Textiles importer and distributor Leeds Group investors gathered on Thursday for the company's annual general meeting, with Jan G Holmstrom bearing bad news in his statement.
The AIM-traded firm's non-executive chairman said that, having completed four months of the current financial year, sales volumes are below expectations which the board attributes, at least in part, to the unseasonably warm weather throughout Europe depressing retail demand.
"In addition, sales in ChinohTex have been held back by large scale factory closures around the Shanghai area ordered by the Chinese authorities to improve air quality in the run up to the recent G20 Summit.
"Nevertheless, profits are above our expectations, aided by currency exchange gains," Holmstrom said.
The expansion of the Hemmers facility at Nordhorn is now completed and in full use, he confirmed, saying the project was completed close to budget in terms of both cost and timeframe.
"[The company] should now begin to reap the benefits of saving the cost of rented warehouse space, increased sales opportunities from a much enlarged showroom, and the ability to bring in-house the double folding of fabrics that has been out-sourced in the past."
In December 2014, Hemmers acquired a 50% joint venture interest in KMR, a retail chain of 14 fabric and haberdashery stores.
Holmstrom said two more stores were opened in the last financial year, and in the first four months of the current financial year the total has been brought to 19 stores by the opening of shops in Berlin, Leipzig and Chemnitz.
"There will be further significant investment by KMR during the year of both a capital and revenue nature as modern EDP systems are introduced as a prerequisite for further profitable growth," he said.
Holmstrom added that, in view of the high levels of recent and continuing investment in the business, the board would not recommend the payment of a dividend.
"It remains the long term intention of the board to seek further opportunities to maximise the value of the group to the benefit of all shareholders by identifying appropriate investments that strengthen the group."