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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Leeds Group Plc | LSE:LDSG | London | Ordinary Share | GB0005100606 | ORD 12P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 10.00 | 9.00 | 11.00 | 10.00 | 10.00 | 10.00 | 0.00 | 07:30:49 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Textile Goods, Nec | 27.82M | -840k | -0.0307 | -3.26 | 2.73M |
From Apr 2019 to Apr 2024
TIDMLDSG
RNS Number : 8514C
Leeds Group PLC
22 October 2020
Issued on behalf of Leeds Group plc Embargoed: 7.00am
Date: 22 October 2020
Leeds Group plc
("Leeds Group" or "the Group")
Final Results for the year ended 31 May 2020
Leeds Group reports the final results of the Group for the year to 31 May 2020.
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 (MAR) and has been arranged for release by Jan G Holmstrom, Chairman.
Enquiries:
Leeds Group plc Cairn Financial Advisers LLP
Dawn Henderson - 01937 547877 Liam Murray/Sandy Jamieson - 020 7213 0880
Chairman's Statement
It has been a difficult year for the Group. Trading conditions have been challenging within both the wholesale and retail textile markets due to increased competition and pressure on prices. In addition, the Covid-19 pandemic affected trading for the last three months of the financial year.
As previously communicated on 31 March 2020, the Directors have implemented a number of cost cutting measures, identified through a strategic review undertaken last year, to refocus on our core business and ensure that the Group has the appropriate infrastructure and cost base aligned to its sales levels.
In last summer's strategic review of the Chinoh-Tex Ltd ('Chinoh-Tex') business, it was concluded that the company was not generating adequate profits and was no longer needed to support our procurement activities in China. Therefore, a decision was taken in October 2019 to cease operations and close the company. Chinoh-Tex ceased trading in November 2019 and the costs of closure have been included in the results for this year. The company was formally liquidated prior to the year end.
Both Hemmers-Itex Textil Import Export GmbH (' Hemmers') and Stoff-Ideen-KMR GmbH ('KMR') businesses were considerably restricted from March 2020 when the German government imposed a country wide lockdown in response to the Covid-19 pandemic. Hemmer's wholesale business was affected by the imposed lockdown and KMR's retail shops were closed from mid-March to mid-April 2020. Both businesses suffered significant sales reductions in the final three months of the year, the effect of which could only be partly offset by the mitigating actions taken by management and by government financial aid. Thus, both companies have experienced significant losses in the financial year to 31 May 2020.
Even though the Covid-19 situation is still impacting the marketplace, sales levels for Hemmers and KMR in the first few months of the new financial year have been better than expected. However, there is a risk that there may be further local or country wide restrictions which would again affect trading. The impact of Covid-19 on the Group is detailed further in the Finance and Operating Review and Directors' Report. The Directors are confident that both businesses are better prepared to mitigate this risk and should benefit again from any government financial support.
The Directors believe that the Group is now leaner and has a stronger management team with a revised customer focused strategy. The group's global wholesale business and retail trading in Germany should now be in a better position to return to acceptable levels of profit in future years, provided there is a return to normal trading conditions in the near future.
On behalf of shareholders, I want to thank the management and staff of Hemmers and KMR who have all continued with their best efforts to work through difficult and challenging times.
Jan G Holmstrom
Chairman
21 October 2020
Finance and Operating Review
Group result
Group revenue for the continuing operations in the year was GBP35,067,000 (2019: GBP38,905,000). Market conditions for both trading subsidiaries have been challenging and Hemmers has faced intense competition both domestically and internationally. The consequences of the Covid-19 pandemic affected both Hemmers and KMR severely in the last three months of the financial year. Although the German government provided financial support, the reduced sales figures did not produce enough contribution to cover the fixed overheads and therefore both Hemmers and KMR made losses for the year. Thus, the Group's operating loss from continuing activities was GBP1,756,000 (2019: loss GBP1,053,000).
With the implementation of IFRS 16 with regard to accounting for leases, the Group has recognised all long-term leases in the financial statements this year as right-of-use assets. The effect of this change in accounting has been that long-term lease payments of GBP915,000 which would have previously been charged to the profit and loss account have been removed and replaced by an additional depreciation charge of GBP865,000. There has also been an additional interest charge of GBP86,000. The net effect of the implementation is a charge of GBP36,000.
