Leeds Group's revenue rises despite weak pound, remains 'cautiously optimistic'

5th Jan 2017 09:03

(ShareCast News) - Fabrics and haberdashery wholesaler Leeds Group's interim revenue rose as it experienced a "material effect" from the recent tumble in the value of sterling, as it remains "cautiously optimistic" about the future.Revenue climbed 13.9% to £21.05m for the six months ended 30 November 2016 compared to last year, which resulted in a 22.5% rise in profit after tax of £848,000. Earnings per share increased to 3.1p from 2.5p.Chairman Jan Holmstrom said: "Given the global economy with its uncertainties, the board is cautiously optimistic for further growth in the second half of the year."Leeds Group did not feel the effects of the weak pound as the its main currency exposure relates to the value of the euro against the dollar.The 13.9% revenue growth comprised a fall of 2.7% in sales at constant exchange rates, due to the translation effect of weaker sterling, which increased reported sales by 16.6%.Similarly, the translation effect on the balance sheet increased net assets by £1.26m since the end of the previous financial year on 31 May 2016.The company said that there has been a gain of some £300,000 in the value of the euro denominated loan it gave to Hemmers/Itex Textil Import Export, its German subsidiary, which has been locked in by derivatives.Revenue at Hemmers fell by 2.9% to €22.52m and pre-tax profit was down 0.4% due to an "inability to keep up with demand for double folded items", which has been addressed with the expansion of facilities in Nordhorn and the acquisition of additional machines.The joint venture with German fabric retailer KMR opened new shops and continues to trade in line with the expectations with sales, 25% greater than last year.Meanwhile, revenue and pre-tax profit at Hemmers' subsidiary in Shanghai, Chino-Tex, "were little changed".Net debt increased "substantially because of the recent property investments" to £5.54m from £579,000 last year. The company said that working capital is expected to fall from its seasonally high level during the second half of the year.Holmstrom, said that in order to "maximise funds available for future investments and the investment in the Hemmers facility during the current year", the company does not propose an interim dividend.