Dawson International

Cashmere specialist Dawson International admits its interim results are ‘deeply disappointing’, especially in the light of its various efforts to buck up performance.

Principal of these efforts was a £2m investment to improve production processes at cashmere yarn spinning business Todd & Duncan, which did not go as smoothly as planned. This limited production volumes and margins were squashed by cashmere costs 10% higher, along with the competitive retail market. Sales slumped £3.3m and operating profits by £1.7m. ‘But we’ve done what needed to be done and we’ve turned the corner,’ says new operations director Andy Bartmess, adding that the improved plant will give Dawson a strong competitive advantage.

Sales were down at the Barrie knitting arm and the American Forte knitwear division, too. Both had exceptional years last year and were both lower in line with expectations. Barrie has absorbed acquisition John Laing, adding new customers and providing entry into new markets, and also incorporated a new sourcing structure which should show through in due course. Both these arms are seeing a trend towards customers buying later in the year, meaning, says Bartmess, ‘the first half is not very indicative of much’, so expect a ‘satisfactory full year result albeit lower than last year’.

Restructuring is ‘on track’ and ‘largely complete’ at last year’s acquisition, bed linen maker Dorma, but like-for-like sales slipped £2.7m against a background of depressed retail market.

Dawson is heavily second-half weighted and, confirms Bartmess, ‘invariably trades at a loss in the first half'. Pre-tax losses in fact increased from £500,000 to £3.2m in the half to July. The shares unwound 21% today, down from a 52-week peak of 10.75p in March, and should be avoided until evidence of a revival is more evident.