TIDMDWSN
RNS Number : 9834L
Dawson International PLC
09 August 2011
DAWSON INTERNATIONAL PLC
("Dawson" or "the Group" or "the Company")
Preliminary Results for the fifteen months ended 2 April
2011
Key Points
-- Continuing operations:
- Revenues GBP38.1 million (12 months ended 2 January 2010:
GBP36.6 million)
- Operating profit before exceptional items GBP0.1 million ( 12
months ended 2 January 2010: GBP2.9 million)
- Pre tax profit GBP2.5 million (12 months ended 2 January 2010:
GBP2.1 million)
- Cashmere businesses performed well in challenging markets
where raw material costs continue to rise
- Central costs increased due to high pension related fees and
charges
-- Discontinued operations:
- Home Furnishings business sold in May 2011 for net proceeds of
c.GBP6.0 million
- Pre tax loss of GBP4.2 million includes GBP2.5 million
estimated loss on sale
-- Combined operations:
- Loss for the period GBP3.5 million (12 month period to 2
January 2010 GBP5.8 million)
- Cash balances and deposits of GBP10.2 million (12 months ended
2 January 2010: GBP12.3 million)
- Ongoing discussions to resolve long term pension funding
David Bolton, Chairman of Dawson, commented,
"Reported results are for the 15 month period to 2 April 2011
and include an additional first calendar quarter, which is
seasonally loss-making for the Group. In this additional first
quarter, continuing operations recorded sales of GBP1.6 million
(2010: GBP2.6 million) and an operating loss of GBP1.7 million
(2010: GBP1.5 million loss).
The pre-exceptional operating profit from continuing operations
was GBP0.1 million for the 15 month period to 2 April 2011 compared
with a pre-exceptional operating profit of GBP2.9 million for the
12 month period to 2 January 2010. Both the UK and US Knitwear
businesses performed well, returning operating profits of GBP0.7
million and GBP2.3 million respectively. These results were
achieved against a background of rapidly escalating cashmere prices
which increased by around 40% in 2010 and a further 20% in the
first part of 2011.
It is clear that our trading results for 2011/12 will be
impacted by the recent increases in cashmere raw material prices
discussed above, reducing margins in both of our Knitwear
businesses but particularly so in the case of the US Knitwear
business. Our key priority is to resolve our pension funding issues
as quickly as possible in a manner which takes full account of the
financial circumstances of the Company, and recognises fairly the
interests of all stakeholders in the Company."
The Annual Report and Accounts for the 15 month period ended 2
April 2011 will be despatched to shareholders on or around 31
August 2011 and will also be available on the Company's website:
(www.dawson-international.co.uk)
The Annual General Meeting of the Company will be held at
Saltire Court, 20 Castle Terrace, Edinburgh, EH1 2ET on 30
September 2011 at 12 noon.
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
In this, my second year as Chairman of Dawson, I am pleased to
report that our cashmere businesses again performed well in
challenging circumstances. However, the results of the Home
Furnishings business were disappointing, impacted by rising raw
material costs and continuing difficulties in the retail market.
The Board had previously agreed that it should focus its strategy
on developing the cashmere businesses which are Dawson's core
competencies and in light of the ongoing difficulties facing the
Home Furnishings business during the period, came to the conclusion
that the business should be sold. The business was sold on 17 May
2011, generating estimated net proceeds of GBP6.0 million.
Therefore, the results presented here concentrate on continuing
operations comprising our UK and US Knitwear businesses.
As we stated in last year's annual report, one of our key
strategic objectives is to finalise negotiations with the Pension
Trustees on an affordable arrangement that addresses the Company's
commitments to its pension plan members, retains the resources
necessary to fund growth and allows shareholders to share equitably
in the future benefits of the business. The Directors believe that
the size of the pension deficit relative to the reduced activities
of the Company makes an affordable long term recovery plan more
challenging and are working with the Trustees of the schemes to
explore what options are open to secure members' benefits without
compromising the future of the business. Whilst it is frustrating
that we are not yet able to report an outcome from our protracted
and expensive negotiations, the funds generated from the disposal
of the Home Furnishings business will assist in the determination
of a satisfactory solution to this ongoing process.
Performance
The Company has changed its accounting reference date from 31
December to 31 March. This is intended to reduce the seasonal
fluctuation between first and second half results and to align the
budgeting process with order intake for the coming season better.
Reported results are therefore for the 15 month period to 2 April
2011 and include an additional first calendar quarter, which is
seasonally loss-making for the Group. In this additional first
quarter, continuing operations recorded sales of GBP1.6 million
(2010: GBP2.6 million) and an operating loss of GBP1.7 million
(2010: GBP1.5 million loss).
The pre-exceptional operating profit from continuing operations
was GBP0.1 million for the 15 month period to 2 April 2011 compared
with a pre-exceptional operating profit of GBP2.9 million for the
12 month period to 2 January 2010. Both the UK and US Knitwear
businesses performed well, returning operating profits of GBP0.7
million and GBP2.3 million respectively. These results were
achieved against a background of rapidly escalating cashmere prices
which increased by around 40% in 2010 and a further 20% in the
first part of 2011.
While strenuous efforts were made to reduce central costs,
including the downsizing and relocation of the Corporate Office,
the benefits of these savings were outweighed by an increase in
pension costs, both the pension protection levy and advisors fees
incurred, as we continue to negotiate a strategy to address the
plan deficits. It is vital that we conclude these discussions as
quickly as possible to stem these costs.
We recorded net exceptional income of GBP1.8 million for the
period (2010: GBP0.6 million). Further proceeds of GBP2.7 million
from our previous joint venture partner, King Deer, were recognised
during the period, however, it was necessary to increase our
provision for US environmental remediation costs by GBP0.6 million
to reflect revised estimates of the remediation period. We also
incurred one-off restructuring costs of GBP0.3 million.
The sale of the Home Furnishings business to Brookmann Home
Limited was completed on 17 May 2011. The consideration was based
on net asset value at completion which, after estimated costs of
GBP0.5 million, is expected to generate funds of GBP6.0 million.
GBP4 million of the consideration was paid on completion with the
balance payable over a period not exceeding six months. As security
for this deferred consideration, the Company has retained stocks of
GBP2.5 million which Dawson Home Group Limited has contracted to
repurchase over this period.
Further details on all of the above are given in the Business
and Financial Review.
Pensions
The pension scheme liabilities reported in the balance sheet are
calculated in accordance with IAS 19. On this basis, the
liabilities reduced from GBP19.3 million to GBP11.5 million, mainly
due to strong asset performance in the period.
However, as noted in the last annual report, the level of
contributions paid by the Company is based on a full actuarial
valuation of scheme liabilities which is updated by the independent
scheme actuary every three years. A triennial valuation is
currently being finalised which is expected to show a significantly
higher deficit than both the current IAS 19 valuation and the last
triennial valuation, mainly due to changes in assumptions made by
the scheme actuary concerning life expectancy and discount factors.
