023 Number 27,320,843 - 2023 £000 3,279 - 2022 Number 31,600,000 (4,279,157) At end of period 27,320,843 3,279 27,320,843 2022 £000 3,792 (513) 3,279 At 31 May 2023, no options over ordinary shares of the Company were outstanding (2022: 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 which were held in treasury and then cancelled as follows: Shares held in treasury as at 31 May 2021 Shares cancelled in 2022 Shares held in treasury as at 31 May 2022 and 2023 Number of shares 4,279,157 (4,279,157) - Cost £000 807 (807) - The cost of these cancelled shares has been calculated on a “first in, first out” basis, and the nominal value of the cancelled shares at 12p each was £513,499. The total nominal value of shares cancelled is £1,113,331. This is shown in the consolidated statement of financial position as a capital redemption reserve, a component of equity. 26 Commitments At 31 May 2023, there were no capital commitments authorised and committed (2022: £nil). There were no amounts authorised but not committed (2022: £nil). 56 Company Statement of Changes in Equity for the year ended 31 May 2023 At 31 May 2021 Loss for the year At 31 May 2022 Loss for the year At 31 May 2023 Share capital £000 Capital redemption reserve £000 Retained earnings Total equity £000 £000 3,279 1,113 1,780 6,172 - - (82) (82) 3,279 1,113 1,698 6,090 - - (21) (21) 3,279 1,113 1,677 6,069 The following describes the nature and purpose of each reserve within equity: Reserve Share capital Description and purpose The nominal value of issued ordinary shares in the Company. Capital redemption reserve Amounts transferred from share capital on redemption of issued shares. Treasury share reserve Cost of own shares held in treasury. Retained earnings Cumulative net gains/(losses) recognised in the Company’s statement of comprehensive income after deducting the cost of cancelled treasury shares. The notes on pages 59 to 61 form part of these financial statements. 58 Notes forming part of the financial statements of the Company for the year ended 31 May 2023 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 statement of comprehensive income. 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 statement of comprehensive income. 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. 59 Notes forming part of the financial statements of the Company for the year ended 31 May 2023 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 the statement of comprehensive income. 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 £21,000 (2022: loss £82,000). 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 (2022: 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 2023 Year ended 31 May 2022 £000 £000 91 2 - 93 91 1 1 93 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 2023 were nil (2022: nil). 4 Investments in subsidiary undertakings At 31 May 2022 Released on liquidation of subsidiary At 31 May 2023 Cost and Carrying value £000 3,370 (20) 3,350 Details of subsidiary undertakings are given on the Group Information page 1 and in note 16 to the consolidated financial statements. 60 Notes forming part of the financial statements of the Company for the year ended 31 May 2023 5 Amounts receivable from subsidiary undertakings 31 May 2023 £000 31 May 2022 £000 Total amounts receivable from subsidiary undertakings 2,579 2,550 No impairment loss was recognised in the year in respect of amounts receivable from subsidiary undertakings. (2022: £nil). The amounts receivable from subsidiary undertaking relates to long term loans with details as follows: Fixed Interest Rate Repayment Profile 31 May 2023 £000 31 May 2022 £000 Loan 1 8% Repayable on demand 2,579 2,550 Although these balances are repayable on demand, the expectation of recoverability of these balances is in nature and substance more of a longer-term funding arrangement, in which the Company does not require payment immediately. As such, this is presented as a non-current asset. 6 Trade and other receivables Total trade and other receivables 16 16 31 May 2023 £000 31 May 2022 £000 7 Trade and other payables Accruals and deferred income Total trade and other payables 8 Share capital Issued and fully paid At beginning of the period Cancellation of treasury shares 31 May 2023 £000 31 May 2022 £000 100 100 2023 Number 27,320,843 - 2023 £000 3,279 - 2022 Number 31,600,000 (4,279,157) 91 91 2022 £000 3,792 (513) 3,279 At end of period 27,320,843 3,279 27,320,843 At 31 May 2023, no options over ordinary shares of the Company were outstanding (2022: £nil). Details of the purchases and cancellation of the shares held in treasury are disclosed in note 25 to the consolidated financial statements. 9 Commitments There were no contracted capital commitments for the Company in either period. End of the financial statements. 