HALF YEAR RESULTS 2009
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HALF YEAR RESULTS 2009. David Bolton, Chairman Andy Bartmess, CEO Dave Cooper, CFO. Introduction. Key messages Half year results Full year outlook Pensions. KEY MESSAGES. Results in line with expectations Revenues from continuing operations 1 £17.5m (2008: £17.6m).

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HALF YEAR RESULTS 2009

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Half year results 2009

HALF YEAR RESULTS 2009

David Bolton, Chairman

Andy Bartmess, CEO

Dave Cooper, CFO


Introduction

Introduction

  • Key messages

  • Half year results

  • Full year outlook

  • Pensions

1 Continuing operations exclude Todd & Duncan and Home Furnishings - Branded


Key messages

KEY MESSAGES

  • Results in line with expectations

  • Revenues from continuing operations1 £17.5m (2008: £17.6m).

  • Operating loss from continuing operations1 £1.9m (2008: £0.4m)

  • Cash outflow £9.7m (2008: £4.0m)

  • Net debt £4.0m (2008: £9.7m)

  • Key objective to reduce exposure to DB pension schemes

  • Phased exit from Dorma branded business on schedule

  • Disposal of Todd & Duncan achieved a critical strategic objective and will generate c. £11m cash

  • Platform of profitable businesses and sound funding

1 Continuing operations exclude Todd & Duncan and Home Furnishings - Branded


Half year results profit loss

Half Year Results Profit & Loss


Half year results profit loss1

Half Year ResultsProfit & Loss

  • Both knitwear businesses reported lower turnover and profits

    • Last year was a record year for both businesses, customers well/over stocked

    • Both are seasonally biased to the second half, particularly the US business.

    • Order books indicate that sales for the full year will be well down on last year’s levels.

  • Home Furnishings (Private Label) sales up 15% but operating profit well down.

    • 25% strengthening of the USD increased sourced product cost which had to be absorbed.

  • Net central costs halved to £0.8m

    • £0.3m King Deer proceeds, £0.3m reduction in professional fees (pensions), £0.2m FX.

  • Home Furnishings (Branded) sales down £4m, losses reduced by £0.5m

    • Phased exit from concession stores on track

  • Exceptional charge of £0.1m incurred by UK Knitwear (redundancies)

  • Interest cost halved due to lower average borrowings

  • Tax charge of £0.6m incurred by US Knitwear business

    • Profits of $6.5m only partly offset by capped losses brought forward.

  • Discontinued business reviewed on following slide


Half year results todd duncan disposal

Half Year ResultsTodd & Duncan disposal


Half year results todd duncan disposal1

Half Year ResultsTodd & Duncan disposal

  • Transaction completed on 28th August 2009

  • Reasons for the disposal:

    • Business consistently loss making after financing charges

    • Many strategic challenges, including excess worldwide capacity, need to relocate, downsize and re-equip.

  • Financial consequences of the sale:

    • Business, fixed assets and stocks sold, debtors and creditors retained.

    • £6.1 million initial sale proceeds for the business, fixed assets and stocks (to be adjusted based on agreed completion account balances)

    • Four year trading agreements between Todd & Duncan/Barrie and Forte/Zhongyin

    • c. £5.5 million working capital to be realised, funding capacity on stocks and debtors lost.

    • Loss on disposal of £5.0m (£4.2m book loss on assets sold and £0.8m costs)

  • Operating losses of £0.3m in the (normally profitable) first half and will incur further losses in July/August.

  • Reported loss on discontinued operations £5.3m, £5.0m loss on disposal and £0.3m first half operating losses.


Half year results summary balance sheet

Half Year ResultsSummary Balance Sheet


Half year results summary balance sheet1

Half Year ResultsSummary Balance Sheet

  • Fixed assets reduce from £4.4m to £2.4m due to sale of Dorma Brand and Todd & Duncan impairment charge of £1m in 2008.