This likely escalation of the deficit represents a significant
challenge for the UK business in terms of the prospective future
demands for increased financial support which may be placed on it
by the pension schemes and discussions are ongoing with the
Pensions Trustees and the Pensions Regulator at considerable
expense to agree a sustainable way forward. Those discussions are
considering a range of options for dealing with the pension
deficit. The length of time taken to resolve this issue is
indicative of the complexity of the situation and the challenge of
funding such significant deficits.
Funding
Our funding position is currently strong with cash and deposits
of GBP10.2 million at 2 April 2011 (2 January 2010: GBP12.3
million). During the period, we extended our US facility with Bank
of America for a further three years and entered into a three year
facility agreement with GE Commercial Finance Limited in the UK,
replacing our previous facility with Gmac Commercial Finance
Limited on broadly similar terms. Our funding position was further
strengthened after the period end by the disposal of the Home
Furnishings business as noted above. It must be recognised however,
that our seasonal working capital requirements absorb some of these
funds mid-year and that a solution to the pensions issue is also
likely to absorb a significant proportion of these funds.
Board and Management
In September 2010 we advised of the departure of Andy Bartmess
and the appointment of Jim Carrie, the Managing Director of Barrie
Knitwear as Chief Operating Officer and myself as Executive
Chairman. Since September Jim has overseen a closer working
relationship between the two knitwear businesses, which he now
heads. With the sale of Dawson Home Group in May 2011, his focus is
now exclusively the knitwear businesses, whilst my responsibilities
are corporate matters and a resolution to the pension issue. On 2
August 2011 Giovanni Ghione left the Board and I would like to
thank him for his valuable contribution during his term of office
which has seen significant change in the Group. I am pleased to
welcome Jim Carrie to the Board following his appointment on 8
August 2011.
Employees
I would again like to acknowledge the very difficult challenges
faced by employees in all of our Group businesses during these
turbulent economic times. I thank everyone for their continued
dedication and efforts to sustain existing business and their
creative approach to maximising opportunities as they emerge.
Outlook
It is clear that our trading results for 2011/12 will be
impacted by the recent increases in cashmere raw material prices
discussed above, reducing margins in both of our Knitwear
businesses but particularly so in the case of the US Knitwear
business. We intend to make the investments and decisions necessary
to ensure both businesses are well placed and resourced to benefit
from returning stability in the raw material market, when this
comes, although this is unlikely in the short term
Our key priority is to resolve our pension funding issues as
quickly as possible in a manner which takes full account of the
financial circumstances of the Company, and recognises fairly the
interests of all stakeholders in the Company.
David Bolton | Chairman
BUSINESS REVIEW
During the period, the Board resolved to focus on the
development of its core cashmere businesses. Subsequently there was
an approach to the Company to acquire the Home Furnishings business
and a sale was concluded on 17 May 2011. The continuing operations
are therefore separated into two reporting divisions: UK Knitwear
and US Knitwear. In addition there is a central administrative
function. The operations of each division are reviewed in the
following sections of this report, as are the results of the
discontinued Home Furnishings division.
During the period, the Company changed its accounting reference
date from 31 December to 31 March. The statutory accounts are
therefore for the 15 month period ended 2 April 2011 with a
comparative period of 12 months to 2 January 2010. The unaudited
pro forma results for the 12 month periods to 2 April 2011 and 3
April 2010 are derived from the statutory and management accounts
and are provided to illustrate trading performance of continuing
operations over a comparable reporting period.
UK Knitwear
Audited Statutory Unaudited pro forma
Extracted from: Results Results
15 month 12 month 12 month 12 month
period
period ended ended period ended period ended
2 April 2 January 2 April 3 April
2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
--------------------- ------------- ---------- ------------- -------------
Revenue 9,040 7,896 7,937 7,725
Operating profit
before exceptional
items 743 1,133 1,084 1,071
Exceptional items - (125) - -
Average capital
employed* (139) (101) (10) (91)
--------------------- ------------- ---------- ------------- -------------
* Average capital employed is derived from management accounts
and comprises fixed assets, working capital and provisions.
------------------------------------------------------------------------------
The UK Knitwear division comprises the Barrie Knitwear business,
based in Hawick, Scotland. It manufactures highest quality cashmere
garments at its factory in the Scottish Borders and sells to some
of the world's most prestigious couture houses, department stores
and private label retail outlets.
Performance
The result for the 15 month period to 2 April 2011 demonstrates
the seasonality of the business with sales up GBP1.1 million
compared with the previous 12 month period but operating profit
down GBP0.4 million. The first calendar quarter of the year is the
manufacturing off-peak period and contract business is accepted at
a lower margin to contribute to overhead recovery.
Performance for the 12 month period to 2 April 2011 was
consistent with the comparative period and the results of both are
very satisfactory. This is particularly so given the increase in
cashmere fibre prices over the past 18 months. Prices rose by
around 40% in 2010 and have increased again by around 20% in 2011.
The impact on reported results to date has been mitigated by the
utilisation of yarn stocks which were purchased or contracted
before these price increases but the ongoing price increases will
inevitably impact on future margins.
Demand from couture customers remains strong and the business
takes pride in its ability to supply these high specification,
technically demanding products. The business is also focused on
promoting its own label garments, Barrie, John Laing and Glenmac,
and attended a number of trade shows during the period, including
Pitti Uomo in Florence and the MRket shows in New York and Las
Vegas.
The business is working closely with the US Knitwear division
and Jim Carrie, managing director of the UK division, now heads
both businesses in his role as Group Chief Operating Officer. It is
expected that this closer relationship will create opportunities to
increase the sales of our high quality Scottish-made product both
in the USA and in the emerging Chinese market.
Outlook
2011/12 has started positively with the order book filled
through to the end of the calendar year. As noted above however, it
has not been possible to fully pass on the increase of cashmere
yarn prices and it is expected that margins in the coming year will
be lower than in recent years.
Websites: www.johnlaing-cashmere.co.uk
www.barrie.co.uk
US Knitwear
Audited Statutory Unaudited pro forma
Extracted from: Results Results
15 month 12 month 12 month 12 month
period period period period
ended ended ended ended
2 April 2 January 2 April 3 April
2011 2010 2011 2010
$000 $000 $000 $000
-------------------------- --------- ---------- ---------- ----------
Revenue 45,202 44,994 42,814 46,093
Operating profit before
exceptional items 3,669 5,918 4,545 6,039
Exceptional items (160) - (160) -
Average capital employed 4,770 4,549 5,691 4,827
GBP000 GBP000 GBP000 GBP000
-------------------------- --------- ---------- ---------- ----------
Revenue 29,055 28,695 27,518 29,334
Operating profit before
exceptional items 2,358 3,774 2,921 3,906
Exceptional items (103) - (104) -
Average exchange rate 1.556 1.568 1.542 1.546
-------------------------- --------- ---------- ---------- ----------
The US Knitwear division comprises the Dawson Forte Cashmere
business based in Boston and New York, USA. Dawson Forte sources
cashmere garments from China for US private label retail programmes
and its own branded cashmere collection 'Kinross'.