61 Appendix 1 - Five Year Summary of Results and Capital Employed Year ended 31 May 2023 £000 Year ended 31 May 2022 £000 Year ended 31 May 2021 £000 Year ended 31 May 2020 £000 Year ended 31 May 2019 £000 27,817 (22,383) 29,590 (24,121) 33,013 (26,700) 35,555 (29,623) 41,271 (32,254) 5,434 (6,114) 171 5,469 (6,944) 147 6,313 (7,226) 966 5,932 (8,020) - 9,017 (9,057) - (509) (384) - - - (893) 53 (1,328) (255) - (1,662) - (3,245) (4) 53 (228) - (333) - (508) 42 (2,088) (260) (40) (194) - - - (34) - (982) (2,348) (6) (1,250) (43) Results Revenue Cost of sales Gross profit Operating expenses Other income (Loss)/profit from operations (excluding impairment of goodwill and assets) Net finance expense Share of post-tax loss of joint venture Impairment of assets Impairment of goodwill Loss before tax Tax credit/(charge) Loss after tax (840) (3,249) (466) (2,354) (1,293) Assets Non-current assets Current assets 6,740 11,651 7,557 15,342 10,261 13,960 10,624 14,962 9,615 17,940 Total assets 18,391 22,899 24,221 25,586 27,555 Non-current liabilities Current liabilities (656) (7,296) (2,001) (9,721) (3,354) (6,306) (3,428) (6,575) (2,289) (7,525) Total liabilities (7,952) (11,722) (9,660) (10,003) (9,814) Total net assets 10,439 11,177 14,561 15,583 17,741 Financed by Total equity Key Statistics 10,439 11,177 14,561 15,583 17,741 Basic and diluted loss per share (3.1p) (11.9p) (1.7p) (8.6p) (4.7p) Net assets per share 38.2p 40.9p 53.3p 57.0p 64.9p 62 Notice of Annual General Meeting The one hundred and twenty third annual general meeting of the Leeds Group plc (the Company) will be held at 2.15pm on 22 November 2023 at the Radisson Blu Hotel, Chicago Avenue, Manchester Airport, M30 3RA for the following purposes: To consider and, if thought fit, pass the following resolutions which will be proposed as ordinary resolutions: 1. 2. 3. To receive the report of the Directors, the financial statements for the year ended 31 May 2023 and the report of the auditors thereon. To re-appoint Mr Dave Cooper as a director. To re-appoint MHA 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. 4. 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 5 will be proposed as an ordinary resolution and resolution 6 will be proposed as a special resolution: 5. 6. 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: 6.1 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 6.2 otherwise than pursuant to sub-paragraph 7.1, up to an aggregate nominal amount of £164,000 (being approximately 5 per cent. of the existing issued share capital of the Company. 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. 63 Notice of Annual General Meeting (continued) Special business (continued) For the purpose of this resolution 6: a) references to an "allotment of equity securities" shall include a sale of treasury shares; and b) 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 23 October 2023 Notes 1. Shareholders of the Company are entitled to attend, speak and vote, either in person or by proxy, at general meetings of the Company. 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 4 (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 6 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 5 and 6 are items of special business. 2. 3. 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 close of business on 20 November 2023 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. 64 Notice of Annual General Meeting (continued) Notes (continued) 4. 5. 6. 7. 8. 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 Group 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, in England and Wales. Or email Link Group at Monday shareholderenquiries@linkgroup.co.uk. to Friday excluding public holidays 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 Group. 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. 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 & International 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 2.15pm on 20 November 2023. 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). Unless otherwise indicated on the Form of Proxy, CREST or any other electronic voting instruction, the proxy will vote as they think fit or, at their discretion, withhold from voting. 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 notarial 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 Group, Central Square, 29 Wellington Street, Leeds, LS1 4DL not later than 2.15pm on 20 November 2023. 65 Notice of Annual General Meeting (continued) Notes (continued) 9. 10. 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 Group, Central Square, 29 Wellington Street, Leeds, LS1 4DL. 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 Group. 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 Group at Central Square, 29 Wellington Street, Leeds, LS1 4DL no later than 2.15pm on 20 November 2023. 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. 11. As at 23 October 2023 (being the last practicable business day prior to the publication of this notice) the Company’s issued share capital consisted of 27,320,843 ordinary shares of 12 pence each, with one voting right per share. 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. 66 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 2023. 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 61 of this document. Resolution numbers 2 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 Dave Cooper is the Director subject to retirement by rotation. Resolutions 2 propose the re-appointment of Mr Cooper. Resolution number 3 The auditors of the Company must be re-appointed at each meeting at which the financial statements are presented. Resolution 3 proposes the re-appointment of MHA following their appointment during the year by the Directors, they have indicated their willingness to be so re-appointed. Resolution number 4 Resolution 4 follows past practice in giving the Directors authority to agree the auditor’s remuneration. Resolution number 5 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 6 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 £164,000, 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. 67 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 68
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