Pittards pays out despite closure cost: Loss-making leather goods group announces 1p dividend

THE WITHDRAWAL from clothing leather production left Pittards with pounds 8.3m in closure and restructuring costs, forcing the group into pre-tax losses of pounds 6.8m compared with a restated profit of pounds 853,000 the previous year. The shares closed unchanged at 55p.

Pittards' continuing businesses increased turnover by 20 per cent to pounds 100.5m. They made operating profits of pounds 3.1m, against pounds 4.7m in 1992.

John Pittard, managing director, said that although the withdrawal from clothing leather was an expensive decision, the modest final dividend was a sign of confidence. The total dividend is 1p, compared with 1.5p in 1992, and will be paid out of reserves. The board is taking advice in case any future lack of dividend payment capacity at subsidiary level affects group dividends. A capital restructuring might be appropriate, the company said.

All factories were now operating at nearly full capacity and demand for higher-margin products was improving, Mr Pittard said. Such products include sweat-resistant and highly colourfast sports gloves, which now account for 60 per cent of the gloving division's output.

Sharply higher raw material prices and demand for lower-margin budget products pushed operating profits in shoes and leathergoods 16 per cent lower.

Rises in raw hide and sheepskin prices have accelerated in the first quarter of this year. The company says that the price behaviour of raw materials is more than usually difficult to predict.

Mr Pittard said prices should be near their peak and any decline would be to the company's advantage. Supplies were complicated because they were a by-product of the meat industry and depended on demand for meat, not demand for footwear and glove leather. There was also no futures market for hides and sheepskin, making it hard to regulate the price.

He said the company, which exports 50 per cent of output, had benefited from a stronger yen, dollar and German mark.

Net borrowings at pounds 15.3m were slightly lower. Although capital was unwound after the clothing closure, higher raw material prices and increased activity pushed up working capital.

Shareholders' funds declined by 30 per cent to pounds 21.3m.

Penny Freer, an analyst with Credit Lyonnais, expects profits this year to reach pounds 2.5m pre-tax. She said a dividend of 2p was possible, depending on any capital restructuring, giving an above-market yield of 4.5 per cent.

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