REG - Dawson International - Second Half Year Results

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 £65.7 million (2009: £64.7 million)

 

·      Pre-exceptional operating profit from continuing businesses*  of £0.8 million (2009: £2.2 million)

- reflects margin impact of raw material price increases

 

·      Operating profit after exceptional items of £1.1 million (2009: £2.0 million)

 

·      Strong cash position with net funds of £11.6 million (2009: £12.3 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 £66.8 million (2009:  £72.9 million) with operating profit before exceptional items of £0.5 million (2009:  £1.4 million). Excluding the results of the Dorma  retail business, which was exited in the first half of the year, revenue was £65.7 million (2009: £64.7 million) with operating profit before exceptional items of £0.8 million (2009: £2.2 million). Our cash position remains strong with net funds of £11.6 million (2009: £12.3 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 £19.3 million to £12.3 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 £4.7 million to £29.7 million in the past six years.

·     The current level of UK pension costs is unsustainable. In addition to costs of £1.1 million (2009: £0.8 million) the Company made deficit repair contributions of £0.4 million (2009: £0.4 million) resulting in a total cash outflow of £1.5 million in the year (2009: £1.2 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 months to 1 January 2011	6 months to 2 January 2010	12 months to 1 January 2011	12 months to 2 January 2010	6 months to 1 January 2011	6 months to 2 January 2010	12 months to 1 January 2011	12 months to 2 January 2010
	£000	£000	£000	£000	£000	£000	£000	£000
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 £65.7 million for the 12 months to 2 January 2011, an increase of £1.0 million. Despite this increase in revenue, pre-exceptional profits from underlying continuing operations¹ fell from £2.2 million to £0.8 million.

 

The table of results above demonstrates the seasonality of the business in the calendar year with £46.6 million (71%) of revenues generated in the second half (2009: £46.1 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.

 

¹Underlying 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 £7.9 million (2009: £7.9 million) and the operating profit £0.9 million (2009: £1.1 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 £5.2 million representing 65% of turnover for the year (2009: £5.0 million, 64%). Operating profit in the second half was £1.3 million (2009: £1.3 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 (£28.6 million) compared with $45.0 million (£28.7 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 (£3.8 million) to $4.9 million (£3.2 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 £29.2 million (2009: £28.1 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 £1.0 million (2009: £0.6 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 £15.5 million (2009: 14.0 million) and the operating loss £0.7 million (2009: £0.6 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 £0.2m 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 £0.3 million (2009: £0.8 million loss).

 

Central costs

Costs in the 12 months to 1 January 2011 were £2.3 million (2009: £2.0 million) inclusive of pension related costs of £1.1 million (2009: £0.8 million).

 

Costs in the six months to 1 January 2011 were £1.1 million (2009: £0.8 million) inclusive of pension related costs of £0.6 million (2009: £0.4 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 £0.2 million.

 

Exceptional Items

The results benefited from net exceptional income of £0.6 million (2009: £0.6 million). Further payments of £1.6 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 £0.4 million and increased provisions for US environmental liabilities by £0.6 million.   The outstanding balance of £4.1 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 £0.2 million on average net funds of £10.1 million (2009: £0.5 million on average net funds of £2.1 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 £0.7 million (2009: £0.9 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 £1.4 million (2009: £0.3 million). £1.3 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. £0.1 million relates to the current year tax charge in the US.

 

Funding and facilities

Net funds at 1 January 2011 were £11.6 million (2 January 2010: £12.3 million). On 5 January 2011, a further payment of $1.5 million (£1.0 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 to 1 January 2011	6 months  to 2 January 2010	12 months to 1 January 2011	12 months to 2 January 2010
	Note	£000	£000	£000	£000
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 to 1 January 2011	6 months  to 2 January 2010	12 months to 1 January 2011	12 months to 2 January 2010
	£000	£000	£000	£000
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	£000	£000
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
	Share	Share	Translation	Profit and
	Capital	Premium	Reserve	Loss account		Total
	£000	£000	£000	£000		£000
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 1 January 2011	6 months  to 2 January 2010	12 months to 1 January 2011	12 months to 2 January 2010
	£000	£000	£000	£000
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 ended 1 January 2011	6 months to 1 January 2011	6 months  to 2 January 2010	12 months to 1 January 2011	12 months to 2 January 2010
	£000	£000	£000	£000
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 months to 1 January 2011	6 months  to 2 January 2010	12 months to 1 January  2011	12 months to 2 January 2010	6 months to 1 January 2011	6 months to 2 January 2010	12 months to 1 January 2011	12 months to 2 January 2010
	£000	£000	£000	£000	£000	£000	£000	£000
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
	£000	£000
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 1 January 2011	6 months  to 2 January 2010	12 months to 1 January 2011	12 months to 2 January 2010
		£000	£000	£000	£000
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 (£2.6million) have been received to date of which $1.5 million (£1.0 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 £0.9 million in the period to disposal and a loss of £5.2 million on disposal.

 

5 Finance income/(costs)

	6 months to 1 January 2011	6 months  to 2 January 2010	12 months to 1 January 2011	12 months to 2 January 2010
	£000	£000	£000	£000
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 1 January 2011	6 months  to 2 January 2010	12 months to 1 January 2011	12 months to 2 January 2010
	£000	£000	£000	£000
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 1 January 2011	6 months  to 2 January 2010	12 months to 1 January 2011	12 months to 2 January 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:	£000s	£000s	£000s	£000s
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	£000	£000	£000	£000
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 £350,000 per annum to £400,000 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 2011					12 months to 1 January 2010
	UK £000	USA £000		Total £000		UK £000		USA £000		Total £000
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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