Leeds Group passes on the rising price of cotton

The Drighlington, Bradford-based group, said sales grew to £19m in the eight months to the end of May, from £18.5m a year earlier. Pre-tax profits were £809,000 versus £719,000 in the same period last year.

Leeds Group, which operates mainly through its Germany-based Hemmers subsidiary, said total fabric sales of 8.6 million metres were down 5.5 per cent on a year earlier.

“This reduction reflected depressed demand in the face of generally unfavourable economic conditions made worse by the very large increase in the cost of cotton goods,” said chairman Kathryn Davenport.

“However, increased sales prices for cotton goods imposed in line with our increased costs led to a rise of 5.5 per cent in sales revenue in local currency terms and an acceptable rate of margin.”

Leeds Group, which has been buying back its shares in recent months, said it is not ready to resume dividend payments while it looks for “appropriate investments that will strengthen the group and benefit all shareholders”.

The company already holds about 29 per cent of Scottish cashmere company Dawson International. It said although Dawson has no debt and significant cash, it does not expect Dawson’s share price, and therefore its investment, to increase until liabilities in its defined benefit pension scheme have been resolved.

“The directors will manage the group’s investment in a proactive manner that will encourage the management team to focus on realising the perceived incremental shareholder value that was at the root of the investment decision,” said Ms Davenport.

She added trading in its new financial year has been in line with its expectations. Net bank debt has been reduced by 59 per cent to £1.8m.

Activist Swedish investor Peter Gyllenhammar has around 21 per cent of the group’s shares, while another Swedish investor Johan Claesson has about 25 per cent.