  • Working capital reduces £4.2m from £29.0m to £24.8m

    • £3.9m reduction at the Knitwear businesses reflecting lower activity this year

    • £2.2m reduction at Home Furnishings (Branded) as we exit that business

    • £1.7m increase at Todd & Duncan due to higher stocks

  • Provisions established for loss on sale of T&D and for Dorma closure costs.

  • Retirement Benefit obligations discussed on slide 15

  • No significant change in the tax balance which relates mainly to £1.5m deferred tax asset in respect of US Knitwear

  • Net debt/Cash flow discussed on slide 11

  • Net assets reduced by £7.9m

    • 2nd half profit 2008£2.1m

    • 1st half loss 2009£(9.0)m

    • Actuarial loss on DB schemes£(2.5)m

    • Exchange£1.4m

    • Share based payments adjustment£0.1m


Half year results summary cash flow

Half Year ResultsSummary Cash Flow


Half year results summary cash flow1

Half Year ResultsSummary Cash Flow

  • Cash flows are highly seasonal

    • Loss making 1st half, profitable 2nd half

    • Build working capital 1st half, release working capital second half.

    • This will become less pronounced with the sale of Todd & Duncan

  • £5.7m funds generated over 12 month period

    • Net proceeds of Dorma brand sale c. £3 million.

    • Reduction of working capital £4.5m.

  • Pension deficit contributions reduced from £887k (all paid in 2nd half in 2008) to £350k p.a.

  • 2nd half 2009 will benefit from the disposal of Todd & Duncan


Full year outlook revenues

Full Year OutlookRevenues

  • UK Knitwear factory loaded through to year end with lower value business taken to maintain production

  • US Knitwear sales reduction reflects order book position at end June.

  • Home Furnishings (Private Label) increase consistent with first half performance

  • Home Furnishings (Branded) reduction reflects phased exit from the business


Full year outlook operating profit loss

Full Year OutlookOperating Profit /(Loss)

  • UK Knitwear profit reduction reflects low margin business accepted to maintain production

  • US Knitwear profitreduction a function of their lower sales

  • Home Furnishings (Private Label) shows some margin recovery from weaker USD with higher second half profit on lower sales.

  • H1 central costs benefited from King Deer receipt of $0.5m. A further payment of $1.0m is due at the end of December but is not assumed in the forecast.

  • Home Furnishings (Branded) losses decline as the business is exited.


Pensions

Pensions

(i)Includes 84 members at Todd & Duncan who became deferred members on the sale of the business


Pensions1

Pensions

  • The IAS 19 deficit has fluctuated between £30m and £5m in the past 5 years.

  • There is a disconnect between the IAS19 valuation and the actuarial valuation which forms the basis of any recovery plan.

  • The 2009 triennial actuarial valuation is in progress and is likely to result in a significant increase in the deficit because of

    • asset values at the valuation date (April)

    • revised mortality assumptions

    • guidance from the Regulator in assessing the covenant of the Company

  • Associated costs (professional fees and PPF levy) are high

  • Key objectives are therefore

    • To manage down the size of the schemes by offering e.g. enhanced transfer values, cash commutations, early retirement options.

    • To agree a recovery plan and schedule of contributions with the Trustee and Regulator based on the principle of affordability but recognising the need to invest in and grow the Company and provide shareholders with a return on their investment.


Summary

Summary

  • H1 2009 results disappointing

    • Operating loss from Todd & Duncan in normally profitable period

    • Losses from Todd & Duncan disposal and Home Furnishings (Branded) exit

    • Knitwear businesses experienced significant reduction in demand due to economic conditions

    • USD exchange rate impacted Home Furnishings (Private Label) margins

  • Continuing operations1 expected to be in operating profit for the year despite economic conditions

    • However insufficient to offset losses from T&D and Home Furnishings (Branded)

  • Completion of the Todd & Duncan sale was a critical achievement

    • Leaves Dawson with a strong core of businesses with a history of excellent returns

    • Platform for future growth

  • Managing the pension scheme deficits is a key objective

    • Reducing the overall size of the schemes

    • Agreeing an affordable recovery plan/schedule of contributions

    • Minimising associated costs

1 Continuing operations exclude Todd & Duncan and Home Furnishings - Branded


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