Performance
As with the UK Knitwear division, the result for the 15 month
period to 2 April 2011 demonstrates the seasonality of the business
with sales up $0.2 million compared with the previous 12 month
period but operating profit down $2.2 million. Sales in the first
quarter of the calendar year were $1.1 million and the operating
loss $1.3 million.
Sales in the 12 month period to 2 April 2011 of $42.8 million
were $3.3 million (7%) lower than in the comparative period and
operating profit of $4.5 million was $1.5 million (25%) lower. As
noted above, cashmere fibre prices rose by around 40% in 2010 and
have increased again by around 20% in 2011. As the US Knitwear
division does not hold stocks, the increase in 2010 had a more
immediate impact than on the UK Knitwear business and this is
reflected in the reduction in sales and in margins, the latter
reducing by around 2% compared with the previous period.
The business aims to secure and grow its private label business
by continuing to offer exceptional service and support. It is
pleasing to have secured the cashmere knitwear programme for
Patagonia, the US outdoor specialist, which has stringent quality,
environmental and social compliance requirements. The business has
lost one significant customer during the year who has chosen to
source directly.
Simultaneously, the business is seeking to increase its support
for the large number of customers who sell the 'Kinross' branded
label. The "Gold Store Initiative" was introduced in 2010 providing
advertising and inventory support to five key customers who
committed more retail floor space to our product. This proved
successful and is being rolled out to 40 more customers in
2011.
The product line is being expanded both to grow existing sales
and to create a product offering in the seasonally quieter first
half of the calendar year. This in turn has required us to engage
additional resource and to expand and strengthen our supplier
factory base, moving into new geographical areas where appropriate.
Management are working closely with the UK Knitwear division to
market a 'made in Scotland' product in the USA and will pursue
opportunities through this relationship to market sourced products
in the UK and Europe.
Outlook
Sales for 2011/12 are likely to be below 2010/11 levels with one
major customer deciding to source directly. However we are
successfully seeking to widen our customer base, as the new
relationship with Patagonia demonstrates. It is clear however that
the recent rise in cashmere prices will have a significant negative
impact on margins in 2011/12 as it is not possible to pass these on
in full to customers. While the coming year is expected to be
difficult it is vital to continue to invest in the growth
opportunities identified.
Website: www.kinrosscashmere.com
Central Costs
Audited Statutory Unaudited pro forma
Extracted from: Results Results
15 month 12 month 12 month 12 month
period period
period ended ended ended period ended
2 April 2 January 2 April 3 April
2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
------------------------- ------------- ---------- --------- -------------
Payroll costs 820 821 610 785
Legal, professional and
treasury fees 358 355 197 336
Other costs 141 257 160 176
------------------------- ------------- ---------- --------- -------------
Costs before pensions,
exchange and
exceptional items 1,319 1,433 967 1,297
Pension related costs 1,513 795 1,279 813
Exchange loss (gain) 154 (209) 154 (363)
Total costs 2,986 2,019 2,400 1,747
------------------------- ------------- ---------- --------- -------------
Net exceptional income 1,890 681 1,890 428
------------------------- ------------- ---------- --------- -------------
During the period, the Company downsized its Corporate Office
function and relocated to shared premises with the UK Knitwear
division in Hawick, Scotland. The Corporate Office provides
administrative and treasury functions to Group businesses. All
costs not directly incurred or attributable to these businesses are
borne centrally.
Significant savings have been achieved in payroll and
professional fees, however, central costs overall have increased
due to the continued escalation in pension related costs.
Pension related charges in the 15 month period to 2 April 2011
were GBP1.5 million (12 months to 2 January 2010: GBP0.8m). In
addition, the Group made deficit repair contributions of GBP0.5
million (GBP0.6 million), resulting in a total cash cost of GBP2.0
million (GBP1.4 million). Charges to the Income Statement comprised
the pension protection fund levy of GBP0.7 million (GBP0.4 million)
and adviser fees of GBP0.8 million (GBP0.4 million). All pension
fees, with the exception of investment manager fees, are borne by
the Company.
Payroll costs comprise the remuneration, inclusive of pension
costs, of the Executive Directors and the corporate office staff,
and the fees paid to the Non-Executive Directors.
The level of legal, professional and treasury fees reflects the
relative complexity of the Group with its overseas operations,
legacy issues from discontinued operations and restructuring
activities. These costs have continued to reduce as the Group
structure has simplified.
Other costs are mainly the administrative and facility costs
associated with running the central function and any legacy costs
associated with discontinued activities.
An exchange loss of GBP0.2 million was recorded in the 15 month
period to 2 April 2011 compared with a gain of GBP0.2 million in
the 12 month period to 2 January 2010.
Net exceptional income of GBP1.9 million was recorded in the 15
month period to 2 April 2011 (12 month period to 2 January 2010:
GBP0.7m). Exceptional income of GBP2.7 million resulted from the
re-instatement of a long standing debt due from the Company's
former joint venture partner, of which GBP1.6 million has been
received and GBP1.1 million is due by 31 December 2011. This was
partly offset by GBP0.2 million reorganisation costs to restructure
the Corporate Office function and a charge of GBP0.6 million to
increase the provision for US environmental remediation costs.
DISCONTINUED OPERATIONS
15 month period 12 month period
ended 2 April 2011 ended 2 January 2010
Dawson Todd Dawson Todd
Home & Home &
Group Duncan Total Group Duncan Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ---------- ------- -------- ----------- -------- --------
Revenue 38,476 - 38,476 36,292 14,625 50,917
-------------- ---------- ------- -------- ----------- -------- --------
Loss before
exceptional
items (1,472) - (1,472) (1,482) (927) (2,409)
Pre disposal
exceptional
costs (256) - (256) - - -
Loss on
disposal of
business (2,500) - (2,500) - (5,200) (5,200)
-------------- ---------- ------- -------- ----------- -------- --------
Loss for the
period from
discontinued
operations (4,228) - (4,228) (1,482) (6,127) (7,609)
-------------- ---------- ------- -------- ----------- -------- --------
Dawson Home Group
The sale of Dawson Home Group Limited to Brookmann Home Limited
was completed on 17 May 2011. Immediately prior to the sale GBP2.5
million of stock was transferred from Dawson Home Group Limited to
its parent company and will be sold back to Dawson Home Group
Limited over a period not exceeding six months. The consideration
was based on the net asset value of the business at completion,
less a discount of GBP2.0 million. Disposal costs are estimated at
GBP0.5 million.
During the 15 month period to 2 April 2011, the business
incurred a trading loss of GBP1.5 million. This was partly as a
result of the increase in world cotton prices which more than
doubled during the period. While this could be regarded as a short
term issue, the Board determined that the businesses had not
demonstrated sufficient progress to achieve an adequate level of
profitability in an acceptable timescale and it should therefore
focus its resources on developing its core cashmere businesses.
The Company had guaranteed the lease obligations of Dawson Home
Group Limited in respect of its administrative offices in
Manchester and this guarantee is expected to remain in place until
expiry of the initial term of the lease in 2017. The annual cost of
the lease is GBP0.3 million.
