Annual Report 2005

Transcription

Annual Report 2005

D AW S O N I N T E R N AT I O N A L P L C
Report and Accounts 2005
Turnover increased by £41.4 million to £111.6 million
Pre-exceptional operating profit £2.1 million (2004: £0.9 million)
Operating cash inflow of £6.6 million (2004: £0.4 million)
Loan Stock eliminated
Acquisition of Dorma bed linen business
01
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Financial Highlights
Chairman’s Statement
Review of Operations
Financial Review
Board of Directors
Accounts Contents
Directors’ Report
Directors’ Report on Remuneration
Directors’ Responsibilities
for the Financial Statements
Independent Auditors’ Report
Financial Statements
Notes to the Financial Statements
Five Year Financial Record
Principal Subsidiary Undertakings
Information for Shareholders
Notice of Annual General Meeting
Form of Proxy
Turnover
Operating profit before exceptional charges and goodwill
Pre-tax profit
Dividends per share
Basic earnings per share
Adjusted earnings/(loss) per share
2005
2004
£m
£m
111.6
2.1
2.9
nil
2.1p
0.6p
70.2
0.9
0.1
nil
0.1p
(1.4)p
Corporate Directory
Secretary and Corporate Office
David Cooper
Lochleven Mills, Kinross, KY13 8GL, Scotland
Tel: 01577 867000 Fax: 01577 867010
Registered Office
Lochleven Mills, Kinross, KY13 8GL, Scotland
Registered Number SC54505
Website: www.dawson-international.co.uk
E-mail: [email protected]
01
“2005 has been a year of considerable
achievement building on the success
of our turnaround strategy, restoring
the Group to profit and establishing
solid foundations for future growth.”
MICHAEL G HARTLEY
02
Overview
Turnover increased by 59 per cent to
£111.6 million. Excluding acquisitions and
disposals turnover increased by 9 per cent
to £63.9 million. Pre-exceptional operating
profit of £2.1 million (restated 2004: £0.9
million) was achieved. Further details
of the financial performance are set out
in the Financial Review.
Overall, the Group improved turnover
and profit during the year. Dawson Forte
returned an outstanding financial performance
achieving the highest levels of turnover
and profit in the history of the business.
Barrie further capitalised on its commercial
independence resulting in a significant
increase in sales of couture and private label
cashmere. Todd & Duncan benefited from
good buying of cashmere and improved
yields in the first half of the year.
The reorganisation of the Dorma bed linen
business acquired in 2005 is ahead of
schedule. The business traded profitability,
in the second half of the year, although
its performance has been constrained
by the challenging market conditions and
the unexpected re-introduction of quotas
on Chinese sourced product in the summer
of 2005. This issue similarly impeded
performance at Dawson Cashmere
Company and Kinross Cashmere Europe,
the Group’s smaller European cashmere
garment sourcing businesses.
The final tranche of Loan Stock was
redeemed in December 2005 and a
new share placement raised £1.4 million,
providing a more robust financial platform
and marking a new beginning for the Group.
In February 2006 Dawson acquired the
Scottish based cashmere business of John
Laing of Hawick. This 175 year old branded
business operates at the top end of the
international cashmere market and will
be integrated within the Barrie business.
The move fits with our strategy of growing
the Group by acquiring businesses which
are asset rich but trading poorly, which can
be acquired at a significant discount to asset
value and which, with the infusion of the
directors’ skills, are capable of turnaround
and cash generation in due course.
Reflecting this new growth phase, I am
pleased to welcome the appointment of
Andy Bartmess as Chief Operating Officer
to the Board of Dawson International. Andy
was previously President of Dawson Forte
Cashmere, based in Boston, USA. Given his
track record, I am confident that Andy can
make a significant contribution to further
improve the profitability of the Group.
In addition, I am greatly encouraged by
the calibre and experience of the four new
Non-Executive Directors appointed to the
Board in February 2006. I extend a warm
welcome to Scott Malvenan, Patrick
Mechoulam, Stephen Russell and J Andrew
Smith, whose additional brand marketing
skills, entrepreneurship and understanding
of the businesses in which we operate
will facilitate acceleration in the pace
of our development.