The Group loss before tax from continuing activities was therefore GBP2,016,000 (2019: loss GBP1,281,000). The result for last year included an impairment charge of GBP982,000 relating to the goodwill which arose on the acquisition of Hemmers in 1999.
The tax charge in the year was GBP6,000 (2019: GBP41,000). The total loss per share was 8.6p (2019: 4.7p).
Hemmers-Itex
Hemmers is a global business engaged in designing, importing, warehousing and wholesaling of fabrics from Germany. Sales for the year were significantly lower than last year at GBP27,060,000 (2019: GBP30,939,000). The market in Germany has fallen considerably during the year and Hemmers has also been under increased price pressure from competitors. Sales fell in the last three months of the year due to the effect of the Covid-19 pandemic. A strategic sales review coupled with a comprehensive cost review was undertaken during the financial year to ensure the cost base for Hemmers is aligned to the current market conditions. The gross contribution percentage decreased to 31% (2019: 36%) due to the pressure on pricing through competition and that, together with the lower level of sales volume, has resulted in a fall in gross contribution. Because of the fall in contribution, it was not sufficient to meet the fixed overheads despite continued reduction in staff and wage costs and therefore, the company produced a loss excluding the share of the joint venture of GBP1,593,000 (2019: profit GBP239,000).
Hemmers is now focused on growing its business domestically and internationally in its wholesale markets with a more customer focused sales strategy. We are confident that Hemmers will be in a much better position to compete in the global marketplace next year to regain lost market share.
Hemmers bank debt, net of cash, decreased in the year to GBP3,184,000 (2019: GBP4,197,000). This was due mainly to the sale of a warehouse in Nordhorn for GBP744,000. The bank debt is secured on the assets of Hemmers.
KMR
KMR is a retail business trading in Germany. Sales were lower than last year at GBP8,007,000 (2019: GBP8,656,000), although within the group accounts only eleven trading months were included last year as KMR became a subsidiary in July 2019, previously it had been included in the accounts as a joint venture. The gross contribution percentage increased slightly to 53% (2019: 50%). However, KMR was affected by the closure of all its retail shops for the last three months of the year from March 2020 due to effect of the Covid-19 pandemic. This lower level of trading, despite financial support from the German government, has resulted in a loss for the year of GBP331,000 (2019: loss GBP554,000). Improved working efficiencies have been implemented during the year including the introduction of new working patterns resulting in reduced cost base. This should eliminate the losses going forward and provide a better foundation for better results in the coming years.
KMR bank debt, net of cash, decreased in the year to GBP979,000 (2019: GBP1,738,000). This was due mainly to the sale of land in Nürnberg for GBP552,000. The bank debt is secured on the assets of KMR.
Chinoh-Tex
Chinoh-Tex, the Chinese subsidiary of Hemmers, was not generating adequate profits despite actions taken to reduce costs and, therefore, a decision was taken during the year to close the company. The costs of closure have been included in the loss of GBP332,000 for the year (2019: profit GBP31,000). The company was formally liquidated prior to the year end.
Fixed Assets
The net book amount of tangible fixed assets in the Consolidated Statement of Financial Position is GBP8,183,000 (2019: GBP8,534,000). In accordance with the newly introduced IFRS 16 with regard to accounting for leases, right-of-use assets with a net book value of GBP3,067,000 have been introduced in the accounts as fixed assets this year in addition to finance leases of GBP29,000 already reflected in the financial statements in previous years.
Capital additions in the year amounted to GBP560,000 (2019: GBP550,000) and additional right-of-use leases of GBP258,000 included in the accounts. Two properties, included in the financial statements partly as fixed assets and partly as investment properties, were sold during this year for sales proceeds of GBP1,296,000. These were included in the total sales proceeds of GBP1,317,000 from the sale of assets realising a profit of GBP32,000.
Working Capital and Cash Flow
Net cash generated in the year was GBP34,000 (2019: GBP497,000), despite the loss produced in the year of GBP2,354,000. Although the loss includes a depreciation and amortisation charge of GBP1,618,000. During the year, cash has been generated from the sale of assets amounting to GBP1,317,000 with capital expenditure of GBP560,000. Working capital, which comprises inventories, trade and other receivables and trade and other payables, decreased in the year by GBP2,738,000 (2019: GBP1,031,000). Stock and debtor levels were lower at 31 May 2019 due to the reduced trading in March to May as a result of the effects of the Covid-19 pandemic on trading. Loan repayments of GBP2,378,000 have been made this year to reduce the total Group borrowing and lease liability repayments of GBP926,000 have been made in the year.