Todd & Duncan
As detailed in last year's annual report, the sale of the Todd
& Duncan business to Ningxia Zhongyin Cashmere Company Limited
("Zhongyin") was completed on 28 August 2009.
As part of the sale two supply agreements were entered into:
(i) The UK Knitwear division signed a four year supply agreement
at arm's length to source yarn from Todd & Duncan Limited at
historical levels.
(ii) The US Knitwear division signed a four year agreement to
offer a minimum level of garment orders to Zhongyin each year.
These arrangements have operated satisfactorily throughout the
period.
FINANCIAL REVIEW
Audited Statutory Unaudited proforma
Results Results
15 month 12 month 12 month 12 month
period
period ended ended period ended period ended
2 April 2 January 2 April 3 April
2011 2010 2011 2010
Income Statement
summary GBP000 GBP000 GBP000 GBP000
--------------------- ------------- ---------- ------------- -------------
Continuing
operations:
Revenue
UK Knitwear 9,040 7,896 7,937 7,725
US Knitwear 29,055 28,695 27,518 29,334
--------------------- ------------- ---------- ------------- -------------
38,095 36,591 35,455 37,059
Operating profit
before exceptional
items:
UK Knitwear 743 1,133 1,084 1,071
US Knitwear 2,358 3,774 2,921 3,906
Central overheads (2,986) (2,019) (2,400) (1,747)
--------------------- ------------- ---------- ------------- -------------
115 2,888 1,605 3,230
------------- -------------
Exceptional items 1,787 556
--------------------- ------------- ----------
Operating profit
after exceptional
items 1,902 3,444
Net finance costs
- on borrowings (234) (498)
- on pension
obligations 838 (889)
Taxation (1,759) (291)
--------------------- ------------- ----------
Continuing
operations profit
after tax 747 1,766
Discontinued
operations loss
after tax (4,228) (7,609)
--------------------- ------------- ----------
Loss after tax (3,481) (5,843)
--------------------- ------------- ----------
Average USD exchange
rate 1.556 1.568
--------------------- ------------- ---------- ------------- -------------
Presentation of Results
Comments below refer to the statutory accounts unless otherwise
stated.
The Home Furnishings business was sold on 17 May 2011 and so is
reported as a discontinued operation in all periods.
Operating results - continuing operations
Revenues from continuing businesses rose by GBP1.5 million to
GBP38.1 million, with GBP1.6 million generated in the additional
three month period. Operating profit before exceptional items fell
from GBP2.9 million to GBP0.1 million with an operating loss of
GBP1.7m incurred in the additional three month period:
- The UK Knitwear division reported revenues up GBP1.1 million
at GBP9.0 million of which GBP1.1m was generated in the additional
three month period. Pre-exceptional operating profit fell from
GBP1.1 million to GBP0.7 million with a loss of GBP0.2 million in
the additional three month period. Pro forma revenues for the 12
month period to 2 April 2011 increased by GBP0.2m compared with the
previous 12 month period, with pre-exceptional operating profits
unchanged at GBP1.1m.
- The US Knitwear division reported revenues up GBP0.4 million
at GBP29.1 million with GBP0.5 million generated in the additional
three month period. Pre-exceptional pre tax profit fell from GBP3.8
million to GBP2.4 million with a loss of GBP0.8 million in the
additional three month period. Pro forma revenues for the 12 month
period to 2 April 2011 were down GBP1.8 million compared with the
previous 12 month period, with pre-exceptional operating profits
down GBP1.0 million. There was no significant exchange rate
effect.
- Central costs for the 15 month period to 2 April 2011 were
GBP3.0 million compared with GBP2.0 million for the 12 month period
to 3 January 2010, an increase of GBP1.0 million of which GBP0.7
million was pension related cost. GBP0.6 million of costs were
incurred in the additional three month period of which GBP0.4
million were pensions related cost. Pro forma costs for the 12
month period to 2 April 2011 were GBP2.4 million, GBP0.6 million
higher than in the comparative 12 month period.
The performance of each division is discussed in the Business
Review above. The results of the Knitwear divisions remain
satisfactory having been achieved in a very challenging economic
environment. In particular, both divisions are having to manage a
significant increase in cashmere raw material prices which
increased by around 40% in 2010 and have again increased by around
20% in 2011. While cashmere fibre is only part of the cost of
cashmere yarn for the UK Knitwear division and cashmere garments
for the US knitwear division, it is a significant proportion and
has resulted in price increases which could not be fully passed on
to customers. The impact on the UK knitwear division was less
pronounced as it was able to utilise existing stocks.
Exceptional Items - continuing operations
Net exceptional income for the 15 month period to 2 April 2011
was GBP1.8 million (12 month period to 2 January 2010: GBP0.6
million).
Exceptional income of GBP2.8 million was recognised in the
current period. As noted in last year's annual report, the Company
agreed a payment plan with Inner Mongolia King Deer Cashmere
Company Limited ("King Deer") in March 2009 for the repayment of a
long standing debt of approximately $10.4 million which had been
fully provided in prior years and received payments totalling $1.5
million in the 12 month period to 2 January 2010. Payments
totalling $2.5 million (GBP1.7 million) were received in the
current period and a debtor of $1.8 million (GBP1.1 million) was
also recognised at the period end in respect of payments which are
due by December 2011. The payment plan was restructured during the
current period such that the remaining $4.6 million of debt now has
no fixed repayment term but is secured against a 9% equity stake in
King Deer. This amount is fully provided given the uncertainty as
to timing and value of realisation.
Exceptional charges totalling GBP0.9 million were recognised in
the current period: GBP0.1 million in respect of restructuring
costs at the US Knitwear division, GBP0.2 million in respect of
restructuring costs at the Corporate Office and an increase of
GBP0.6 million in US environmental provisions.
Further details are given in note 4 to the Preliminary
Statement
Net Finance Costs
Net finance costs, excluding pension related items, for the 15
month period to 2 April 2011 were GBP0.2 million on average net
funds of GBP10.4 million (12 month period to 2 January 2010: GBP0.5
million on average net debt 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 for the 15 month
period to 2 April 2011 was GBP0.8 million (12 month period to 2
January 2010: GBP0.9m cost). This is a notional figure only,
calculated as the expected return on scheme assets in the year less
the unwinding of one year's discount on pension obligations. The
expected rate of return on assets for the 15 month period to 2
April 2011 was 7.4% compared with 5.6% in the previous period. In
both periods, the actual return on assets exceeded the expected
return.
Taxation
A tax charge of GBP1.8 million for the 15 month period to 2
April 2011 was incurred (12 month period to 2 January 2010: GBP0.3
million). A charge of GBP1.9 million for the reversal of the
deferred tax asset was offset by a current year tax credit of
GBP0.1 million. The deferred tax asset was released in full during
the period, GBP0.7m due to the utilisation of prior period tax
losses in the USA and the balance on the basis that the current
volatility in cashmere prices makes short term profitability in the
USA insufficiently certain to justify recognition of the asset at
this time.
