Yarn firm sold as pensions unravel

Published on Tuesday 1 September 2009 21:13

DAWSON International is back on the acquisition hunt after finally completing the sale of its cashmere yarn business, Todd & Duncan, after 18 months of negotiations.

Kinross headquartered Dawson posted a 9 million loss for the six months to 4 July as it was hit by a slowdown in consumer spending in its traditionally weaker first half.

The figures were also affected by the sale price of Todd & Duncan, which was offloaded to Ningxia Zhongyin at a 5m discount to its book value.

Chief executive Andy Bartmess said the group hoped to use some of the 6.1m cash raised from the deal to fund bolt-on acquisitions which complement its bedware and cashmere businesses.

As well as enhancing its growth prospects, Bartmess said part of the acquisition strategy was to increase the scale of the group compared to the size of its pension scheme.

Dawson's pension scheme has around 100m in total liabilities, 30m more than its forecast sales for all of 2009.

Bartmess warned yesterday that the pension issue was making it harder to convince institutional investors to buy its shares.

He said: "We're in a situation where we have a pension plan which is quite large compared to the size of the company, and it would be better if we could get some more scale into the company to make that a more reasonable ratio."

At the end of 2008, the scheme had a 4.25m deficit, a figure finance director David Cooper warned "will inevitably have widened" when it is recalculated at the end of the year.

Cooper said the concern was not the size of the deficit but the risk of the gap between assets and liabilities growing as investment returns drop and life expectancy figures are reviewed.

"If you break (the scheme] out into 100m of liabilities and 95m of assets, you've got two big numbers there, both of which are quite volatile."

Dawson reported a 15 per cent fall in first half revenue to 24.1m yesterday, with its operating loss before exceptional items increasing by 1.1m to 2.8m.

Most of the group's sales come in the second half, although WH Ireland is forecasting the group will fall to a pre-tax loss of 1.9m for the full year.

Bartmess said sales of bedware products had held up well during the recession so far, but he predicted that sales of cashmere garments could be 30 per cent lower than in 2008 for the full year.

Shares in the Aim-listed group closed unchanged at 2.25p yesterday.