10th Aug 2018 09:58
LONDON (Alliance News) - Leeds Group PLC on Friday posted a substantial drop in profit, blaming currency headwinds, margin pressures, and increased competition.
In its financial year ended May 31, the fabric trader recorded a GBP885,000 pretax profit, only a little more than half its GBP1.4 million profit the year before. The chief cause of this was a GBP49,000 loss on currency exchange, swinging from a GBP310,000 gain the previous year.
The company also faced increased competition and margin pressure so that, although revenue grew 1% to GBP41.5 million from GBP41.1 million, the company's profit suffered.
Leeds' principal trading company, Hemmers-Itex Textil Import Export GmbH, recorded fabric sales up 2.1% to GBP38.3 million from GBP37.5 million year-on-year. However this was due largely to the weakening of sterling as, in euro terms, its revenue dropped to EUR43.3 million from EUR44.2 million. During the year to May, a strategic review and a cost review were undertaken to improve profitability. The results of these reviews are expected to materialise in Leeds' current financial year.
In addition, reduced gross margins drove Hemmers' Shanghai subsidiary, Chinoh Tex Ltd, to an GBP86,000 pretax loss in its most recent year from a GBP47,000 profit the year before.
Hemmers also holds a 50% interest in Stoff-Ideen-KMR GmbH, a haberdashery chain which is operated as a joint venture. The company said KMR's operating performance was "unsatisfactory", and it has reached an agreement to terminate the joint venture. Leeds' share of KMR's loss for the year was GBP107,000, sinking from a GBP33,000 profit.
"The board considers there are still potential growth opportunities...despite a competitive environment and given the steps taken to improve efficiencies, the directors believe that we are well placed to return to previous profit levels for the group," said Leeds Group Chairman Jan Holmstrom.
"At this early point in the current financial year, sales and profit are in line with the expectations of the board," Homstrom added.
Shares in Leeds Group were untraded at 28.00 pence on Friday.
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