Outlook
On an FRS17 adjusted basis we enter
the new year with a significantly improved
balance sheet. Looking ahead, we expect
to see returns from the actions taken during
2005. In particular, Dorma is expected to
reap the rewards of its restructuring and
in the second half of 2006 Todd & Duncan
will begin to experience the benefits of its
£2 million capital investment programme.
Against a background of slow sell through
at retail in 2005, it is likely that the
performances at Dawson Forte and Barrie
Knitwear will not match 2005’s exceptionally
high levels, however the directors expect
that the Group will achieve continued steady
improvement in 2006.
“A £2 million capital investment programme in
new equipment and refurbishment across all
departments will further enhance productivity,
competitiveness and customer service from the
second half of 2006.”
GRAHAM FERRIER
FINANCE DIRECTOR
TODD & DUNCAN
03
2005 has been a year of considerable
achievement building on the success of our
turnaround strategy, restoring the Group
to profit and establishing solid foundations
for future growth.
Fibres & Yarns
Todd & Duncan
Todd & Duncan, our cashmere yarns
business based in Kinross, made further
progress during 2005 resulting in much
improved turnover and operating profit.
The business benefited from good buying
of cashmere and improved yields in the
first half of the year. In addition, a recently
completed £2 million capital investment
programme in new equipment and
refurbishment across all departments
will further enhance productivity,
competitiveness and customer
service from the second half of 2006.
04
“ Barrie further capitalised on its commercial
independence in 2005 delivering substantial
growth in turnover and profit. Much of this
success is attributable to the commitment
of its workforce.”
JIM CARRIE
MANAGING DIRECTOR
BARRIE
Knitwear
Sourced Garments
Home Furnishings
Barrie
United States of America
Dorma
Barrie, our couture cashmere knitwear
business based in Hawick, further capitalised
on its success in 2004 delivering substantial
growth in turnover and operating profit. The
business operates at the quality end of the
cashmere market and has benefited from
increased demand from couture and private
label customers. Part of this success is the
result of a strong focus on generating very
fast product development lead times for
customers, thus improving competitiveness,
reputation and new business potential
in this niche market sector. A key factor
in Barrie’s successful turnaround is the
continued commitment and positive attitude
of its workforce.
Boston based Dawson Forte Cashmere,
which sources cashmere garments from
China, delivered another year of excellent
financial performance achieving the highest
levels of turnover and profit in the history
of the business. Sales of its highest margin
branded cashmere collection rose by 16
per cent. The appointment of a dedicated
Branded Sales Manager in 2006 is intended
to further exploit the market potential
in this sector.
Dorma, the UK’s leading brand of bed linen,
was acquired by Dawson International in
February 2005. The acquisition was part
of the Group’s growth strategy of purchasing
poorly trading, asset rich businesses that can
be acquired at a significant discount to net
asset value and be turned around to become
cash generative. Our initial objectives were
rapidly achieved as the business generated
cash through reductions in working capital
and traded profitably in the second half
of the year.
Given the cyclical nature of the market and
disappointing retail sales in cashmere in
2005 among many mid market customers,
it is unlikely that Dawson Forte will repeat
its exceptional 2005 financial performance
in 2006. However, the strategic focus will
centre on building its branded cashmere
collection, implementing aggressive new
business and promotional initiatives and
capitalising on its design strength to market
some of the most desirable and distinct
cashmere products in the market place.
Europe
Dawson Cashmere Company (DCC) and
Kinross Cashmere Europe, which source
cashmere knitwear from China for the
European market, were both adversely
affected by the impact of the unexpected
re-introduction of quotas on certain
categories of Chinese sourced product
in the summer of 2005.
Following major restructuring, which is well
ahead of schedule, Dorma is now managed
as three discrete business units: Dorma
brand, M&S own-label and Dunelm private
label. This move has resulted in overhead
and cost reduction, improved response
times, better customer service and
increased competitiveness.
