Coats Viyella rules out disposals as profits slump

Click to follow
The Independent Online
COATS VIYELLA, the underperforming textiles group, yesterday confirmed plans to press ahead with a demerger of its clothing and home furnishings business this year and ruled out the sale of any of its key units.

The group, which issued a profits warning last December, said headline pre-tax profits tumbled to pounds 52.9m in 1997 from pounds 83.3m a year earlier. One-off items wiped a further pounds 19.6m off profits and the company cut its total dividend to 4.7p per share from 8.8p in 1996.

Michael Ost, the chief executive, quashed speculation that the group could sell part of the Viyella business earmarked for demerger. The division includes fashion chain Jaeger, Dorma household textiles and a contract clothing business which is a large supplier to Marks and Spencer.

"People want to buy bits of our business all the time. But I tell shareholders it is not in their interests to sell significant parts of the group now," Mr Ost said. "Why? Because we are at the bottom of our performance cycle and a sale would be crystallising shareholder loss."

Coats Viyella said its 1997 results were disappointing and added that none of its operating divisions had performed to their full potential.

Mr Ost detected some signs of improvement so far this year, saying trading in both arms of the company was "nicely ahead" of the first two months of last year. He said he hoped the dividend cut would prove to be a one- off adjustment.

The company said it had suffered from the effects of the economic slowdown in Brazil while the strength of sterling had reduced operating profit by almost pounds 20m.

Coats' shares, which have languished below 90p since the profit warning late last year, closed down 0.5p at 86p.

Sir David Alliance, the chairman, said he believed the planned demerger, which shareholders will vote on later this year, would help the group to realise its potential.

Post-demerger, Coats will incorporate the group's largest division, which supplies thread to the clothing, footwear and automotive industries as well as threads and yarns for domestic sewing. It will also include a precision engineering business.

There are plans for a second demerger of the engineering arm, which could be spun off by the middle of next year.

- Reuter