The Group continues to carefully monitor its working capital requirements to ensure it operates within its current banking facilities.
Net Asset Value
Net assets decreased in the year by GBP2,158,000 as follows:
Hot Features
Premium
Net assets Per share
GBP000 pence
At 31 May 2019 17,741 64.9
(Loss) after tax (including discontinued
operations) (2,354) (8.6)
Translation differences 196 0.7
At 31 May 2020 15,583 57.0
=========================================== ==================== ===========
Debt Profile
The funding policy of the Group continues to be to match its funding requirement in trading subsidiaries in a cost-effective fashion with an appropriate combination of short and longer-term debt. Property investments have been financed partly by long term loans at fixed interest rates between 1.05% and 4.07%. Working capital finance, when required, is via short term loans of three months currently attracting interest at rates of between 1.25% and 3%. Bank debt in the subsidiaries is secured by charges on inventories, receivables and property and is without recourse to the Parent Company.
Impairment reviews
In accordance with IAS 36, annual impairment reviews are carried out for each cash-generating unit to which goodwill is allocated. An impairment loss of GBP982,000 was recognised in the last financial period in respect of the goodwill which arose on the acquisition of Hemmers in 1999.
Following the implementation of IFRS16, the right-of-use assets are now considered part of the cash generating units. Although annual impairment reviews are not required on tangible assets, management have performed an impairment review on these assets due to historic trading losses and the effects of the Covid-19 pandemic. Impairment tests have been performed by assessing relevant cash flows of each cash generating unit and assessing this against the value of assets relating to that specific cash generating unit. Following this review, no impairment charge has been recognised during this financial year.
Principal risks and uncertainties
The Board has identified the main categories of business risk in relation to the Group's strategic aims and objectives, and has considered reasonable steps to prevent, mitigate and manage these risks. The principal risks identified are as follows:
Funding risk
The Group has a combination of short-term borrowing facilities and longer-term loan agreements secured on Group assets. The Group remains dependent upon the support of these funders and there is a risk that failure in a company to meet banking covenants could have implications for the Group. Borrowing facilities are monitored regularly and the facilities agreed are more than needed for the Group's requirements. The Group has close working relationships with their current funders but believe alternative banking funders could be secured if required.
Market risk
There is always the ongoing threat of reduced market demand. This has been seen this year and the Group continues to strive to combat the reduced demand by looking at other markets both domestically and internationally and looking at expanding its product ranges for example introducing home furnishing products.
The commercial risks of operating in the highly competitive European fabric market are limited by the fact that Hemmers has a wide range of suppliers, and no customer accounts for more than 5% of revenues.
Foreign exchange risk
Most fabric purchased by Hemmers is paid for in US dollars, while the Euro is the principal currency in which Hemmers sells its product. The Euro/dollar rate is of greater significance to Leeds Group than the strength of Sterling. The Hemmers management continue to manage this transactional currency risk by a combination of forward exchange contracts with reputable banks and sales price increases where necessary.
Covid-19
During the year, the global Covid-19 situation which resulted in lockdowns across the world, has affected both businesses. This affected the last three months of the year, March to May. KMR whose main business is retail shops was required to close all its shops from mid-March to mid-April. The financial impact on all businesses was partly mitigated by financial support from the German government. Financial support was provided to cover the wages of staff unable to work due to the country wide lockdown. There is a risk that if infections of Covid-19 are not controlled that a further country wide or local lockdown will be required. It is expected that in this event, Government support would again be provided, and the management have looked at further measures to mitigate the risk having experienced the first wave of the pandemic. See note 1 for additional disclosure.
Brexit
Following the UK's decision to leave the European Union ("EU") by 31 December 2020, the economic environment is still uncertain. This uncertainty continues as the UK looks to secure an acceptable deal to leave the EU. The threat of no deal creates more uncertainty. However, the business of Leeds Group is conducted entirely by subsidiaries incorporated in Germany, and their exports to the UK account for approximately 3% only of Group revenue. For this reason, the Directors do not believe that a material risk to Leeds Group will arise from the terms on which the UK will, in the future, have access to EU markets, and vice versa. Leeds Group has a loan denominated in euros which does carry a currency risk and may be affected by Brexit, however, the Directors do not believe the impact would have a material effect on the Group's results as the subsidiary trades in Euros and the Directors consider this provides a natural hedge.
