TIDMDWSN
RNS Number : 0341C
Dawson International PLC
01 March 2011
DWSN
DAWSON INTERNATIONAL PLC
("Dawson" or "the Group" or "the Company")
HALF YEAR REPORT FOR THE PERIOD ENDED 1 JANUARY 2011
Following the change of accounting year end from 31 December to
31 March, announced in December 2010, Dawson is issuing a second
half year report. This statement covers both the 12 month period
and the six month period to 1 January 2011. Comparative data is
provided for both periods.
KEY POINTS
Continuing Operations highlights:
-- Creditable results despite ongoing impact of rising cashmere
and cotton prices
-- Revenues from continuing businesses* for the 12 months of
GBP65.7 million (2009: GBP64.7 million)
-- Pre-exceptional operating profit from continuing businesses*
of GBP0.8 million (2009: GBP2.2 million)
- reflects margin impact of raw material price increases
-- Operating profit after exceptional items of GBP1.1 million
(2009: GBP2.0 million)
-- Strong cash position with net funds of GBP11.6 million (2009:
GBP12.3 million)
* excludes Dorma branded retail business, which was exited in
the first half of the year
Commenting on the half year results, chairman, David Bolton
said: "The period under review has been marked by significant
increases in cashmere and cotton prices, the main input costs for
our Knitwear businesses and Home Furnishings business respectively.
Whilst this has caused some decline in margins in all of our
businesses during the period, both of our knitwear businesses
returned creditable results in 2010, although the Home Furnishings
business performance was disappointing.
The upward trend in raw material prices continues to impact our
businesses as we move through 2011. It is therefore important to
ensure that selling prices recognise the increase in costs and we
are also offering customers alternative products. Our cash position
should ensure that we can manage the potentially difficult short
term economic conditions. It remains a priority to conclude
negotiations with the pension Trustees and to minimise the
associated costs."
For further information please contact:
David Bolton, Chairman: 07710 497166
David Cooper, Group Finance Director: 07836 299548
Zoe Biddick, Biddicks Financial Public Relations: 0203 178
6378
Robin Gwyn, WH Ireland 0161 832 2174
Chairman's Statement
Overview
In December 2010 we announced that the Company was changing its
accounting reference date from 31 December to 31 March and as a
result, our annual report for 2010/11 will cover the 15 month
period to 2 April 2011. AIM regulations require that interim
results are published for each half-yearly period and this report
is our second half-yearly report, covering both the six month and
twelve month periods to 1 January 2011. The reasons for this change
are to align reporting with the seasonality of the business and to
improve our budgeting process by bringing it closer to our main
selling season.
Revenue from continuing businesses for the 12 months to 1
January 2011 was GBP66.8 million (2009: GBP72.9 million) with
operating profit before exceptional items of GBP0.5 million (2009:
GBP1.4 million). Excluding the results of the Dorma retail
business, which was exited in the first half of the year, revenue
was GBP65.7 million (2009: GBP64.7 million) with operating profit
before exceptional items of GBP0.8 million (2009: GBP2.2 million).
Our cash position remains strong with net funds of GBP11.6 million
(2009: GBP12.3 million).
The period under review has been marked by significant increases
in cashmere and cotton prices, the main input costs for our
Knitwear businesses and Home Furnishings business respectively.
This has caused some decline in margins in all of our businesses
during the period and will increasingly impact results in 2011. The
most significant impact is expected in our US Knitwear business
where the increase in cashmere prices will reduce both turnover and
margins from our private label customers. Against this background,
both of our knitwear businesses returned creditable results in
2010, however, the results of the Home Furnishings business were
disappointing.
Given these challenging conditions, it is important that the
Group is structured in a way that can attract essential investment.
However, the pension liabilities and their associated costs are a
major disincentive to such investment:
-- Whilst net pension liabilities, calculated in accordance with
IAS 19, have reduced from GBP19.3 million to GBP12.3 million in the
year in line with the increase in the market value of assets, on a
funding basis liabilities are calculated more prudently and are
significantly higher.
-- Net pension liabilities, calculated in accordance with IAS
19, can fluctuate significantly year on year, and have ranged from
GBP4.7 million to GBP29.7 million in the past six years.
-- The current level of UK pension costs is unsustainable. In
addition to costs of GBP1.1 million (2009: GBP0.8 million) the
Company made deficit repair contributions of GBP0.4 million (2009:
GBP0.4 million) resulting in a total cash outflow of GBP1.5 million
in the year (2009: GBP1.2 million) in addition to regular
contributions.
The Company has been in negotiations with the Trustee for a
number of years to seek a solution which gives the most equitable
result for pension scheme members, the Company and shareholders. To
date these have been inconclusive and it has now become vital to
resolve this position quickly to find an ultimate solution for all
parties concerned.
