Dawson looks for buyer as sales slump

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The Independent Online
DAWSON International, the Scottish knitwear group best known for the Pringle sweaters worn by Nick Faldo, put itself up for sale yesterday after it issued a profits warning and said that it did not expect to pay an interim dividend.

The company blamed the warning on the strength of sterling, the economic crisis in Asia, and higher than expected returns of its thermal clothing from retailers in America. The result will be a cut-back in UK production, exceptional charges of pounds 11m and "several hundred" job losses, mostly in wool-spinning plants in the Scottish borders.

As the shares fell 13.4 per cent to 48.5p, valuing Dawson at pounds 96m, Scottish union leaders expressed concern about the affects of a "triple whammy" for the textile industry north of the border.

Grampian Holdings, the Scottish knitwear group, is cutting 120 jobs due to the strong pound and to shifts in fashion-wear away from knitwear towards cotton and fleece products.

And, on Wednesday, The Sweater Shop, the manufacturer and retailer, called in the receivers as a result of continuing losses. Up to 1,300 jobs, including 270 at garment centres in Ayrshire, are under threat.

Bill Speirs, the Scottish TUC general secretary, said: "It is a very worrying situation and we are obviously concerned about the future of the industry. We will be having a meeting with the textile unions to come up with an assessment of where the industry stands at the moment."

Unions hoped to promote a strategy which secures textile jobs in Scotland and would be making representations to the Scottish Office, Scottish Enterprise and employers, he said.

"We are also concerned about the prospect of someone like Dawson International producing its wares overseas in places such as Italy and India to cut costs. It has built its reputation on a quality Scottish product produced by Scottish workers and any change to that will have to be looked at very closely."

Dawson said at its annual meeting in April that it was experiencing tough trading conditions. Since then, it has received "unprecedented" levels of return of its thermal clothing from American discount retailers like Wal-Mart and K-Mart.

The company has decided to accept the returned stock in order to maintain relationships with key retail customers. Sales of its more upmarket Duofold range of thermal clothing have also been well below expectations.

"In the light of these developments, the board is undertaking a review of all options available to maximise shareholder value, including the possibility of securing an offer for the company," said Derek Finlay, the company's chairman.

The Sweater Shop, which was bought by its management in a pounds 150m deal three years ago, has been forced to call in administrative receivers after defaulting on its debts for the second time in 12 months. It is understood to have recorded losses of around pounds 15m on sales of pounds 55m last year.

The company has 78 shops and manufacturing operations in Syston, Leicestershire, Nottingham and Cumnock, in Scotland.

Richard Rees, of the receivers, Price Waterhouse, said he was confident that a buyer could be found for the stores but said the manufacturing operations might be more difficult to dispose of.

The manufacturing sites employ around 600 workers. The Sweater Shop cut 180 jobs in Leicester recently in an attempt to cut costs.