The currency markets dislike the current air of uncertainty surrounding the current negotiations with regard to the UK leaving the EU and sterling has weakened since the UK announced it was leaving the EU. This benefits Leeds Group since, as the pound weakens, the value of the revenues, profits and net assets of foreign subsidiaries are increased in sterling terms. This effect has been seen in both this year's and last year's accounts with translation gains in the Statement of Financial Position of GBP196,000 (2019: GBP55,000).
Section 172 Report
Leeds Group is committed to acting ethically and with integrity throughout all its business dealings and relationships. It is important to the company and its subsidiaries that trusted business relationships are established and maintained with key stakeholders, customers and suppliers and that it invests in and supports all its employees equally.
The Directors have always acted in accordance with their lawful duties, which includes their duty to act in good faith to promote the success of the Group for the benefits of its shareholders, having regard to its stakeholders and matters set out in Section 172 (1) of the Companies Act 2006. Section 172 considerations are embedded throughout the decision making of the Board. Issues, factors and risks which the Directors have considered when discharging their duty under section 172 (1) are further detailed in the Chairman's Statement, Directors' Report and Corporate Governance Report contained within these report and accounts.
During the year, as detailed in the Chairman's Statement, the Directors took the decision to close Chinoh-Tex after consultation with the employees affected and the closure was overseen by Jörg Hemmers, one of the Directors. He also ensured the completion of the two property sales transacted in the year. The sale of the warehouse in Nordhorn was agreed as Hemmers no longer required the warehouse space and external rentals could not be secured, therefore the decision was taken to sell as it would also release cash to pay down the group debt. As part of the acquisition of KMR in 2019, it had been agreed to sell the land at Nurnberg, adjacent to one of the KMR shops as it was a development opportunity as part of the acquisition of the company. The Directors are now looking to focus on developing the Hemmers and KMR businesses.
The two major shareholders are represented as non-executive members on the Board. The Board recognises the importance of effective and transparent dialogue with shareholders and ensuring that non-management shareholders understand and support the Group's strategy and objectives. The Board meet quarterly on as formal basis, and ad hoc, as necessary, throughout the year. The Board is more than happy to engage with shareholders at any time and answer questions they may have. The AGM is a formal meeting at which to have this dialogue.
The Board looks to ensure the systems, processes and controls established to manage its businesses to the highest standards. The supply chain is an integral part of trading business and it is of paramount importance that best practice in terms of anti-bribery and modern slavery are adhered to. All employees have therefore completed training to ensure this is in place. The Board receives updates from the management team at Hemmers as to the relationships with key customers and suppliers. Hemmers management regularly engage in dialogue with key suppliers and customers. All operational staff are based in Germany, based either at Nordhorn or work within one of the KMR retail shops. Regular dialogue is maintained with all staff and meetings are held regularly to ensure staff understand the strategy and positions of the businesses. Staff are encouraged to discuss any concerns or issues they may have with their line manager or Hemmers management are always available to meet staff if necessary.
Jan G Holmstrom
Chairman
21 October 2020
Consolidated Statement of Comprehensive Income
for the year ended 31 May 2020
Year ended Year ended
31 May 2020 31 May 2019
GBP000 GBP000
------------------------------------ ----- -------------------- -------------------
Continuing operations
Revenue 35,067 38,905
Cost of sales (29,039) (30,365)
------------------------------------------- -------------------- -------------------
Gross profit 6,028 8,540
Distribution costs (2,876) (3,229)
------------------------------------------- -------------------- -------------------
Impairment of goodwill - (982)
Administrative expenses (4,908) (5,393)
------------------------------------------- -------------------- -------------------
Administrative costs Other income (4,908) (6,375)
- 11
------------------------------------------ -------------------- -------------------
(Loss) from operations (1,756) (1,053)
Finance expense (260) (194)
Share of post-tax (loss) of
joint venture - (34)
(Loss) before tax (2,016) (1,281)
Tax charge (6) (41)
------------------------------------------- -------------------- -------------------
(Loss) from continuing operations (2,022) (1,322)
------------------------------------------- -------------------- -------------------
Discontinued operations
(Loss)/profit from discontinued
operations (332) 29
------------------------------------------- -------------------- -------------------
(Loss) for the year attributable
to the equity holders of the
Parent Company (2,354) (1,293)
------------------------------------------- -------------------- -------------------
Other comprehensive income
Translation differences on foreign
operations 196 55
------------------------------------------- -------------------- -------------------
Total comprehensive loss for
the year attributable to the
equity holders of the Parent
Company (2,158) (1,238)
=========================================== ==================== ===================
There is no tax effect relating to other comprehensive income for the year. Amounts included in other comprehensive income may be reclassified subsequently as profit or loss.