Operating and Financial Review
Revenue Profit /(loss)
6 6 12 12 6 6 12 12
months months months months months months months months
to 1 to 2 to 1 to 2 to 1 to 2 to 1 to 2
January January January January January January January January
2011 2010 2011 2010 2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------- -------- -------- -------- -------- -------- -------- -------- --------
UK Knitwear 5,167 5,037 7,906 7,896 1,287 1,257 935 1,133
US Knitwear 25,922 27,043 28,577 28,695 4,304 4,945 3,195 3,774
Home Furnishings
- Private
Label 15,507 13,976 29,178 28,109 (688) (598) (975) (643)
Unallocated
central costs - - - - (1,075) (843) (2,322) (2,019)
----------------- -------- -------- -------- -------- -------- -------- -------- --------
Continue
operations
underlying
results(i) 46,596 46,056 65,661 64,700 3,828 4,761 833 2,245
Home Furnishings
- Branded (47) 3,578 1,171 8,183 69 (261) (286) (839)
----------------- -------- -------- -------- -------- -------- -------- -------- --------
Pre-exceptional
operating
results 46,549 49,634 66,832 72,883 3,897 4,500 547 1,406
Exceptional
items - - - - (112) 333 556 556
Net finance
charges - - - - 570 (1,131) 480 (1,387)
Taxation - - - - (1,185) 304 (1,410) (291)
----------------- -------- -------- -------- -------- -------- -------- -------- --------
Continuing
operations 46,549 49,634 66,832 72,883 3,170 4,006 173 284
----------------- -------- -------- -------- -------- -------- -------- -------- --------
Revenue from underlying continuing operations was GBP65.7
million for the 12 months to 2 January 2011, an increase of GBP1.0
million. Despite this increase in revenue, pre-exceptional profits
from underlying continuing operations(1) fell from GBP2.2 million
to GBP0.8 million.
The table of results above demonstrates the seasonality of the
business in the calendar year with GBP46.6 million (71%) of
revenues generated in the second half (2009: GBP46.1 million, 71%)
and all operating profit generated in the second half. In order to
align reporting with the seasonality of the business, the Company
has changed its accounting reference date from 31 December to 31
March and the annual report will cover the 15 month period to 2
April 2011.
(1)Underlying continuing operations exclude the results of the
Home Furnishings Branded business which was exited in the first
half of 2010.
UK Knitwear
Revenue for the 12 months to 1 January 2011 was GBP7.9 million
(2009: GBP7.9 million) and the operating profit GBP0.9 million
(2009: GBP1.1 million). As expected, sales to couture customers
were lower than in the previous year and these volumes were
replaced with lower margin contract business. Against this
background of a poorer sales mix, and escalating cashmere yarn
prices, this is another satisfactory performance.
Revenue in the six months to 1 January 2011 was GBP5.2 million
representing 65% of turnover for the year (2009: GBP5.0 million,
64%). Operating profit in the second half was GBP1.3 million (2009:
GBP1.3 million) with the reduction of sales to couture customers
impacting the first half of the year.
With further increases in cashmere yarn prices expected, there
will be additional pressure on margins in 2011.
US Knitwear
Revenue for the 12 months to 1 January 2011 in US dollars was
$44.1 million (GBP28.6 million) compared with $45.0 million
(GBP28.7 million) in the previous year. This business sells to both
higher volume/lower margin private label customers and lower
volume/higher margin branded customers, with private label
customers representing around 90% of overall revenues. Compared
with the previous year, private label revenues fell $1.6 million
and branded revenues increased $0.7 million. Operating profit fell
from $5.9 million (GBP3.8 million) to $4.9 million (GBP3.2 million)
in the year as a result of the overall reduction in sales,
increased cashmere fibre costs and a change in private label
customer mix.
Revenue in the six months to 1 January 2011 was $40.1 million,
representing 91% of turnover for the year (2009: $42.5 million,
94%). Operating profit in the second half was $6.6 million (2009:
$7.7 million).
Prior to 2010 cashmere prices had remained relatively stable for
a number of years at a price point which enabled substantial growth
in our private label business. With the sharp increase in cashmere
prices in 2010, and further increases expected in 2011, private
label revenues and margins are expected to decrease significantly
in 2011.
Home Furnishings Private Label
Revenue for the 12 months to 1 January 2011 was GBP29.2 million
(2009: GBP28.1 million) with growth coming both from existing
customers and the addition of new customers. Despite this increase
in revenue, the operating loss before exceptional items increased
to GBP1.0 million (2009: GBP0.6 million loss). This is
disappointing in what was expected to be a turnaround year for the
business. Sales growth has been slower than expected in certain
areas while margins have been impacted by the well documented
increase in cotton prices which more than doubled in the year.
Revenue in the six months to 1 January 2011 was GBP15.5 million
(2009: 14.0 million) and the operating loss GBP0.7 million (2009:
GBP0.6 million) with margins impacted in the second half of 2010 by
the increase in cotton prices.