The sudden decision of the EU Commission
to reinstate quotas on certain categories
of goods imported from China was a
blow to the transition of Dorma from
UK manufacturer to a low cost sourcing
operation. Despite rapid action to secure
alternative sourcing, its supply chain was
disrupted during a critical period for the
business. This resulted in lost sales and a
rise in costs, taking the edge off its rapidly
improving performance in the short-term.
As part of its turnaround strategy Dorma
embarked on a total brand and product
makeover. Launched in March 2006 and
supported by a highly targeted advertising
and PR campaign, the new look is
receiving a very positive reaction from
retailers. Future focus is on new product
development through design, colour trends
and product innovation.
05
In February 2006 Dawson International
acquired the stock, machinery and brand
of cashmere knitter, John Laing of Hawick.
The brand, which has a strong reputation at
the top end of the cashmere knitwear market,
particularly in Italy, is to be integrated into
and operated as part of the Barrie business,
which will continue to manufacture and
market John Laing branded knitwear.
During the year the business strengthened
its infrastructure, hiring personnel in key
areas of finance, design and sourcing to
better support Dawson Forte’s current scale
of business. In addition, it opened a new
office in Shanghai to be closer to the centre
of garment manufacturing and upgraded
quality assurance processes.
Financial Review
Overview
The financial results in 2005 benefited
from the restructuring of the Group which
occurred in 2004, eliminating loss making
businesses and stabilising the funding
position. All significant retained businesses
grew turnover and operating profit.
Major investments were made, firstly with
the acquisition of the Dorma bed linen
business and subsequently in a major
capital expenditure programme at Todd
& Duncan, our market leading cashmere
spinning business.
The funding position of the Group was
strengthened by the injection of £6.7 million
of additional share capital, £5.3 million from
Loan Stock conversions and £1.4 million
from a share placement. As a result, the
outstanding Loan Stock of £6 million was
eliminated with £5.3 million converted to
equity at the election of the Loan Stock
holders and the balance of £0.7 million
redeemed by the Company.
Financial Review
06
As explained in last year’s annual report the
Group has implemented FRS17 – Retirement
Benefits which resulted in a reduction of £30.0
million in net assets at December 2004.
Operating Results
The operating results for 2004 have been
restated to reflect the implementation of
FRS17 – Retirement Benefits and FRS20 –
Share Based Payments. The impact was to
improve pre-exceptional operating profit by
£1.1 million and pre tax profit by £2.1 million.
Turnover increased by £41.4 million to £111.6
million. Excluding the effect of acquisitions
and disposals, underlying turnover increased
by 9 per cent to £63.9 million. The operating
profit before exceptional charges and goodwill
was £2.1 million (restated 2004: £0.9 million).
The Fibres & Yarns business which comprises
Todd & Duncan and included Joseph Dawson
until its disposal in October 2004, reported
a base operating profit of £1.6 million (2004:
£0.7 million). A £2 million capital expenditure
programme commenced in the second
half of the year and will complete in the first
half of 2006. £0.2 million of exceptional
operating charges were incurred as a result
of this reorganisation.
our turnaround plan, particularly as this
business was also severely impacted
by the re-introduction of Chinese quotas.
The Knitwear business, which comprises
Barrie and included Ballantyne until its
disposal in March 2004, reported an
operating profit of £0.8 million (2004 loss:
£0.6 million). This was an excellent result
from the Barrie business based on strong
demand from our couture and private label
customers and for our Barrie and Glenmac
labels. As described in the Review of
Operations, the assets and business of John
Laing were acquired in February 2006 which
will further expand the branded sales base.
Central costs were £2.7 million (2004: £2.3
million). 2004 benefited from foreign exchange
gains of £0.5 million. An exceptional charge
of £0.1 million was incurred in respect of
the costs of transferring from the Official List
of the UKLA to AIM.
The Sourced Garments business comprises
a long established operation based in Boston
USA and a small operation based in the
UK. The US business had an exceptional
year reporting record turnover and profits.
The development of the UK business was
disrupted by the re-introduction of quotas on
Chinese sourced cashmere garments during
the summer and was loss making in the year.
Overall the business reported an operating
profit of £2.7 million (2004: £3.1 million).