(Loss) per share attributable to the equity holders of the Company
Note Year ended Year ended
31 May 31 May 2019
2020
----------------------------------- ------ ------------ --------------
Basic and diluted total (loss)
per share (pence) 11 (8.6)p (4.7)p
=================================== ====== ============ ==============
Basic and diluted (loss)
from continuing operations per
share (pence) 11 (7.4)p (4.8)p
=================================== ====== ============ ==============
Consolidated Statement of Financial Position
at 31 May 2020
Company number 00067863 31 May 2020 31 May 2019
GBP000 GBP000
-------------------------------- -------------- --------------
Assets
Non-current assets
Property, plant and equipment 8,183 8,534
Right-of-use assets 2,374 -
Investment property - 1,009
Intangible assets 67 72
Total non-current assets 10,624 9,615
-------------------------------- -------------- --------------
Current assets
Inventories 10,188 11,760
Trade and other receivables 3,464 4,382
Tax recoverable 206 733
Cash and cash equivalents 1,104 1,065
Total current assets 14,962 17,940
-------------------------------- -------------- --------------
Total assets 25,586 27,555
================================ ============== ==============
Liabilities
Non-current liabilities
Loans and borrowings (1,950) (2,289)
Lease liabilities (1,478) -
Total non-current liabilities (3,428) (2,289)
-------------------------------- -------------- --------------
Current liabilities
Trade and other payables (2,877) (2,770)
Loans and borrowings (2,671) (4,655)
Lease liabilities (927) -
Provisions (100) (100)
Total current liabilities (6,575) (7,525)
-------------------------------- -------------- --------------
Total liabilities (10,003) (9,814)
================================ ============== ==============
TOTAL NET ASSETS 15,583 17,741
================================ ============== ==============
Capital and reserves attributable
to
equity holders of the Company
Share capital 3,792 3,792
Capital redemption reserve 600 600
Treasury share reserve (807) (807)
Foreign exchange reserve 2,741 2,545
Retained earnings 9,257 11,611
TOTAL EQUITY 15,583 17,741
==================================== ======== ========
The financial statements were approved and authorised for issue by the Board of Directors on 21 October 2020 and were signed on behalf of the Board by:-
Jan G Holmstrom
Chairman
Consolidated Cash Flow Statement
for the year ended 31 May 2020
Year ended Year ended
31 May 2020 31 May 2019
GBP000 GBP000
-------------------------------------------- -------------- --------------
Cash flows from operating activities
(Loss) for the year (2,354) (1,293)
Adjustments for:
Depreciation of property, plant
and equipment 723 668
Depreciation of right-of-use assets 876 -
Depreciation of investment property 13 16
Amortisation of intangible assets 6 7
Finance expense - interest on bank
loans 174 194
Finance expense - interest lease
liabilities 86
Impairment of goodwill - 982
Net goodwill arising on acquisition - (7)
Gain on sale of property, plant
and equipment (32) (5)
Share of post-tax loss of joint
venture - 34
Tax charge 6 43
Cash flows (to)/from operating
activities before
changes in working capital and
provisions (502) 639
Decrease in inventories 1,735 441
Decrease in trade and other receivables 965 140
Increase in trade and other payables 38 450
Cash generated from operating activities 2,236 1,670 Tax received/(paid) 519 (430) Net cash flows from operating activities 2,755 1,240 ============================================ ============== ============== Investing activities Purchase of property, plant and equipment (560) (550) Purchase of subsidiary net of debt - 75 Proceeds from the sale of fixed assets 1,317 6 Net cash generated/(used) in investing activities 757 (469) ============================================ ============== ============== Financing activities Purchase of treasury shares - (9) Bank borrowings repaid (2,378) (1,358) Bank borrowings drawn down - 1,287 Repayment of principal on lease (840) - liabilities Repayment of interest on lease (86) - liabilities Bank interest paid (174) (194) Net cash (used) in financing activities (3,478) (274) ============================================ ============== ============== Net increase in cash and cash equivalents 34 497 Translation gain/(loss) on cash and cash equivalents 5 (4) Cash and cash equivalents at the beginning of the year 1,065 572 Cash and cash equivalents at the end of the year 1,104 1,065 ============================================ ============== ==============
Consolidated Statement of Changes in Equity
for the year ended 31 May 2020
Share Capital Treasury Foreign Retained
capital redemption share exchange earnings Total equity
reserve reserve reserve GBP000
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---------- ------------- ---------- ----------- ----------- ----------------