Further action has been taken to reduce the cost structure of
the business and develop new product lines including the recently
launched "Horrockses" range based on a classic fashion label owned
by the Home Furnishings business and subject of a recent exhibition
and positive press coverage. While these measures are expected to
improve profitability it is important that selling prices adjust to
the change in raw material costs which will otherwise further erode
margins in 2011. Exceptional costs of GBP0.2m were incurred as a
result of the restructuring.
Home Furnishings Branded
The planned exit from Dorma retail operations and the process of
liquidating working capital was successfully completed on time and
within budget during the first half of 2010. The operating loss for
the 12 months to 1 January 2011 was GBP0.3 million (2009: GBP0.8
million loss).
Central costs
Costs in the 12 months to 1 January 2011 were GBP2.3 million
(2009: GBP2.0 million) inclusive of pension related costs of GBP1.1
million (2009: GBP0.8 million).
Costs in the six months to 1 January 2011 were GBP1.1 million
(2009: GBP0.8 million) inclusive of pension related costs of GBP0.6
million (2009: GBP0.4 million).
As part of its ongoing efforts to reduce underlying central
costs, headcount has been reduced and the Corporate Office has
relocated to Hawick where it shares premises with the Barrie
Knitwear business. The exceptional cost of these actions was GBP0.2
million.
Exceptional Items
The results benefited from net exceptional income of GBP0.6
million (2009: GBP0.6 million). Further payments of GBP1.6 million
were received from our former joint venture partner, Inner Mongolia
King Deer Cashmere Company Limited ("King Deer") while the Company
incurred restructuring costs of GBP0.4 million and increased
provisions for US environmental liabilities by GBP0.6 million. The
outstanding balance of GBP4.1 million due by King Deer remains
fully provided while the terms of a revised payment plan are
discussed.
Net Finance Costs
Net finance costs, excluding pension related items, for the 12
months to 1 January 2011 were GBP0.2 million on average net funds
of GBP10.1 million (2009: GBP0.5 million on average net funds of
GBP2.1 million). Effective interest rates are high due to the
geographical spread of funds, the seasonal nature of the businesses
which results in a significant inflow of funds in the final months
of the year and the high fixed cost element of the Group's asset
based lending facilities.
Net finance income on pension obligations in the 12 months to 1
January 2011 was GBP0.7 million (2009: GBP0.9 million charge). This
is a notional, non cash amount only, calculated as the expected
return on scheme assets in the year less the unwinding of one
year's discount on pension obligations. The improvement is due to
an assumption of higher expected return on assets recommended by
the scheme actuary compared with the previous year.
Taxation
The estimated tax charge for the 12 months to 1 January 2011 is
GBP1.4 million (2009: GBP0.3 million). GBP1.3 million of the tax
charge for the year is due to a reduction in the deferred tax asset
to reflect the deterioration in projected performance of the US
Knitwear business. GBP0.1 million relates to the current year tax
charge in the US.
Funding and facilities
Net funds at 1 January 2011 were GBP11.6 million (2 January
2010: GBP12.3 million). On 5 January 2011, a further payment of
$1.5 million (GBP1.0 million) was received from King Deer as part
of our agreed payment plan.
Effective 30 June 2010 the working capital facility with Bank of
America which funds our US business was extended for a further
three years and since the period end, a three year working capital
facility has been agreed with GE Commercial Finance to replace the
facility with Gmac Commercial Finance which previously funded our
UK businesses.
Outlook
The rapid escalation in both cashmere and cotton prices during
2010 will undoubtedly impact both sales and margins in the coming
year, particularly in our US Knitwear business where certain of our
private label customers have already indicated that they will scale
back significantly their purchases in the coming year. While we
look for stability in the raw material markets the trend remains
upwards and it is therefore important to ensure that selling prices
recognise the increase in costs in a timely manner. We are also
seeking to offer our customers alternative products where our
current ranges have moved above their price points. We will reduce
our cost base further where that can be done without compromising
future recovery and seek to invest where there is the opportunity
to extend our product offering to a wider range of customers. Our
cash position was strong at the end of the period and may benefit
in 2011 from further receipts due under the payment plan agreed
with King Deer, our former joint venture partner. This gives us the
financial ability to manage the potentially difficult short term
economic conditions. It remains our priority to agree with the
Pension Trustees a structure for the pension liabilities which
encourages essential new investment into the business.