Earnings Per Share
The basic loss per share for the 15 month period to 2 April 2011
was 1.6 pence (12 month period to 2 January 2010: 2.6 pence loss).
The adjusted loss per share, calculated on the results of
continuing operations before exceptional items, was 0.5 pence (12
month period to 2 January 2010: 0.5 pence earnings). The weighted
average number of shares in issue was 225.2 million (225.2
million).
Dividends
No dividends were paid or proposed in the year.
Balance Sheet
2 April 2 January
2011 2010
Balance Sheet summary GBP000 GBP000
----------------------------- --------- ----------
Fixed assets 647 1,068
Working capital 1,881 8,180
Provisions (2,005) (2,166)
Other financial liabilities (106) (51)
Net assets of disposal
group 5,201 -
Net tax asset 351 1,366
Pension obligations (11,544) (19,246)
Net funds 10,157 12,343
============================= ========= ==========
Net assets 4,582 1,494
============================= ========= ==========
Fixed Assets
Fixed assets reduced by GBP0.4 million in the period, GBP0.2
million of which was due to the reclassification of Dawson Home
Group into Net assets of disposal group. Capital expenditure was
GBP0.2 million and depreciation GBP0.4 million.
Working Capital
Working capital reduced by GBP6.3 million in the period. A
reduction of GBP7.2 million resulted from the reclassification of
Dawson Home Group into Net assets of disposal group while an
increase of GBP1.1 million resulted from the recognition of a debt
which had previously been provided.
Provisions
Provisions were GBP2.0 million at 2 April 2011 (2 January 2010:
GBP2.2 million), comprising GBP0.2 million for reorganisation
costs, GBP1.3 million for environmental liabilities, GBP0.2 million
for the cost of exiting an onerous lease and GBP0.3 million for
customer claims and unfunded retirement benefits. A charge of
GBP0.6m was made in the period to increase the provision for US
environmental remediation costs to reflect a longer expected
remediation period.
Other Financial Liabilities
As noted below, the policy of the Company is to enter into
forward foreign exchange contracts to protect against the impact of
unfavourable exchange movements on its forecast Euro sales and US
Dollar purchases. These are not designated as cash flow hedges,
instead any unrealised gains or losses arising on open contracts at
the end of the year are taken to the Income Statement in the period
and an asset or liability recorded in the balance sheet. At the
period end the unrealised loss was GBP0.1 million (2 January 2010:
GBP0.1 million).
Net assets of disposal group
As required by IFRS 5, the assets and liabilities of the Home
Furnishings business which was sold on 17 May 2011 are classified
separately on the balance sheet as held for sale at the period end.
Liabilities include a provision of GBP2.5 million for the loss on
sale.
Net tax recoverable
Tax recoverable of GBP0.4 million at 2 April 2011 relates to an
estimated repayment due in the USA. The net tax recoverable balance
of GBP1.4 million at 2 January 2010 comprised a deferred tax asset
of GBP1.8 million offset by a current tax liability of GBP0.4
million.
IAS12 requires that deferred tax liabilities are provided in
full and that deferred tax assets be recognised to the extent they
are considered recoverable. A deferred tax asset of GBP1.8 million
was recognised at 2 January 2010 in respect of unexpired operating
losses brought forward which could be set off against the
prospective profits of the US Knitwear division. GBP0.7 million of
this asset was utilised during the year and the balance of GBP1.1
million has been de-recognised on the basis that the current
volatility in cashmere prices makes it insufficiently certain at
the present time that the remaining losses will be utilised in the
foreseeable future.
Pension obligations
Pension obligations are calculated by applying IAS19 which
specifies that assets are measured at market value at the balance
sheet date and liabilities are measured by discounting projected
future benefit payments at good quality corporate bond rates. The
projected future benefit payments are based on a number of
actuarial assumptions such as life expectancy and inflation.
On this basis the liability reduced from GBP19.3 million to
GBP11.5 million in the period despite the UK schemes discount rate
for liabilities reducing from 5.8% to 5.6%. The improvement was
driven mainly by an increase in the market value of assets during
the period. Contributions by the Company were GBP0.7 million (12
month period to 2 January 2010: GBP0.8 million) of which GBP0.2
million (GBP0.2 million) was current service cost and GBP0.5
million (GBP0.6 million) additional contributions to reduce the
deficit. An additional deficit repair contribution of GBP1.8
million was made after the period end.
Funding and Facilities
Net cash and deposits reduced by GBP2.1 million during the 15
month period to 2 April 2011, from GBP12.3 million to GBP10.2
million. Funds are absorbed mid year due to seasonal working
capital requirements and fell to a minimum of GBP5.2 million in
August 2010.
Borrowing facilities comprise a GBP10 million working capital
facility with GE Commercial Finance which funds the Group's UK
operations and a $15 million working capital facility with Bank of
America which funds the Group's US operation. The funding capacity
of each facility varies according to the working capital of the
respective businesses. Both are three year facilities. The GE
facility expires in February 2014 and the Bank of America facility
expires in June 2013.
Going Concern
In carrying out their duties in respect of going concern, the
Directors have reviewed the Group's financial position and cash
flow forecasts for a period of 12 months from the date of signing
these Group financial statements. These have been based on a
comprehensive review of revenue, expenditure and cash flows, taking
into account the likelihood of recovering the balance of King Deer
debt and the deferred consideration from the disposal of Dawson
Home Group Limited and specific business risks and the
uncertainties brought about by the current economic
environment.
The key assumption made in these forecasts is that there is no
demand for a pensions' deficit repair contribution beyond the means
of the Group to pay.
Based on current negotiations with the Trustees and the Pensions
Regulator, the Directors see little likelihood of a deficit
contribution notice that would jeopardise the going concern status
as any insolvent realisation that this would trigger would
disadvantage all stakeholders.
On this basis, the Group's forecasts and projections, taking
account of reasonably possible changes in trading performance and
other business risks, show that the Group should be able to operate
within the level of its current and forecast facilities.
Accordingly, the Directors have continued to adopt the going
concern basis of preparing the financial statements.
Treasury
The Group's funding policy is to negotiate sufficient facilities
to cover forecast net borrowings for the following 12 month period
with adequate headroom against identified risks.
The Group's policy on currency risk is to minimise the impact of
currency risk on currency transaction flow through use of forward
foreign exchange contracts. Due to uncertainty of timing of future
cash flows these are not accounted for as cash flow hedges.
Instead, all gains and losses are recognised in the Income
Statement in the period arising. This can result in timing
differences with gains or losses on forward foreign exchange
contracts marked to market at each reporting period.
Translation exposures on foreign currency net assets and income
streams are not hedged.
