Leeds lifted by cut in price of cotton

The Drighlington, Bradford-based group, said there is no doubt that customers are buying less fabric than usual this year and it remains to be seen whether order levels will pick up as the year progresses.

Company secretary Malcolm Wilson said: “Cotton prices more than doubled and reached a peak about six months ago. It’s still not down to where it was, but it’s a lot lower. We hope that will stimulate demand and we get volume back.”

Sales volumes at Hemmers Europe, the group’s German based operating subsidiary, were 20 per cent down on last year as a result of generally depressed levels of consumer spending and the high price of cotton goods.

The group increased fabric sales prices to preserve margins and this resulted in revenues in line with last year.

Group revenues were flat at £14.7m for the six months to November 30.

Pre-tax profits almost trebled from £240,000 to £700,000 due to reductions in distribution costs and other overhead expenses.

“The reduction in distribution costs has followed the reduction in volumes as shipping costs have significantly reduced,” said Mr Wilson.

“Overheads were reduced after we amalgamated the Dutch subsidiary with the German one,” he added.

Leeds Group’s main customers are German supermarkets, smaller wholesalers, retail outlets and clothing manufacturers.

Its fabric is used mainly for clothing, curtains and bedsheets. Going forward, Mr Wilson said it is very hard to predict when the market will pick up.

“Volumes are very difficult to call,” he said.

“The whole of Europe is a bit of a mess,” he said, referring to the problems within the eurozone countries.

Total metres sold during the six months by ChinohTex, the Chinese subsidiary of Hemmers, increased by 34 per cent over the same period last year.

The company said that although profitability at ChinohTex remains modest, it performs invaluable work to assist the European operation through its purchasing strengths and product inspection prior to shipment.

The group said it is satisfied with the progress being made in China.

Leeds has continued to buy back its shares in recent months, although liquidity has been limited and during the six-month period the group purchased only 25,000 shares.

In line with previous decisions, the board does not propose to pay an interim dividend.

The group continues to hold its 29 per cent stake in Scottish cashmere company Dawson International.

It said Dawson’s interim results issued last month showed profitable trading in continuing operations and cash resources in excess of £5m, but also showed a significant liability in two defined benefit pension schemes.

Leeds said that, subject to a satisfactory resolution of these pension issues, Dawson’s current share price does not fully reflect its longer term value.

The group said it has lost a further appeal against the decision by Leeds City Council to classify the land owned by the group at Haw Lane, Yeadon as a town or village green.

Three years ago a residents’ group set up a campaign to keep a large field owned by the company as recreational ground.

Leeds is currently consulting its legal advisers to find out what further course of action may be open to have the land de-registered.

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

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