CONSOLIDATED
INCOME STATEMENT
For the period
ended 1 January
2011
6 months 6 months 12 months 12 months
to to to to
1 January 2 January 1 January 2 January
2011 2010 2011 2010
Note GBP000 GBP000 GBP000 GBP000
------------------- ----- ----------- ----------- ----------- -----------
Continuing
operations
Revenue 2 46,549 49,634 66,832 72,883
Cost of sales (35,765) (37,364) (52,612) (55,744)
------------------- ----- ----------- ----------- ----------- -----------
Gross profit 10,784 12,270 14,220 17,139
Other income 109 82 125 82
Selling and
distribution
costs (2,991) (3,830) (5,882) (7,992)
Administrative
expenses (4,005) (4,022) (7,916) (7,823)
------------------- ----- ----------- ----------- ----------- -----------
Operating profit
before
exceptional
items 2 3,897 4,500 547 1,406
Exceptional items 3 (112) 333 556 556
------------------- ----- ----------- ----------- ----------- -----------
Operating profit 3,785 4,833 1,103 1,962
Finance income 5 9 9 9 15
Finance costs 5 (112) (251) (202) (513)
Net finance income
(expense) on
pension assets/
liabilities 673 (889) 673 (889)
------------------- ----- ----------- ----------- ----------- -----------
Profit before
taxation 4,355 3,702 1,583 575
Taxation 6 (1,185) 304 (1,410) (291)
------------------- ----- ----------- ----------- ----------- -----------
Profit for the
period from
continuing
operations 3,170 4,006 173 284
Discontinued
operations
Profit (loss) for
the period from
discontinued
operations 4 70 (845) - (6,127)
------------------- ----- ----------- ----------- ----------- -----------
Profit (loss) for
the period 3,240 3,161 173 (5,843)
------------------- ----- ----------- ----------- ----------- -----------
Basic and Diluted
earnings (loss)
per share
- From continuing
operations 7 1.4p 1.8p 0.1p 0.1p
- From continuing
and discontinued
operations 7 1.4p 1.4p 0.1p (2.6)p
------------------- ----- ----------- ----------- ----------- -----------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 1
January 2011
6 months 6 months 12 months 12 months
to to to to
1 January 2 January 1 January 2 January
2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
-------------------------- ----------- ----------- ----------- -----------
Profit (loss) for the
period 3,240 3,161 173 (5,843)
-------------------------- ----------- ----------- ----------- -----------
Other comprehensive
income:
Exchange differences on
translation of foreign
operations (118) (329) 312 (577)
Actuarial gain (loss) on
defined benefit pension
obligations 5,912 (12,373) 5,912 (12,373)
-------------------------- ----------- ----------- ----------- -----------
Other comprehensive
income for the period 5,794 (12,702) 6,224 (12,950)
-------------------------- ----------- ----------- ----------- -----------
Total comprehensive
income for the period 9,034 (9,541) 6,397 (18,793)
-------------------------- ----------- ----------- ----------- -----------
Total comprehensive income is all attributable to equity holders
of the parent.
CONSOLIDATED BALANCE SHEET
As at 1 January 2011
1 January 2 January
2011 2010
Note GBP000 GBP000
-------------------------------- ----- ---------- ----------
Non-current assets
Intangible assets 79 143
Property, plant and equipment 798 925
Deferred tax asset 479 1,750
-------------------------------- ----- ---------- ----------
Total non-current assets 1,356 2,818
-------------------------------- ----- ---------- ----------
Current assets
Inventories 8,625 8,309
Trade and other receivables 9,670 9,350
Income tax recoverable 359 -
Cash and cash equivalents 11,609 12,343
-------------------------------- ----- ---------- ----------
Total current assets 30,263 30,002
-------------------------------- ----- ---------- ----------
Total assets 31,619 32,820
-------------------------------- ----- ---------- ----------
Current liabilities
Trade and other payables 9,104 9,479
Income tax payable - 384
Provisions 366 1,144
Other financial liabilities 39 51
-------------------------------- ----- ---------- ----------
Total current liabilities 9,509 11,058
-------------------------------- ----- ---------- ----------
Non-current liabilities
Provisions 1,869 1,022
Retirement benefit obligations 8 12,325 19,246
-------------------------------- ----- ---------- ----------
Total non-current liabilities 14,194 20,268
-------------------------------- ----- ---------- ----------
Total liabilities 23,703 31,326
-------------------------------- ----- ---------- ----------
Net assets 7,916 1,494
-------------------------------- ----- ---------- ----------
Equity
Share capital 51,989 51,989
Share premium account 5,489 5,489
Translation reserve 552 240
Retained earnings (50,114) (56,224)
-------------------------------- ----- ---------- ----------
Total equity 7,916 1,494
-------------------------------- ----- ---------- ----------
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
For the period ended 1 January
2011
Profit
Share Share Translation and
Loss
Capital Premium Reserve account Total
GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- -------- -------- ------------ --------- --------
At 3 January 2009 51,989 5,489 818 (38,056) 20,240
Total comprehensive income for
the period - - (248) (9,004) (9,252)
Share-based payments charge - - - 37 37
-------------------------------- -------- -------- ------------ --------- --------