£0.2 million was expensed to goodwill in
the period in respect of the acquisition cost
of a distribution network in Europe.
Home Furnishings comprises the Dorma
bed linen business which was acquired
in February 2005. The business had been
heavily loss making prior to acquisition but
in our view represented a clear turnaround
opportunity. The business was acquired at
a discount to net asset value of £6.6 million
which is being released through the profit
and loss account over the 22 months to
December 2006 reflecting the plan to restore
the business to profit. The business was
restructured during the year incurring
operating exceptional charges of £0.7 million.
A similar level of restructuring costs will be
incurred in 2006 to complete the restructuring
process. The base operating loss of £0.3
million is a satisfactory result, in line with
Exceptional Charges
As detailed above, operating exceptional
charges were £1.0 million comprising
reorganisation costs at Fibres & Yarns
£0.2 million, reorganisation costs at Dorma
£0.7 million and the costs of transferring
to AIM £0.1 million.
Net negative goodwill of £2.8 million was
released to the profit and loss account being
£3.0 million negative goodwill on Dorma
offset by £0.2 million positive goodwill
on Sourced Garments.
Pensions
In 2005 the Group implemented FRS17 –
Retirement Benefits. The impact of this
accounting standard is to report surpluses
or deficits in defined benefit pension schemes
in the balance sheet of the Group and to
report movements in that deficit through the
Statement of Total Recognised Gains and
Losses (STRGL) if they relate to actuarial
gains and losses, or through the profit and
loss account if they relate to regular pension
costs or to notional interest costs on scheme
assets and liabilities. Prior year figures have
been restated accordingly which resulted in
a reduction in net assets of £30.0 million at
December 2004 comprising the recognition
of the FRS17 liabilities of £29.3 million and
the elimination of a net prepayment of £0.7
million arising under previous accounting
guidelines. The reduction in net assets of
£30.0 million was incorporated by a prior
year adjustment of £21.1 million, an actuarial
loss of £11.0 million reported in the 2004
STRGL and a net credit of £2.1 million
reported in the 2004 profit and loss account.
exceptional charges and goodwill were
0.6 pence (restated 2004 loss: 1.4 pence).
The weighted average number of shares in
issue during 2005 was 116.3 million shares
(2004: 101.5 million).
It is common practice to report pension
liabilities net of an associated deferred
tax asset. The Group has chosen not to
recognise a deferred tax asset on its pension
scheme liabilities on the basis that it has yet
to demonstrate a sufficient future income
stream to utilise that asset.
Dividends
Interest
The interest charge for the year was
£1.0 million (2004: £2.5 million) of which
£0.7 million was the notional interest cost
on pension scheme assets and liabilities.
The interest charge benefited from the
credit of £0.6 million Loan Stock premium
charged in 2004 but reversed in 2005 when
Loan Stock holders elected to convert their
Loan Stock to ordinary shares rather than
accept redemption.
Taxation
The taxation rate on profit on ordinary
activities before exceptional items was lower
than the UK corporate tax rate of 30 per
cent, mainly due to the utilisation of trading
losses brought forward. A tax charge of
£0.5 million was incurred in respect of state
taxes in the USA.
FRS19 requires that deferred tax liabilities
be provided in full and deferred tax assets be
recognised to the extent they are considered
recoverable. There are substantial deferred
tax assets in both the UK and USA however
the deferred tax asset has been restricted to
£1.5 million and relates to prospective profits
in the USA only.
Earnings Per Share
Basic earnings per share were 2.1 pence
(restated 2004: 0.1 pence). Adjusted earnings
per share, calculated on the profit before
No dividends were paid or proposed
in the year.
The Group’s principal borrowing facilities
are two three year working capital facilities
totalling £22 million with Gmac Commercial
Finance which commenced in October 2004
and February 2005 respectively and fund
the Group’s UK operations and a three year
working capital facility of $25 million with
Bank of America which commenced in May
2004 and funds the Group’s US operations.
Cash Flow
Treasury
The net cash outflow for the year before
management of liquid resources and
financing was £3.8 million (2004: £16.3
million inflow). Excluding acquisitions and
disposals the net cash inflow was £3.1
million (2004: £0.2 million outflow).