David Bolton | Chairman
David Cooper | Finance Director
Consolidated Income Statement
-------------------------------------------- ----- ------------- ----------
For the 15 month period ended 2 April
2011
Re-presented*
15 month 12 month
period
period ended ended
2 April 2 January
2011 2010
Note GBP000 GBP000
-------------------------------------------- ----- ------------- ----------
Continuing Operations
Revenue 2 38,095 36,591
Cost of sales (28,721) (26,337)
-------------------------------------------- ----- ------------- ----------
Gross profit 9,374 10,254
Other operating income 124 66
Selling and distribution costs (1,624) (1,318)
Administrative expenses 4 (7,759) (6,114)
-------------------------------------------- ----- ------------- ----------
Operating profit before exceptional
items 2,3 115 2,888
Exceptional administrative items 2,4 1,787 556
-------------------------------------------- ----- ------------- ----------
Operating profit 2,3 1,902 3,444
Finance income 10 15
Finance costs (244) (513)
Net finance (expense) income on pension
assets/liabilities 838 (889)
-------------------------------------------- ----- ------------- ----------
Profit before taxation 2,506 2,057
Taxation (1,759) (291)
Profit for the period from continuing
operations 747 1,766
Discontinued operations
Loss for the period from discontinued
operations 5 (4,228) (7,609)
Loss for the period (3,481) (5,843)
-------------------------------------------- ----- ------------- ----------
Basic and Diluted earnings (loss) per
share
From continuing operations 0.3p 0.8p
From continuing and discontinued operations (1.6)p (2.6)p
-------------------------------------------- ----- ------------- ----------
* Comparative information has been re-presented to reclassify
the results of the Home Furnishings division to discontinued
operations
Consolidated Statement of Comprehensive
Income
------------------------------------------------ --------- -------------
For the 15 month period ended 2 April 2011
15 month 12 month
period
ended period ended
2 April 2 January
2011 2010
GBP000 GBP000
------------------------------------------------ --------- -------------
Loss for the period (3,481) (5,843)
------------------------------------------------ --------- -------------
Other comprehensive income:
Exchange differences on translation of foreign
subsidiaries 181 (577)
Actuarial gain (loss) on defined benefit
pension obligations 6,388 (12,373)
Other comprehensive income (loss) for the
period 6,569 (12,950)
Total comprehensive income (loss) for the
period 3,088 (18,793)
------------------------------------------------ --------- -------------
Consolidated Balance Sheet
-------------------------------------- ----- --------- ----------
As at 2 April 2011
2 April 2 January
2011 2010
Note GBP000 GBP000
-------------------------------------- ----- --------- ----------
Non-current assets
Intangible assets 1 143
Property, plant and equipment 646 925
Deferred tax asset - 1,750
Total non-current assets 647 2,818
-------------------------------------- ----- --------- ----------
Current assets
Inventories 2,684 8,309
Trade and other receivables 2,581 9,350
Income tax recoverable 351 -
Cash and cash equivalents 10,157 12,343
Disposal group held for sale 5 11,636 -
-------------------------------------- ----- --------- ----------
Total current assets 27,409 30,002
-------------------------------------- ----- --------- ----------
Total assets 28,056 32,820
-------------------------------------- ----- --------- ----------
Current liabilities
Trade and other payables 3,384 9,479
Income tax payable - 384
Provisions 495 1,144
Other financial liabilities 106 51
Liabilities directly associated with
disposal group held for sale 5 6,435 -
Total current liabilities 10,420 11,058
-------------------------------------- ----- --------- ----------
Non-current liabilities
Provisions 1,510 1,022
Retirement benefit obligations 11,544 19,246
Total non-current liabilities 13,054 20,268
-------------------------------------- ----- --------- ----------
Total liabilities 23,474 31,326
-------------------------------------- ----- --------- ----------
Net assets 4,582 1,494
-------------------------------------- ----- --------- ----------
Equity
Share capital 51,989 51,989
Share premium account 5,489 5,489
Translation reserve 421 240
Retained earnings (53,317) (56,224)
Total equity 4,582 1,494
-------------------------------------- ----- --------- ----------
The financial statements of Dawson International PLC (registered
number SC54505) were approved by the Board of Directors and
authorised for issue on 8 August 2011. They were signed on its
behalf by:
David Bolton | Chairman
David Cooper | Finance Director
Consolidated Cash Flow Statement
-------------------------------------------- ------ --------- -------------
15 month period ended 2 April 2011 Re-presented
15 month 12 month
period period
ended ended
2 April 2 January
2011 2010
Note GBP000 GBP000
-------------------------------------------- ------ --------- -------------
Continuing operations
Cash flows from operating activities
Profit before tax 2,506 2,057
Depreciation 216 129
Net finance (income) expense (604) 1,387
Share based payment expense - 47
---------------------------------------------------- --------- -------------
2,118 3,620
Increase in inventories (1,455) (90)
Decrease in receivables 1,458 1,360
Decrease in payables (1,369) (1,838)
Increase (decrease) in provisions 466 (8)
Cash generated by operations 1,218 3,043
Additional contributions to pension schemes (480) (606)
Taxes paid (702) (261)
Net cash generated by operating activities 36 2,235
---------------------------------------------------- --------- -------------
Cash flows from investing activities
Interest received 10 15
Proceeds from disposal of Todd & Duncan - 5,426
Purchase of property, plant and equipment (48) (87)
Purchase of intangible assets (47) (1)
Net cash generated by investing activities (85) 5,353
---------------------------------------------------- --------- -------------
Cash flows from financing activities
Interest paid (244) (513)
Decrease in asset backed finance - (4,212)
Net cash used by financing activities (244) (4,725)
---------------------------------------------------- --------- -------------
Net cash (used) generated by continuing
operations (293) 2,805
---------------------------------------------------- --------- -------------
Discontinued operations
Net cash (used) generated by operating activities (1,960) 821
Net cash used by investing activities (36) (355)
Net cash (used) generated by discontinued
operations (1,996) 466
---------------------------------------------------- --------- -------------
Net (decrease) increase in cash and cash
equivalents (2,289) 3,271
Cash and cash equivalents at the beginning
of the period 12,343 9,900
Exchange rate effects 103 (828)
Cash and cash equivalents at the end of
the period 10,157 12,343
---------------------------------------------------- --------- -------------
Reconciliation of Movement in Net Funds
-------------------------------------------------- --------- -------------
15 month period ended 2 April 2011
15 month 12 month
period
ended period ended
2 April 2 January
2011 2010
GBP000 GBP000
-------------------------------------------------- --------- -------------
(Decrease) increase in cash and cash equivalents (2,289) 3,271
Decrease in borrowings - 4,212
Exchange rate effects 103 (828)
-------------------------------------------------- --------- -------------
(Decrease) increase in net funds (2,186) 6,655
Opening net funds 12,343 5,688
-------------------------------------------------- --------- -------------
Closing net funds 10,157 12,343
-------------------------------------------------- --------- -------------
Consolidated Statement of Changes in
Equity
------------------------------------------ ------------ --------- ---------
Share Share Translation Retained
Capital Premium Reserve Earnings 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 - - (578) (18,215) (18,793)
Share-based payments
charge - - - 47 47
---------------------- -------- -------- ------------ ---------
At 2 January 2010 51,989 5,489 240 (56,224) 1,494
Total comprehensive
income for the
period - - 181 2,907 3,088
---------------------- -------- -------- ------------ ---------
At 2 April 2011 51,989 5,489 421 (53,317) 4,582
---------------------- -------- -------- ------------ --------- ---------
NOTES TO THE PRELIMINERY ANNOUNCEMENT
1. Basis of information in the Preliminary Announcement
The financial information set out above does not constitute the
Company's statutory accounts for the 15 month period ended 2 April
2011 or for the 12 month period ended 2 January 2010 but is derived
from those accounts. Statutory accounts for the 12 month period
ended 2 January 2010 have been delivered to the Registrar of
Companies and those for the 15 month period ended 2 April 2011 will
be delivered following the Company's Annual General Meeting. The
auditors have reported on those accounts; their report was
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under section 498(2) or (3) of the Companies Act 2006 or
equivalent preceding legislation.