At 4 July 2009 51,989 5,489 570 (47,023) 11,025
Total comprehensive income for
the period - - (330) (9,211) (9,541)
Share-based payments charge - - - 10 10
-------------------------------- -------- -------- ------------ --------- --------
At 2 January 2010 51,989 5,489 240 (56,224) 1,494
Total comprehensive income for
the period - - 430 (3,067) (2,637)
-------------------------------- -------- -------- ------------ --------- --------
At 3 July 2010 51,989 5,489 670 (59,291) (1,143)
Total comprehensive income for
the period - - (118) 9,152 9,034
Share-based payments charge - - - 25 25
-------------------------------- -------- -------- ------------ --------- --------
At 1 January 2011 51,989 5,489 552 (50,114) 7,916
-------------------------------- -------- -------- ------------ --------- --------
CONSOLIDATED CASH
FLOW STATEMENT
For the period
ended 1 January
2011
6 months to 6 months to 12 months to 12 months to
1 January 2 January 1 January 2 January
2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
-------------------- ------------ ------------ ------------- -------------
Continuing
operations
Profit before tax 4,355 3,702 1,583 575
Depreciation 144 129 280 214
Net finance
(income) expense (570) 1,131 (480) 1,387
Share based payment
expense 25 10 25 47
-------------------- ------------ ------------ ------------- -------------
3,954 4,972 1,408 2,223
Decrease (increase)
in inventories 953 4,390 (289) 1,950
(Increase) decrease
in debtors (3,974) (1,918) (1,079) 1,799
Decrease in
creditors (1,235) (1,157) (264) (3,326)
Increase (decrease)
in provisions 604 (256) 71 (1,711)
-------------------- ------------ ------------ ------------- -------------
Cash generated
(used) by
operations 302 6,031 (153) 935
Additional
contributions to
pension schemes (192) (431) (379) (606)
Taxes (paid)
recovered (189) 304 (831) (261)
-------------------- ------------ ------------ ------------- -------------
Net cash (used)
generated by
operating
activities (79) 5,904 (1,363) 68
-------------------- ------------ ------------ ------------- -------------
Cash flows from
investing
activities
Interest received 9 9 9 15
Proceeds from
disposal of Todd &
Duncan - 5,426 - 5,426
Purchase of
property, plant
and equipment (40) (79) (95) (114)
Purchase of
intangible assets - (47) (1) (59)
-------------------- ------------ ------------ ------------- -------------
Net cash (used)
generated by
investing
activities (31) 5,309 (87) 5,268
-------------------- ------------ ------------ ------------- -------------
Cash flows from
financing
activities
Interest paid (112) (251) (202) (513)
Decrease in asset
backed finance - (7,212) - (4,212)
-------------------- ------------ ------------ ------------- -------------
Net cash used by
financing
activities (112) (7,463) (202) (4,725)
-------------------- ------------ ------------ ------------- -------------
Net cash (used)
generated by
continuing
operations (222) 3,750 (1,652) 611
-------------------- ------------ ------------ ------------- -------------
Discontinued
operations
Net cash generated
by operating
activities 422 5,521 660 2,930
Net cash generated
(used) by
investing
activities - 176 - (270)
-------------------- ------------ ------------ ------------- -------------
Net cash generated
by discontinued
operations 422 5,697 660 2,660
-------------------- ------------ ------------ ------------- -------------
Net increase
(decrease) in cash
and cash
equivalents 200 9,447 (992) 3,271
Cash and cash
equivalents at the
beginning of the
period 11,597 3,249 12,343 9,900
Exchange rate
effects (188) (353) 258 (828)
-------------------- ------------ ------------ ------------- -------------
Cash and cash
equivalents at the
end of the period 11,609 12,343 11,609 12,343
-------------------- ------------ ------------ ------------- -------------
RECONCILIATION OF
MOVEMENT IN NET
FUNDS (DEBT)
For the period 6 months to 6 months to 12 months to 12 months to
ended 1 January 1 January 2 January 1 January 2 January
2011 2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
-------------------- ------------ ------------ ------------- -------------
Increase (decrease)
in cash and cash
equivalents 200 9,447 (992) 3,271
Decrease in asset
backed finance - 7,212 - 4,212
Exchange rate
effects (188) (353) 258 (828)
-------------------- ------------ ------------ ------------- -------------
Increase (decrease)
in net funds 12 16,306 (734) 6,655
Opening net funds
(debt) 11,597 (3,963) 12,343 5,688
-------------------- ------------ ------------ ------------- -------------
Closing net funds 11,609 12,343 11,609 12,343
-------------------- ------------ ------------ ------------- -------------
NOTES TO THE HALF YEAR REPORT
1 Basis of preparation and significant accounting policies
Basis of preparation
This half year report contains the condensed consolidated
financial information of the Company and its subsidiaries ("the
Group") for both the twelve month period and the six month period
ended 1 January 2011 prepared in accordance with the AIM rules. It
is unaudited and has not been reviewed by the auditors. The report
does not contain all of the information and disclosures required in
the annual financial statements and does not therefore constitute
statutory accounts as defined in section 435 of the Companies Act
2006. It should be read in conjunction with the 2009 annual
report.