At 31 May 2018 3,792 600 (798) 2,490 12,904 18,988
(Loss) for the year - - - - (1,293) (1,293)
Other comprehensive
income - - - 55 - 55
Total comprehensive
income/(loss) - - - 55 (1,293) (1,238)
------------------------- ---------- ------------- ---------- ----------- ----------- ----------------
Transaction with
Shareholders:
Purchase of treasury
shares - - (9) - - (9)
------------------------- ---------- ------------- ---------- ----------- ----------- ----------------
At 31 May 2019 3,792 600 (807) 2,545 11,611 17,741
------------------------- ---------- ------------- ---------- ----------- ----------- ----------------
(Loss) for the year - - - - (2,354) (2,354)
Other comprehensive
income - - - 196 - 196
------------------------- ---------- ------------- ---------- ----------- ----------- ----------------
Total comprehensive
income/(loss) - - - 196 (2,354) (2,158)
------------------------- ---------- ------------- ---------- ----------- ----------- ----------------
At 31 May 2020 3,792 600 (807) 2,741 9,257 15,583
========================= ========== ============= ========== =========== =========== ================
The following describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Share capital The nominal value of issued ordinary shares
in the Company.
Capital redemption reserve Amounts transferred from share capital on
redemption of issued shares.
Treasury share reserve Cost of own shares held in treasury.
Foreign exchange reserve Gains/(losses) arising on retranslation
of the net assets of overseas operations
into sterling.
Retained earnings Cumulative net gains/(losses) recognised
in the consolidated statement of comprehensive
income after deducting the cost of cancelled
treasury shares.
Notes
1. Basis of preparation
This announcement has been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRS"), and with the Companies Act 2006 applicable to companies reporting under IFRS.
Changes in accounting policies
The Directors have adopted the following accounting standards which became effective for periods beginning on or after 1 January 2019:
IFRS 16, 'Leases' is effective for periods beginning on or after 1 January 2019. The impact of the new standard has brought operating lease arrangements on the balance sheet, with the right of use asset and corresponding financial liability recognised on transition. Within the income statement rental expense has been replaced by depreciation and interest expenses. This has resulted in an increase in depreciation and finance costs.
The Group has significant operating lease commitments and therefore the adoption of the standard has had a material impact on the Financial Statements of the Group. The Directors have applied the modified retrospective approach and therefore at the date of initial application an amount equal to the lease liability, using appropriate incremental borrowing rates, has been recognised as a right-of-use asset. The weighted average incremental borrowing rate of 3% has been used at the date of initial application. This has been calculated as the net present value of the remaining lease payments. There has been no impact on the opening reserves on the date of the initial application and in using the modified retrospective approach, the comparative figures for last year have not been restated. The portfolio of leases consists of vehicle leases and property leases. For short-term leases, the Directors have decided to apply the exemptions not to recognise those leases as a right-of-use asset and a lease liability.
The effect of adopting IFRS 16 resulted in the recognition of right-of-use assets and lease liabilities of GBP3,067,000 as at 1 June 2019. Instead of recognising operating lease expenses for its operating leases, the Group has recognised interest on its lease liabilities and depreciation on its right-of-use assets. The overall impact on the financial results to 31 May 2020 has resulted in an additional charge to the profit and loss of GBP36,000.
Going Concern
When considering its opinion about the application of the going concern basis of preparation of the financial statements to 31 May 2020, the Directors have given due consideration to:
-- The performance of the Group in the last financial year and the robustness of forecasts for the next 24 months, which return the Group to profit.
-- The impact of the Covid-19 pandemic on the business, its suppliers and its customers.
-- The financing facilities available to the Group and the circumstances in which these could be limited or withdrawn.
Financial performance and forecasts
Having been consistently profitable the Group has been loss making in each of the last two years.
-- In the year to 31 May 2019, the Group reported a pre-tax loss from continuing operations of GBP1.3m after writing off goodwill of GBP1.0m.