The Group’s funding policy is to negotiate
facilities sufficient to cover forecast net
borrowings for the following 12 month
period with adequate headroom against
identified risks.
The net cash inflow from operating activities
before exceptional items was £8.5 million
(2004: £2.0 million). The cash cost of
exceptional items, including amounts
provided in previous years, was £1.9 million
(2004: £1.6 million).
The net cash outflow from interest and similar
charges was £0.7 million (2004: £1.2 million).
Capital expenditure of £2.4 million was
partially offset by fixed asset disposals of
£0.1 million resulting in a net cash outflow
of £2.3 million (2004: £0.3 million inflow).
The net cash outflow from the acquisition
of Dorma was £6.9 million (2004 inflow from
disposals: £16.5 million).
Funding and Facilities
The funding position of the Group was
significantly strengthened during the year
by a share placement of £1.4 million and by
the elimination of £6 million of Loan Stock,
£0.7 million of which was redeemed by
the Company and £5.3 million of which
was converted to ordinary share capital
at an option price of 5 pence. The Board
is pleased to have eliminated this expensive
borrowing at the earliest possible opportunity.
The Group’s current interest rate policy is
that 50 per cent of any core net borrowings
will be at fixed rates of interest. However,
in 2005, the Group had no core net
borrowings and so borrowed only at floating
rates of interest to fund seasonal working
capital requirements.
The Group’s policy on currency risk is to
minimise the impact of currency risk arising
from currency transaction flow. A forward
foreign exchange contract facility was agreed
in the second half of 2005 and the Group
accordingly now seeks to hedge a large
proportion of its transactions using forward
foreign exchange contracts. Translation
exposures on foreign currency net assets
and income streams are not hedged.
The average exchange rate used to translate
US dollar income into Sterling for reporting
purposes was $1.82 (2004: $1.83); the year
end rate was $1.72 (2004: $1.92).
MICHAEL G HARTLEY
CHAIRMAN AND CHIEF EXECUTIVE
DAVID G COOPER
FINANCE DIRECTOR
“ Dawson Forte Cashmere delivered another
year of excellent financial performance
achieving the highest levels of turnover
and profit in the history of the business.”
ANDY BARTMESS
CHIEF OPERATING OFFICER
DAWSON INTERNATIONAL PLC
07
Financial Review
In 2005 the deficit on the pension schemes
increased from £29.3 million to £29.7 million.
The Group made contributions of £1.6 million
to the schemes in the year of which the
current service cost was £0.8 million.
Board of Directors
~MICHAEL G HARTLEY (57)
GIOVANNI GHIONE (54)
+*~STEPHEN
Appointed Chairman of Dawson International
PLC on 25 June 2003 and Executive
Chairman in late August 2003. He spent
16 years with Coats Viyella PLC, latterly as a
main board director and chief executive of the
Viyella division, where he led the successful
turnaround and sale of the Viyella businesses.
Prior to Coats his main experiences were in
retail, initially with Marks & Spencer. He is a
Non-Executive Director of ITE Group plc and
Servocell Group Plc.
Appointed Deputy Chairman on 28 May 2004
having previously been a Non-Executive
Director of Dawson International PLC since
7 March 2002. He has served on the boards
of a number of European merchant banks
and property development companies.
Appointed Non-Executive Director on
15 February 2006, Stephen brings a wealth
of experience gained in the international textile
business in a variety of senior financial and
general management positions with Coats
plc spanning 25 years. He is Chairman of
the Audit Committee.
ANDY BARTMESS (45)
Board of Directors
08
Appointed Chief Operating Officer in
November 2005 and joined the Board
on 15 February 2006. He was previously
President of Dawson Forte Cashmere,
the Group’s highly successful sourced
cashmere garment business based in
Boston, USA, acquired in 1997. Prior to
joining Dawson Forte he held managerial
positions with Deloitte Consulting and IBM.