Comparative information for the six month period to 2 January
2010 is unaudited and has not been reviewed by the auditors.
Comparative information for the twelve month period to 2 January
2010 is based on the statutory accounts for that period which were
prepared under International Financial Reporting Standards as
adopted by the EU and have been delivered to the Registrar of
Companies. The report of the auditors was (i) unqualified, (ii) did
not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report, and
(iii) did not contain statements under section 498 (2) or (3) of
the Companies Act 2006.
The financial information is prepared on the historical cost
basis and is presented in Sterling, rounded to the nearest
thousand.
The condensed financial statements have been prepared on the
going concern basis which the directors consider to be appropriate
based on a review of projected cash flows and borrowing facilities
which take into account (i) the general economic environment, which
continues to be challenging and (ii) the business specific risks
and uncertainties which are discussed on pages 13 and 14 of the
2009 annual report and are not considered to have changed.
This half year report contains certain forward looking
statements which are subject to various risks and uncertainties and
should therefore be treated with an appropriate level of caution
and not regarded as a forecast of future results.
Significant accounting policies
The interim condensed consolidated financial statements have
been prepared applying the same accounting policies that are
expected to be adopted in the Group's full financial statements for
the fifteen month period ended 2 April 2011 which are not expected
to be significantly different to those set out in note 1 of the
Group's audited financial statements for the period ended 2 January
2010.
The following new standards, amendments to standards and
interpretations are mandatory for the first time for financial
periods commencing on 1 January 2010 but have had no material
impact on the financial statements of the Group:
-- IFRS 3 (amended) Business combinations
-- IAS 27 (amended) Consolidated and separate financial
statements
-- Improvements to IFRSs 2009
-- IFRIC 17 Distribution of non-cash assets to owners
-- IFRS1 (amended) Additional exemptions for first-time
adopters
This half year report was approved by the board of directors on
28 February 2011. Copies of this report and the 2009 Annual Report
are available on the Company's website at
www.dawson-international.co.uk.
2 Segmental analysis
The chief operating decision maker has been identified as the
Board of Directors.
The Board reviews the internal reports of the group in order to
assess performance and allocate resources and has determined the
operating segments based on these internal reports as follows:
UK Knitwear
This segment comprises the Barrie business which manufactures
cashmere and woollen garments which are sold mainly in the European
market. It sells both to private label customers and under its own
labels which include Barrie, John Laing and Glenmac.
US Knitwear
This segment comprises the Forte business which sources cashmere
garments from China which are sold in the American market,
primarily to large private label customers. It also sells to
smaller boutique customers under its own 'Kinross' label. This
business is highly seasonal, making over 90 per cent of its sales
and all of its profit in the second half of the year.
Home Furnishings - Private Label
This segment designs and sources bed linen, primarily from Asia,
which is sold to Private Label customers.
Home Furnishings - Branded
This segment designed and sourced 'Dorma' branded bed linen
which it retailed through a number of channels. Following the sale
of the 'Dorma' brand to Dunelm Group in July 2008 a phased exit
from this business commenced which is now complete. Certain costs
and revenues, previously allocated to the Home Fashions Branded
segment, form part of ongoing operations and have been allocated to
the Home Fashions Private Label segment in the current period.
Prior period figures have been restated to compare as closely as
possible on a like for like basis.
Revenue Profit (loss)
6 6 12 12 6 6 12 12
months months months months months months months months
to 1 to 2 to 1 to 2 to 1 to 2 to 1 to 2
January January January January January January January January
2011 2010 2011 2010 2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ -------- -------- -------- -------- -------- -------- -------- --------
UK Knitwear 5,167 5,037 7,906 7,896 1,287 1,257 935 1,133
US Knitwear 25,922 27,043 28,577 28,695 4,304 4,945 3,195 3,774
Home Furnishings
- Private
Label 15,507 13,976 29,178 28,109 (688) (598) (975) (643)
Home Furnishings
- Branded (47) 3,578 1,171 8,183 69 (261) (286) (839)
------------------ -------- -------- -------- -------- -------- -------- -------- --------
Segmental
revenues/results
before
exceptional
items and
central costs 46,549 49,634 66,832 72,883 4,972 5,343 2,869 3,425
Unallocated
central costs (1,075) (843) (2,322) (2,019)
------------------ -------- -------- -------- -------- -------- -------- -------- --------
Operating
profit before
exceptional
items 3,897 4,500 547 1,406
Exceptional
items (112) 333 556 556
Net finance
charges (103) (242) (193) (498)
Net finance
income (expense)
on pension
assets/
liabilities 673 (889) 673 (889)
------------------ -------- -------- -------- -------- -------- -------- -------- --------
Continuing
operations 46,549 49,634 66,832 72,883 4,355 3,702 1,583 575
------------------ -------- -------- -------- -------- -------- -------- -------- --------
US Knitwear
in US dollars 40,076 42,517 44,115 44,994 6,620 7,673 4,933 5,918
------------------ -------- -------- -------- -------- -------- -------- -------- --------
Net finance charges are not allocated across segments as borrowing
requirements are managed on a group wide basis.
