Coats Viyella seeks buyer for struggling clothing supplier

More than a thousand jobs were put under threat yesterday after Coats Viyella, the struggling textiles group, said it had decided to exit one of its main clothing businesses. Sir David Alliance, the group's chairman, also confirmed plans to break up the company he has spent decades assembling.

Coats Viyella is seeking buyers for Counterpart, the troubled Bhs and Next clothing supplier which plunged pounds 8m into the red this year. If it cannot find a buyer in the next few months seven factories in the Midlands and Scotland, which together with back office functions, employ 1,100 people, will have to be closed.

Coats Viyella is also splitting itself in two in an effort to reverse the decline in its share price. Its M&S clothing business, the Jaeger and Viyella retail chains and its home furnishings operation will be spun off into a new quoted company called Coats. The remaining Viyella group will house its thread and precision engineering divisions. There are also plans to create a three-way split with a demerger of the engineering business awaiting approval from the US tax authorities.

However the group's shares fell 15.5p to 95p as it warned that current year profits would fall up pounds 40m short of the pounds 174.3m in made in 1996. The cost of exiting Counterpart and reorganising its poorly performing Berghaus Russian wholesale business will also wipe up to pounds 45m off the bottom line.

Analysts believe the group could be forced to halve its final year dividend. Sir David Alliance said: "Because of restructuring we have lost our way. The change of management and the strength of sterling played a part. Now it is best that the three businesses stand on their own feet with focused management."