Fabric wholesaler implements cost cutting exercises to improve profitability
Leeds Group, the wholesaler of fabrics and haberdashery, has seen revenues suffer because of “increased competition in a reduced market place” but pre-tax profits improve as it undergoes cost cutting across the group’s subsidiaries.
The listed firm, which has bases in Yeadon and Drighlington, this morning reported n the six month period to 30 November 2018.
Turnover stood at £21.8m in the period, down from £22.1m during the same period last year. However, pre-tax profits rose to £1.1m, up from £628,000 in the previous period.
Leeds Group chairman Jan Holmstrom said: “Market conditions have been challenging with increased competition in a reduced market place.”
Holmstrom added that the Board continued to believe that the result for the full year “will be at a higher level to last year” despite the challenging market conditions.
“The Group have implemented a number of cost reduction and efficiency plans throughout to ensure cost bases are reduced in accordance to the current market conditions to ensure the companies remain profitable,” said Holmstrom.
Sales at Hemmers – its German trading subsidiary – decreased to €19.7m (2017: €23m) which it said was due mainly to decreased demand in its main markets.
Leeds Group said that profit levels “have been maintained by an ongoing cost cutting exercise to reduce fixed overheads and improve efficiencies. The firm added: “This will continue in to the second half of the year with the objective of ensuring that profitability is maintained at a similar level to last year.”
On July 5 2018, Hemmers became 100% owners of KMR following the buyout of our Joint Venture partner. The consideration was £444,000 partly paid in cash £222,000 and the balance being three shops valued at £222,000.
Leeds Group said there was an accounting effect of both transactions which resulted in a gain on sale of the joint venture of £118,000 and negative goodwill arising on consolidation of £380,000 both of which have been credited to the profit and loss account. KMR will be consolidated as a subsidiary company in the Group for eleven months of this financial year.
Sales at KMR decreased to €4,9m (2017: €5,3m) as the retail sector saw reduced demand in particular through the hot summer months. Thus, there was an operating loss for KMR in the first half year of €315,000 (2017: loss of €126,000).
Chinoh-Tex, the subsidiary of Hemmers which is based in Shanghai, achieved external sales revenue of €1,9m (2017: €2,134,000). Chinoh-Tex achieved a pre-tax profit of €144,000 (2017: loss of €32,000).
Holmstrom added: “Although trading has been somewhat difficult, the infrastructure and administrative costs were reduced last year to align to the expected reduction in demand and this has continued into this financial year.”