The results of discontinued operations are disclosed in note 4.
Assets
1 January 2 January
2011 2010
GBP000 GBP000
------------------------------------- ---------- ----------
UK Knitwear 2,537 2,267
US Knitwear 4,124 3,052
Home Furnishings - Private
Label 11,390 8,313
Home Furnishings - Branded - 3,818
------------------------------------- ---------- ----------
Segmental assets 18,051 17,450
Unallocated central assets 1,480 628
Deferred tax 479 1,750
Cash and deposits 11,609 12,343
------------------------------------- ---------- ----------
Total assets, continuing operations 31,619 32,171
Total assets, discontinued
operation - 649
------------------------------------- ---------- ----------
Total assets 31,619 32,820
------------------------------------- ---------- ----------
3 Exceptional items - continuing operations
6 months to 6 months to 12 months to 12 months to
1 January 2 January 1 January 2 January
2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
-------------------- ------------ ------------ ------------- -------------
Doubtful debt
recovered (i) 958 625 1,626 973
Reorganisation
costs
- UK Knitwear - - - (125)
Home
- Furnishings (210) - (210) -
Corporate
- office (240) - (240) -
Property and
environmental
costs (ii) (620) (292) (620) (292)
-------------------- ------------ ------------ ------------- -------------
(112) 333 556 556
-------------------- ------------ ------------ ------------- -------------
(i) In 2009 the Company established a payment plan to recover a
debt of approximately $10 million due by a former joint venture
partner which had been fully provided. Payments of $4.0 million
(GBP2.6million) have been received to date of which $1.5 million
(GBP1.0 million) was received shortly after the period end, however
given the age of the debt and the breakdown of previous payment
plans, the Company considers it appropriate to retain a full
provision against the outstanding balance at this time.
(ii) The provision for environmental remediation costs in the
USA has been increased to $1.5 million which represents
approximately 10 years' expenditure.
4 Discontinued operations
On 28 August 2009 the Company completed the sale of the
business, fixed assets and stocks of the Todd & Duncan yarn
spinning division to Ningxia Zhongyin Cashmere Company Limited. The
business incurred a trading loss of GBP0.9 million in the period to
disposal and a loss of GBP5.2 million on disposal.
5 Finance income/(costs)
6 months to 6 months to 12 months to 12 months to
1 January 2 January 1 January 2 January
2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
-------------------- ------------ ------------ ------------- -------------
Interest receivable
on short-term
deposits 9 3 9 15
-------------------- ------------ ------------ ------------- -------------
Finance income 9 3 9 15
-------------------- ------------ ------------ ------------- -------------
Interest payable on
asset backed
finance (112) (251) (202) (513)
-------------------- ------------ ------------ ------------- -------------
Finance costs (112) (251) (202) (513)
-------------------- ------------ ------------ ------------- -------------
6 Income tax expense
6 months to 6 months to 12 months to 12 months to
1 January 2 January 1 January 2 January
2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
-------------------- ------------ ------------ ------------- -------------
Current tax
expense:
Current year 237 367 237 462
Adjustments in
respect of prior
years (397) (421) (172) 79
-------------------- ------------ ------------ ------------- -------------
(160) (54) 65 541
Deferred tax:
Origination and
reversal of timing
differences 1,345 (250) 1,345 (250)
-------------------- ------------ ------------ ------------- -------------
Total income tax
expense 1,185 (304) 1,410 291
-------------------- ------------ ------------ ------------- -------------
The deferred tax asset has been reduced to reflect a
deterioration in forecast performance in the US Knitwear business
during the period to expiry of carried forward operating
losses.
7 Earnings (loss) per share
6 months to 6 months to 12 months to 12 months to
1 January 2 January 1 January 2 January
2011 2010 2011 2010
------------ ------------ ------------- -------------
Weighted average
number of shares
in issue 225,158,542 225,158,542 225,158,542 225,158,542
-------------------- ------------ ------------ ------------- -------------
There were no potentially dilutive shares in either
the current or prior periods.
