Sales rise but profits narrow at fabric wholesaler

Leeds Group, the wholesaler of fabrics and haberdashery, has reported half-year sales of £22m, up from £21m last year; but profits have narrowed. 

In its half-year report, the Drighlington-based firm said that its post-tax profits had reduced to £404,000 from £848,000 for the same period in the previous year.

The business  is conducted by its German trading subsidiary Hemmers and Chinoh-Tex Limited, a subsidiary of Hemmers based in Shanghai. These trading companies sell both basic commodity fabrics and also fabrics from their own fashion collections. Around 55% of sales are to retailers, with remaining sales activities divided between the wholesale and garment manufacturing sectors.

The results for the period to 30 November 2016 were boosted by currency gains of £392,000 as compared to currency losses for the period to 30 November 2017 of £34,000. Earnings per share were 1.5 pence (2016: 3.1 pence).

Fabric sales at Hemmers increased to €23m (2016: €22m). Growth in this division was achieved in the retail and garment manufacturing sectors but this was offset by reduced sales in the wholesale sector.  Profit also increased to €722,000 (2016: €616,000).

Jan Holmstrom, chairman of Leeds Group, said: “The KMR joint venture in which we have a 50% share continues to trade in line with expectations.  Sales increased to €5,334,000 (2016: €5,083,000). The operating loss was reduced to €126,000 (2016: €165,000) in the seasonally weaker first half. The business is expected to deliver an increased full year profit despite the costs associated with its continued growth. This has a consequential pull-through benefit for Hemmers.”

Chinoh-Tex, based in Shanghai, achieved external sales revenue of €2,1m(2016: €2,8m). The reduced turnover resulted in a pre-tax loss of €32,000 (2016: profit of €170,000).

Holmstrom said: “Trading has been difficult and therefore infrastructure and administrative costs are being reduced to align to this reduced demand. Though relatively small Chinoh-Tex also provides valuable assistance to its European parent in terms of purchasing, quality inspection and bulk shipping of material bought in China.”

Group net debt was £6,3m at 30 November 2017 – up from £5,5m in the previous year. 

“The increased net debt is partly because of the additional property investment made in Nordhorn last spring,” added Holmstrom. 

The Board of Directors do not propose an interim dividend, given the recent property investments at Hemmers in Nordhorn, Germany.

Holmstrom said: “The Board remains confident, despite the disappointing first half, that the underlying trading result for the full year will be better than last year, partly backed by a strong order book at Hemmers.

 As ever, I offer thanks to our employees throughout the Group for their great commitments.”