-- In the year to 31 May 2020, the Group reported a pre-tax loss from continuing operations of GBP2.0m. Approximately GBP1.0m of this loss arose in the final quarter which was significantly impacted by the Covid-19 restrictions discussed below. To address the poor underlying performance the Directors and management restructured the business in the first half of the year to focus on profitable business streams and reduce its operating costs. Restructuring costs of GBP0.4m were incurred in the financial year which will benefit results going forward. Although loss making, the business was cash generative in the year with net debt reducing by GBP2.4m, of which GBP1.3m resulted from the sale of investment properties.
Forecasts have been prepared for the 24-month period to 31 May 2022 which indicate a return to modest profit over that period. These forecasts have been prepared in the knowledge of current Covid-19 conditions and assume that there is no protracted period of total lockdown. At the end of the first quarter of the current financial year sales and profit were ahead of forecast. The company has sensitised these forecasts for a reduction in revenues of 10% at both Hemmers and KMR in the forecast period and an additional net EUR1 million profit reduction from a second period of lockdown. The Directors are of the opinion that this is a reasonable worst case, and the currently available facilities would be sufficient in this scenario.
Covid-19 Impact
Both Hemmers and KMR are located in Germany which has responded well to the outbreak. KMR was most directly impacted by the measures put in place with all stores closed from the mid-March to the mid-April. Since reopening, the stores have performed ahead of both last year and forecast. Hemmers saw significantly reduced demand during March and April but like KMR, has traded strongly in the first quarter of the current year, ahead of last year and forecast.
Considering the progress made to restructure the Group, the trading results in the first quarter of the current financial year, the likely ongoing impact of the Covid-19 pandemic and the headroom available on the Hemmers working capital facility, the Directors are of the opinion that it is appropriate to apply the going concern basis of preparation to the financial statements.
2. Dividends
The Directors do not recommend the payment of a dividend in 2020 (2019: GBPnil).
3. (Loss) per share
Year ended Year ended
31 May 2020 31 May 2019
----------------------------------------------- ---------------- ----------------
Numerator
Total (loss) for the year GBP(2,354,000) GBP(1,293,000)
Denominator
Weighted average number of shares (excluding
treasury shares) 27,320,843 27,330,788
Basic and diluted total (loss) per share (8.6)p (4.7)p
=============================================== ================ ================
Numerator
(Loss)/profit for the year from continuing GBP(2,022,000) GBP(1,322,000)
operations
Denominator
Weighted average number of shares (excluding
treasury shares) 27,320,843 27,330,788
Basic and diluted (loss) from continuing
operations per share (7.4)p (4.8)p
=============================================== ================ ================
Numerator
(Loss)/profit for the year from discontinued GBP(332,000) GBP29,000
operations
Denominator
Weighted average number of shares (excluding
treasury shares) 27,320,843 27,330,788
Basic and diluted (loss)/profit from discontinued
operations per share (1.2)p 0.1p
==================================================== ============== ============
Since there are no outstanding share options, there is no difference between basic and diluted earnings per share.
4. Segmental information
Year ended Hemmers KMR Inter Parent Continuing Discontinued Total
31 May 2020 segmental Company operations operations Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ---------- --------- ------------ ---------- ------------- -------------- ----------
External revenue 27,060 8,007 - - 35,067 488 35,555
Inter-segmental
revenue 1,563 5 (1,681) - (113) 113 -
Cost of sales (24,468) (5,930) 1,472 - (28,926) (697) (29,623)
Gross profit/(loss) 4,155 2,082 (209) - 6,028 (96) 5,932
Distribution
costs (1,628) (1,312) 64 - (2,876) (51) (2,927)
Admin expenses (3,913) (988) 233 (240) (4,908) (185) (5,093)
Other income 88 - (88) - - - -
Operating (loss) (1,298) (218) - (240) (1,756) (332) (2,088)
Finance expense (147) (113) - - (260) - (260)
Internal interest (148) - - 148 - - -
(Loss) before
tax (1,593) (331) - (92) (2,016) (332) (2,348)
====================== ========== ========= ============ ========== ============= ============== ==========
At 31 May 2020 Hemmers KMR Inter Parent Continuing Discontinued Total
segmental Company operations operations Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- --------- --------- ------------ ---------- ------------- -------------- ----------