2. Segmental analysis
As required by IFRS 8 the segmental analysis below reflects
internal reporting to the 'Chief Operating Decision Maker' which is
considered to be the Board of Directors. The Board receives monthly
reports which focus primarily on the operating results of the
segments before exceptional charges and on working capital
management. Borrowings and tax are managed on a group wide basis
and so are not allocated across segments. Accordingly, net finance
charges are not allocated across segments. The operating segments
of continuing operations have been identified as the following:
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.
The results of discontinued operations are disclosed in note
5.
Unaudited pro forma operating results for the 12 month period
ended 2 April 2011 are given in note 6.
Results for 15 month period ended
2 April 2011
---------------------------- ----------------------------------------------
UK US Unallocated
Knitwear Knitwear Central Total
GBP000 GBP000 GBP000 GBP000
---------------------------- --------- --------- ------------ ---------
Revenues from external
customers 9,040 29,055 - 38,095
Cost of sales (6,884) (21,678) (159) (28,721)
----------------------------- --------- --------- ------------ ---------
Gross profit 2,156 7,377 (159) 9,374
Operating expenses (1,413) (5,019) (2,827) (9,259)
----------------------------- --------- --------- ------------ ---------
Operating profit before
exceptional items 743 2,358 (2,986) 115
Exceptional items - (103) 1,890 1,787
----------------------------- --------- --------- ------------ ---------
Operating profit after
exceptional items 743 2,255 (1,096) 1,902
Net finance charges
- On funding facilities (234) (234)
- On net pension liabilities 838 838
Profit before tax from
continuing operations (492) 2,506
----------------------------- --------- --------- ------------ ---------
Results for 12 month period ended
2 January 2010
------------------------------- ---------------------------------------------
UK US Unallocated
Knitwear Knitwear Central Total
GBP000 GBP000 GBP000 GBP000
------------------------------- --------- --------- ------------ ---------
Revenues from external
customers 7,896 28,695 - 36,591
Cost of sales (5,691) (20,900) 254 (26,337)
------------------------------- --------- --------- ------------ ---------
Gross profit 2,205 7,795 254 10,254
Operating expenses (1,072) (4,021) (2,273) (7,366)
------------------------------- --------- --------- ------------ ---------
Operating profit before
exceptional items 1,133 3,774 (2,019) 2,888
Exceptional items (125) - 681 556
------------------------------- --------- --------- ------------ ---------
1,008 3,774 (1,338) 3,444
Net finance charges
- On funding facilities (498) (498)
- On net pension liabilities (889) (889)
Profit before tax from
continuing operations (2,725) 2,057
------------------------------- --------- --------- ------------ ---------
Net assets at 2 April 2011
----------------------------------- -----------------------------------------
UK US Unallocated
Knitwear Knitwear Central Total
GBP000 GBP000 GBP000 GBP000
----------------------------------- -------- -------- ----------- --------
Non-current assets 490 32 125 647
Inventories 1,376 1,308 - 2,684
Trade and other receivables 658 234 1,689 2,581
Cash and deposits - - 10,157 10,157
Tax recoverable - - 351 351
Disposal group held for sale 11,636 11,636
----------------------------------- -------- -------- ----------- --------
Total assets 2,524 1,574 23,958 28,056
----------------------------------- -------- -------- ----------- --------
Trade, other payables and
provisions (2,219) (569) (2,707) (5,495)
Disposal group held for sale - - (6,435) (6,435)
Retirement benefit obligations - - (11,544) (11,544)
----------------------------------- -------- -------- ----------- --------
Total liabilities (2,219) (569) (20,686) (23,474)
----------------------------------- -------- -------- ----------- --------
Net assets 305 1,005 3,272 4,582
----------------------------------- -------- -------- ----------- --------
Net assets at 2 January 2010
-------------------- -------------------------------------------------------------------------
UK US Discontinued Unallocated
Knitwear Knitwear Operations Central Total
GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- --------- --------- ----------------- ---------------- --------------
Non-current assets 576 57 301 1,884 2,818
Inventories 278 946 7,085 - 8,309
Trade and other
receivables 1,413 2,049 5,394 494 9,350
Cash and deposits - - - 12,343 12,343
Total assets 2,267 3,052 12,780 14,721 32,820
-------------------- --------- --------- ----------------- ---------------- --------------
Trade, other
payables and
provisions (2,050) (1,888) (5,326) (2,432) (11,696)
Income tax payable - - - (384) (384)
Retirement benefit
obligations - - - (19,246) (19,246)
Total liabilities (2,050) (1,888) (5,326) (22,062) (31,326)
-------------------- --------- --------- ----------------- ---------------- --------------
Net assets 217 1,164 7,454 (7,341) 1,494
-------------------- --------- --------- ----------------- ---------------- --------------
Continuing Discontinued
Operations Operations Total
15
15 month 12 month month 12 month 15 month 12 month
period period period period period period
ended ended ended ended ended ended
2 2
2 April January April 2 January 2 April 2 January
2011 2010 2011 2010 2011 2010
3. Operating Profit GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Operating profit is
stated after
charging (crediting):
Cost of inventories
recognised as an expense 28,213 26,549 31,897 40,239 60,110 66,788
Staff costs 7,889 6,458 3,069 6,876 10,958 13,334
Net foreign exchange
losses (gains) 122 (444) 350 (231) 472 (675)
Depreciation of
property,
plant and equipment 216 129 53 282 269 411
Amortisation of computer
software - - 90 47 90 47
Loss (gain) on disposal
of property,
plant and equipment 17 (5) (9) 4 8 (1)
Impairment (gains)
losses recognised on
trade receivables (238) (124) 30 365 (208) 241
Operating lease rentals - -
- plant and machinery 1 2 23 62 24 64
- other 202 167 447 343 649 510
Government grants
towards
- training costs 2 4 - - 2 4
- market research costs 5 8 - - 5 8
- efficiency projects 13 4 - - 13 4
Auditor's remuneration
(as analysed below) 393 143 52 38 445 181
----------------------------- --------- --------- ------- --------------- ----------- -------------
Auditor's remuneration:
Audit of these financial
statements 82 66 - - 82 66
Audit fees for
subsidiaries
pursuant to legislation 25 14 39 26 64 40
Total audit fees 107 80 39 26 146 106
----------------------------- --------- --------- ------- --------------- ----------- -------------
Pensions advice 149 31 - - 149 31
Other services relating
to taxation 137 32 13 12 150 44
Total non-audit fees 286 63 13 12 299 75
----------------------------- --------- --------- ------- --------------- ----------- -------------
15 month 12 month
period period
ended ended
2 April 2 January
2011 2010
Exceptional administrative items - continuing
4. operations GBP000 GBP000
------------------------------------------------- --------- ----------
Reorganisation costs (i)
- UK Knitwear - (125)
- US Knitwear (103) -
- Central (249) -
King Deer debt recovery (ii) 2,754 973
Environmental remediation costs (iii) (615) -
Property costs - (292)
------------------------------------------------- --------- ----------
1,787 556
------------------------------------------------- --------- ----------
Total administrative expenses, net of the exceptional items
noted above, were GBP5,972,000 (12 months to 2 January 2010:
GBP5,558,000).