+*~SCOTT
MALVENAN (50)
15 February 2006, Scott is currently Chief
Executive of Sofa Brands International
Limited, a leading UK upholstered furniture
manufacturing business. He has extensive
international textile experience gained
in a range of senior financial and general
management positions with Courtaulds
Textiles plc, latterly as a main board
director, and Sara Lee Corporation.
+*~PATRICK
DAVID COOPER (47)
Appointed Finance Director of Dawson
International PLC on 1 January 2002, having
previously been Group Financial Controller
and Company Secretary. He joined the
Company as Group Financial Accountant
in 1986 and is a member of the Institute
of Chartered Accountants of Scotland.
RUSSELL (57)
MECHOULAM (53)
15 February 2006, Patrick directs a portfolio
of real estate projects from a Monte Carlo
base, as well as providing consulting
services to a range of multinational groups.
He was previously alternate director to the
Chairman of Andrew Sykes Group Plc,
a leading hire service company. He has
also managed businesses in North
America and Hong Kong.
+*~J
ANDREW SMITH (57)
Appointed Non-Executive Director
on 15 February 2006, J Andrew Smith
is President of Brown-Forman Spirits
Europe, Africa and Eurasia, based in
London. Principal brands include Jack
Daniels Tennessee Whiskey and Southern
Comfort. He is a veteran of the international
consumer branded goods business having
spent his entire career working in a variety
of commercial and general management
positions with Martell Cognac, Seagrams
and Brown-Forman Beverages. He is
currently President of Pitts Bay Limited,
Bermuda, a joint venture with Bacardi
International Limited and Chairman
of Finlandia Vodka Worldwide. He is
Chairman of the Remuneration Committee
and Senior Independent Director.
+
Member of the Audit Committee
* Member of the Remuneration Committee
~ Member of the Nominations Committee
Accounts
Accounts
09
10
11
14
15
16
20
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37
37
38
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Directors’ Report
Directors’ Responsibilities
for the Financial Statements
Independent Auditors’ Report
Financial Statements
Form of Proxy
“ Dorma is now managed as three discrete business units:
Dorma brand, M&S own-label and Dunelm private label.
This move has resulted in overhead and cost reduction,
improved response times, better customer service and
increased competitiveness.”
MYRON MANN
MANAGING DIRECTOR
DORMA
Directors’ Report
The Directors present their report and the audited
consolidated financial statements of the Company
for the financial period ended 31 December 2005.
Business Activities and Development
The names and activities of the Group’s principal
businesses are set out on page 37. A review of
the activities of the Group for the period is given
in the Review of Operations on pages 4 to 5.
Results
A financial review of the period is set out on pages
6 to 7.
Dividends
No interim or final dividend was paid or is proposed.
Substantial Shareholders
As at 10 March 2006 the Company had been
notified of the following interests amounting
to 3 per cent or more in its share capital:
Third Advance Value Realisation Limited
Cantor Fitzgerald Europe
Global Asset Management
Guinness Peat Group plc
G Ghione
Man Financial Limited
Fairmont Investment Trading Limited
S di Canossa
Accounts
10
29.09%
8.22%
7.77%
6.90%
5.82%
5.37%
4.44%
3.83%
Directors
The names and biographical details of the present
directors are set out on page 8.
On 15 February 2006 the Board appointed
Andrew Bartmess as an Executive Director.
The Board also appointed, on 15 February
2006, the following Non-Executive Directors:
J Andrew Smith (Chairman of the Remuneration
Committee and Senior Independent Director),
Scott Malvenan, Patrick Mechoulam and Stephen
Russell (Chairman of the Audit Committee).
In accordance with the Articles of Association,
all appointees, being eligible, offer themselves
for re-election at the Annual General Meeting.
Michael Hartley retires by rotation from the Board
at the Annual General Meeting and, being eligible,
offers himself for re-election.
The interests of the directors in the share capital
of the Company are set out in the Directors’
Report on Remuneration on pages 11 to 13.
Annual General Meeting
The Notice convening the Annual General Meeting
for 3 May 2006 is set out on pages 38 and 39.