Basic and diluted
earnings (loss) per
share
Profit (loss) for
the period
attributable to
equity holders of
the parent: GBP000s GBP000s GBP000s GBP000s
Continuing
operations 3,170 4,006 173 284
Discontinued
operations 70 (845) - (6,127)
-------------------- ------------ ------------ ------------- -------------
3,240 3,161 173 (5,843)
-------------------- ------------ ------------ ------------- -------------
Basic and diluted
earnings (loss) per
share: Pence Pence Pence Pence
Continuing
operations 1.4 1.8 0.1 0.1
Discontinued
operations - (0.4) - (2.7)
-------------------- ------------ ------------ ------------- -------------
1.4 1.4 0.1 (2.6)
-------------------- ------------ ------------ ------------- -------------
Adjusted earnings
(loss) per share GBP000 GBP000 GBP000 GBP000
Profit (loss) for
the period from
continuing
operations
attributable to
equity holders of
the parent 3,170 4,006 173 284
Add back
exceptional items 112 (333) (556) (556)
-------------------- ------------ ------------ ------------- -------------
3,282 3,673 (383) (272)
-------------------- ------------ ------------ ------------- -------------
Pence Pence Pence Pence
Adjusted earnings
(loss) per share 1.5 1.6 (0.2) (0.1)
-------------------- ------------ ------------ ------------- -------------
Adjusted earnings (loss) per share is calculated on
the profit or loss for the period from continuing
operations before exceptional items.
8 Retirement benefit obligations
The Group operates two defined benefit pension schemes in the UK
(the "Staff" and the "Works" schemes) which are closed to new
members and a defined benefit pension scheme in the USA which is
closed to all members. The UK schemes have less than 60 active
members and the Company is considering closing the schemes to
future accrual for existing members.
Full actuarial valuations of the UK schemes are made triennially
by an independent, professionally qualified actuary and these form
the basis of a recovery plan which is agreed with the Pension
Trustees. The assumptions applied by the actuary when calculating
the deficit and recovery plan differ from those prescribed by IAS
19 for financial reporting purposes. In particular, the assumptions
used for valuing liabilities are more conservative and can result
in a significantly higher liability than that reported in the
balance sheet.
The Company and the Trustee are currently finalising the 2009
valuations and funding plans. Pending completion of that exercise,
the Company has increased deficit repair contributions from
GBP350,000 per annum to GBP400,000 per annum.
Membership as at 1
January 2011 Staff Works UK Total USA
------------------------- --------------- ----- ---------- ------- ------------ -----------
Active 19 37 56 -
Deferred 537 1,240 1,777 128
Retired 805 682 1,487 852
------------------------- --------------- ----- ---------- ------- ------------ -----------
1,361 1,959 3,320 980
------------------------- --------------- ----- ---------- ------- ------------ -----------
Analysis of amounts in
financial statements
12 months to 1 January 12 months to 1 January
2011 2010
------------------------- ---------------------------------- ----------------------------------
UK USA Total UK USA Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---------- ---------- ---------- ------------ -------- ----------
Income Statement
Operating profit:
Current service cost (164) - (164) (195) - (195)
Curtailment loss
resulting from the sale
of Todd & Duncan - - - (90) - (90)
------------------------- ---------- ---------- ---------- ------------ -------- ----------
(164) - (164) (285) - (285)
------------------------- ---------- ---------- ---------- ------------ -------- ----------
Net finance income
(expense) on pension
assets/liabilities:
Expected return on
pension scheme assets 7,335 364 7,699 5,360 332 5,692
Interest on obligations (6,689) (337) (7,026) (6,235) (346) (6,581)
------------------------- ---------- ---------- ---------- ------------ -------- ----------
646 27 673 (875) (14) (889)
------------------------- ---------- ---------- ---------- ------------ -------- ----------
Balance Sheet
Total market value of
assets 107,393 4,655 112,048 100,154 4,620 104,774
Actuarial value of
liabilities (117,960) (6,413) (124,373) (117,921) (6,099) (124,020)
------------------------- ---------- ---------- ---------- ------------ -------- ----------
Net retirement benefit
obligations (10,567) (1,758) (12,325) (17,767) (1,479) (19,246)
------------------------- ---------- ---------- ---------- ------------ -------- ----------
Statement of
comprehensive income
Actual return less
expected return on
scheme assets 4,683 43 4,726 5,236 321 5,557
Actuarial gain (loss) on
scheme liabilities 1,492 (306) 1,186 (17,888) (41) (17,929)
------------------------- ---------- ---------- ---------- ------------ -------- ----------
6,175 (263) 5,912 (12,652) 280 (12,372)
------------------------- ---------- ---------- ---------- ------------ -------- ----------
Principal assumptions
Discount rate for
liabilities 5.5% 5.0% 5.8% 5.50%
Retail price inflation 3.2% n/a 3.4% n/a
Weighted average
expected return on
scheme assets
- Staff 7.2% 8.0% 7.4% 8.0%
- Works 7.6% 8.0% 7.8% 8.0%
No changes were made to mortality assumptions in the period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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