(i) Reorganisation costs comprise redundancy payments resulting
from the restructuring of the operating divisions and corporate
office.
(ii) In 2009, the Company agreed a payment plan with Inner
Mongolia King Deer Cashmere Company Limited ("King Deer") for the
repayment of a long outstanding debt of approximately $10.4 million
which had been fully provided in previous years and received $1.5
million (GBP1.0 million) in accordance with that plan. The payment
plan was amended in January 2010 such that $4.6 million of the
remaining debt had no fixed repayment term but was secured against
a 9% equity stake in King Deer. The remaining debt balance of $4.3
million was scheduled for repayment in accordance with the amended
plan.
During the current period, $2.5 million (GBP1.7 million) was
received in accordance with the amended payment plan and the
remaining debt balance of $1.8 million (GBP1.1 million) was
re-instated as a debtor, resulting in total exceptional income of
$4.3 million (GBP2.8 million).
The balance secured against equity of $4.6 million (GBP2.9
million) remains fully provided in the financial statements.
(iii) The Company is responsible for environmental remediation
works stemming from previous manufacturing operations in the USA (2
locations) and the UK (1 location). The Company has recently been
notified of a further possible contaminated site in the USA which
is currently being investigated. The provision for remediation
costs in the USA has been increased by $1.0 million.
5. Discontinued operations
On 17 May 2011 the Company completed the sale of Dawson Home
Group Limited. The consideration was based on net asset value at
completion less a discount of GBP2.0 million. A provision for loss
on disposal was made at 2 April 2011 comprising the discount to net
asset value of GBP2.0 million and estimated costs of GBP0.5
million. The assets and liabilities of Dawson Home Group Limited
have been classified as held for sale at 2 April 2011 as the
Company was actively engaged in the sale of the business at that
date.
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
("Zhongyin"). The consideration was based on the value of fixed
assets and stocks at completion less a discount of GBP4.2 million.
The Company incurred costs of GBP0.9 million in respect of the
disposal.
The results of these discontinued operations are as follows:
15 month period 12 month period
ended 2 April 2011 ended 2 January 2010
Dawson Todd Dawson Todd
Home & Home &
Group Duncan Total Group Duncan Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- --------- ------- --------- --------- --------- ---------
Revenue 38,476 - 38,476 36,292 14,625 50,917
Cost of sales (32,275) - (32,275) (29,407) (13,201) (42,608)
--------------- --------- ------- --------- --------- --------- ---------
Gross margin 6,201 - 6,201 6,885 1,424 8,309
Operating
expenses (7,673) - (7,673) (8,367) (2,351) (10,718)
--------------- --------- ------- --------- --------- --------- ---------
Loss before
exceptional
items (1,472) - (1,472) (1,482) (927) (2,409)
Restructuring
costs (256) - (256) - - -
Loss on
disposal of
business (2,500) - (2,500) - (5,200) (5,200)
--------------- --------- ------- --------- --------- --------- ---------
Loss for the
period from
discontinued
operations (4,228) - (4,228) (1,482) (6,127) (7,609)
--------------- --------- ------- --------- --------- --------- ---------
The assets and associated liabilities of Dawson Home Group
Limited which were classified as held for sale at 2 April 2011 were
as follows:
GBP000
----------------------------------------------------- -------
Assets classified as held for sale:
Intangible assets 90
Property plant and equipment 142
Inventories 7,486
Trade and other debtors 3,918
11,636
----------------------------------------------------- -------
Liabilities directly associated with disposal group
held for sale:
Trade and other payables 3,878
Provision for loss on sale 2,500
Other provisions 57
6,435
----------------------------------------------------- -------
There are certain ongoing obligations associated with each of
the above transactions as follows:
Dawson Home Group Limited
(i) Prior to the sale, Dawson Home Group Limited transferred
GBP2.5 million of inventory to its parent Company and will
repurchase that inventory over a period not exceeding six
months.
(ii) Dawson International PLC has guaranteed the lease
obligations of Dawson Home Group Limited in respect of its
administrative offices in Ardwick, Manchester. The lease expires in
August 2017 and has an annual cost of approximately GBP0.3
million.
Todd & Duncan
As part of the sale two supply agreements were entered into:
(iii) Barrie signed a four year supply agreement at arm's length
to source yarn from Todd & Duncan Limited at historical
levels.
(iv) Dawson Forte signed a four year agreement to offer a
minimum level of garment orders to Zhongyin each year.
6. Unaudited Pro forma results for the year ended 2 April
2011
The group has changed its financial reporting reference date
from 31 December to 31 March to reflect the seasonality of the
business better and improve the budgeting process. The following
unaudited pro-forma financial information compares the revenues and
operating results of continuing operations before exceptional items
and is derived from both statutory and management accounting
information.
Comparative unaudited pro-forma interim information is given to
demonstrate the reduced impact of seasonality on reported results
as previously the first half of the financial year was invariably
loss making.
6 month 12 month 6 month 12 month
period period period period
to to to to
4 September 2 April 5 September 3 April
2010 2011 2009 2010
Continuing operations GBP000 GBP000 GBP000 GBP000
---------------------------- ------------ --------- ------------ ---------
Revenues
UK Knitwear 4,893 7,937 4,634 7,725
US Knitwear 16,465 27,518 14,564 29,334
------------ --------- ------------ ---------
21,358 35,455 19,198 37,059
Operating profit before
exceptional items
UK Knitwear 388 1,084 618 1,071
US Knitwear 2,376 2,921 2,011 3,906
Central overheads (1,627) (2,400) (866) (1,747)
------------ --------- ------------ ---------
1,137 1,605 1,763 3,230
This information is provided by RNS
The company news service from the London Stock Exchange
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Dawson Intl. (LSE:DWSN)
Historical Stock Chart
From Apr 2024 to May 2024
Dawson Intl. (LSE:DWSN)
Historical Stock Chart
From May 2023 to May 2024