Special business proposed to be dealt with at the
meeting is as follows:
Resolution 10 – Allotment
of Relevant Securities
Under Section 80 of the Companies Act 1985 the
Directors must be given authority by shareholders
to allot the Company’s shares. Resolution 10
seeks general authority for a period of five years
for the Directors to allot a limited number of
ordinary shares (74,977,794 representing 33.3
per cent of the issued ordinary share capital at
10 March 2006). This authority will expire five
years after the passing of the resolution unless
it is revoked, varied or extended by the Company
in general meeting.
Resolution 11 – Purchase of Own Shares
by the Company
In certain circumstances, it may be advantageous
for the Company to purchase its own shares.
This resolution, to be proposed as a special
resolution, renews the authority for it to do so
for a further year in respect of up to 22,515,854
shares (10 per cent of the issued equity share
capital) on the terms set out in the resolution.
The Directors confirm that the power would
only be used if the Board was satisfied it was
in the best interests of shareholders.
Resolution 12 – Issue of Shares for Cash
Section 89 of the Companies Act 1985 requires
issues of shares for cash to be made to existing
shareholders in proportion to their holdings.
Resolution 12, to be proposed as a special
resolution, disapplies these pre-emption rights
in the case of small issues and to deal with
certain aspects of rights issues. It also excludes
shares issued in lieu of dividend from counting
towards the limitations. The authority is at a level
of approximately 25 per cent of the share capital
of the Company as at 10 March 2006. Whilst this
is higher than the Pre-Emption Group guidelines
the Directors believe that this authority is justifiable
on the basis of the costs of seeking additional
authority in the future. There are no present
plans to take advantage of this authorisation.
Resolution 13
Resolution 13 to be proposed at the Annual
General Meeting provides for the alteration of
the Company’s Articles of Association, where
the Board wish to remove a Director, to allow
such removal by a simple majority of the Board
(excluding such Director).
Employees
The Group provides all employees with equal
opportunities for advancement regardless of their
age, sex, race, creed or sexual orientation and
encourages, where possible, the recruitment,
training and career development of disabled people
and any employees who may become disabled.
It is also the Group’s policy to encourage the spread
of information regarding developments affecting
both the Group and an employee’s workplace.
Environment
The Group is conscious of the need to protect
the quality of the environment and strives to meet
or exceed applicable regulations at all locations.
Supplier Payment Policies
It is the policy of the Group to agree terms of
payment when orders for goods and services
are placed and to adhere to these arrangements
when making payment. Purchases made by
the Company itself are, with very few exceptions,
made from subsidiaries and do not, therefore,
involve taking credit from external suppliers.
Auditors
The Company’s auditors, KPMG Audit Plc
have indicated that they are willing to continue
in office and, accordingly, a resolution proposing
their reappointment will be put to the Annual
General Meeting.
By order of the Board
David Cooper, Secretary, 10 March 2006
The Remuneration Committee
The Remuneration Committee is composed
of four non-executive directors and is chaired
by J Andrew Smith. On 15 February 2006 Michael
G Hartley, Giovanni Ghione and David Cooper
resigned from the Committee.
The role of the Committee is to make
recommendations to the Board on all aspects
of conditions of employment of the Executive
Directors of the Company and on the terms and
conditions of employment of senior management.
It determines the structure of remuneration
packages and sets the criteria for performance
related components. The Committee may, at its
discretion, seek external advice at the expense
of the Company when setting remuneration
levels. In the absence of any proposed changes
to remuneration policy no external advice was
sought in the year.
Remuneration Policy
The Committee aims to ensure that remuneration
packages are offered which are designed to
attract, retain and motivate high calibre executive
directors and senior management.
As recommended by provision B.1.1 of the
Combined Code performance related remuneration
forms a significant proportion of the overall
remuneration package of the Executive Directors
and is designed to align their interests with those
of the shareholders.
In addition to their basic salary the executive
directors and senior management have had
the potential to earn a bonus of between 25 per
cent and 100 per cent of basic salary, dependent
on grade, through achievement of business
performance targets and achievement of specific
personal and strategic goals.
The Company has operated an Executive Share
Option scheme since 1980. The Remuneration
Committee may award both standard and
super options to Executive Directors and senior
management. Such awards are made at the
sole discretion of the Remuneration Committee.