Total assets 16,998 5,745 (218) 3,061 25,586 - 25,586
Total liabilities (5,769) (4,151) - (83) (10,003) - (10,003)
Total net assets 11,229 1,594 (218) 2,978 15,583 - 15,583
==================== ========= ========= ============ ========== ============= ============== ==========
Year ended Hemmers KMR Inter Parent Continuing Discontinued Total
31 May 2019 segmental Company operations operations Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ---------- --------- ------------ ---------- ------------- -------------- ----------
External revenue 30,939 7,966 - - 38,905 2,366 41,271
Inter-segmental
revenue 1,852 - (2,056) - (204) 204 -
Cost of sales (25,911) (6,092) 1,842 - (30,161) (2,093) (32,254)
Gross profit/(loss) 6,880 1,874 (214) - 8,540 477 9,017
Distribution
costs (2,027) (1,202) - - (3,229) (195) (3,424)
Admin expenses (4,231) (1,119) 193 (1,218) (6,375) (251) (6,626)
Other income 11 - - - 11 - 11
Operating profit/(loss) 633 (447) (21) (1,218) (1,053) 31 (1,022)
Finance expense (155) (39) - - (194) - (194)
Internal interest (239) - - 239 - - -
Share of JV (loss) (34) - - - (34) - (34)
Profit/(loss)
before tax 205 (486) (21) (979)_ (1,281) 31 (1,250)
========================== ========== ========= ============ ========== ============= ============== ==========
At 31 May 2019 Hemmers KMR Inter Parent Continuing Discontinued Total
segmental Company operations operations Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- ---------- --------- ------------ ---------- ------------- -------------- ----------
Total assets 22,330 4,609 (331) 109 26,717 838 27,555
Total liabilities (10,130) (2,450) - 2,961 (9,619) (195) (9,814)
Total net assets 12,200 2,159 (331) 3,070 17,098 643 17,741
==================== ========== ========= ============ ========== ============= ============== ==========
5. Loans and borrowings
The book value of loans and borrowings are as follows:
31 May 2020 31 May
GBP000 2019
GBP000
Current
Secured bank loans 2,671 4,655
Non - current
Secured bank loans 1,950 2,289
Total loans and borrowings 4,621 6,944
============================= ============= =========
At 31 May 2020 current loans and borrowings of GBP2,671,000 (2019: GBP4,655,000) comprise short term loans of GBP2,290,000 and instalments due on long term loans detailed below of GBP381,000. The interest rate on the short-term loans range from 1.25% to 3% (2019: 1.25% to 2.5%) and these loans are secured on the inventories and trade receivables of Hemmers and KMR. The short-term loans are drawn down by Hemmers against short term borrowing facilities of EUR11.5m and by KMR against short term borrowing facilities of EUR1.5m. Neither the Parent Company nor any of its subsidiaries other than Hemmers and KMR have borrowing facilities. The bank facilities are reviewed annually and are now in place for the forthcoming year.
A non-current loan was drawn down in 2007 from Kreissparkasse to finance the freehold extension of the warehouse in Nordhorn. In 2016 and 2017 further loans were drawn down to finance developments at Nordhorn.
Amounts outstanding at 31 May 2020 were:
Fixed Repayment Final repayment 31 May 2020 31 May 2019
interest profile date GBP000 GBP000
rate
Loan September
1 4.07% Equal monthly instalments 2027 436 493
Loan Equal quarterly September
2 1.65% instalments 2025 1,124 1,350
Loan Equal quarterly
3 1.05% instalments March 2026 390 446
Non-current loans 1,950 2,289
================================================= ================= ============= =============
6. Other information
The financial information set out above does not constitute the company's statutory accounts for 2020 or 2019.
Statutory accounts for the years ended 31 May 2020 and 31 May 2019 have been reported on by BDO LLP, Statutory Auditor. The Independent Auditor's Report on the Annual Report and Financial Statements for both 2020 and 2019 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
Statutory accounts for the year ended 31 May 2019 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 May 2020 will be delivered to the Registrar in due course. The Annual Report and Accounts giving notice of the 2020 Annual General Meeting, have been today published on the Group's website at www.leedsgroup.plc.uk . and have been sent to those shareholders who have elected to receive a hard copy of the Annual Report and Accounts by the post.
The Annual General Meeting will be held at 12 noon on 23 November 2020. In light of the UK Government's current guidance on public gatherings due to the Covid-19 pandemic, for this year's Annual General Meeting, the Board has concluded that shareholders cannot be permitted to attend the annual general meeting in person and so it will take place as a closed meeting. The annual general meeting will be held by electronic means.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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