The options held by directors during the financial
period and the performance criteria which are
required to be met to enable their exercise are
disclosed in table D.
The Board believes that it is in the best interests of
the Company to encourage the Executive Directors
to accept external non-executive positions as this
adds to the depth of their experience. The policy
of the Board is that executive directors may accept
external non-executive appointments and may
retain any fees earned.
Directors’ Emoluments
Directors’ emoluments are summarised in table A.
Non-Executive Directors’ fees, other than those
of the Deputy Chairman, were set at £20,000 per
annum in April 2002, while those of the Deputy
Chairman were set at £30,000 per annum in May
2004. In 2005 the Deputy Chairman was also
remunerated for his role as Chairman of the
Todd & Duncan business.
Retirement Benefits
Mr Cooper participates in the Dawson
International Executive Retirement Benefits
Plan which normally provides a pension at age
65 equal to two thirds of final pensionable salary
after 40 years’ service, with attaching widows’
pension and lump sum death in service benefit.
These benefits have been enhanced with a normal
retirement age of 60 and the grant of a pension
of two thirds final salary, inclusive of benefits
earned in previous employments. Only basic
salary is pensionable. Mr Hartley receives no
retirement benefits. Mr Bartmess participates in
a defined contribution plan in the USA. The Group
pays matched contributions up to 4 per cent of
salary and a potential further 5 per cent based
on the results of the Forte business.
Service Contracts
The non-executive directors have formal
engagement letters but do not have service
contracts with the Company. The service contract
of Mr Hartley commenced on 1 September 2003.
The notice periods to be given by the Company
and Mr Hartley are six months respectively. The
service contract of Mr Cooper commenced on
1 January 2002. The notice periods to be given
by the Company and Mr Cooper are 12 months
and three months respectively. The service contract
of Mr Bartmess commenced on 15 February 2006.
The notice periods to be given by the Company
and Mr Bartmess are six months and three months
respectively. Neither Mr Hartley nor Mr Cooper took
part in Remuneration Committee meetings when
discussing their own remuneration.
11
Accounts
As an AIM listed Company, Dawson International
PLC is not required to comply with Schedule
7A of the Companies Act, however the directors
feel it is appropriate to provide the following
information to shareholders.
Directors’ Report on Remuneration (continued)
Table A – Directors’ Emoluments
M G Hartley
D G Cooper
G Ghione
Former directors
(i)
Fees
£000
Basic
salary
£000
Bonus
£000
–
–
30
10
40
258
105
80
–
443
247
76
27
–
350
Taxable
(i)
benefits
£000
–
14
–
–
14
2005
2004
Total
£000
Total
£000
505
195
137
10
847
450
147
26
68
691
Taxable benefits comprise private health care cover and company car option.
Table B – Retirement Benefits
Accrued benefit
Increase in year
D G Cooper
(i)
(ii)
Transfer value of accrued benefit
At 31
December
2005
£000
Including
inflation
£000
Excluding
inflation
£000
At 31
December
2005
£000
At 1
January
2005
£000
Increase less
Directors’
contributions
£000
35
1
1
489
388
101
Accrued benefits are the amounts which would be paid annually on retirement based on service to date.
Transfer values have been calculated by an independent actuary in accordance with Actuarial Guidance Note GN11.
Table C – Directors’ Interests
Accounts
12
M G Hartley
D G Cooper
G Ghione
(i)
(ii)
31 Dec
2005
Share Capital
1 Jan
2005
31 Dec
2005
Loan Stock
1 Jan
2005
Number
Number
£
£
1,222,200
25,000
13,113,800
–
–
–
–
–
–
59,860
–
355,690
No Director had any beneficial interest in the shares of any subsidiary undertaking.
Mr Mechoulam, who joined the Board on 15 February 2006 was the beneficial owner of 1,000,000 shares in the Company at 31 December 2005.
Table D – Share Options
Number of share options
M G Hartley
Exercise
price
At
1 January
2005
Granted
Surrendered
At
31 December
2005
Date
from which
exercisable
Expiry
date
Pence
000s
000s
000s
000s
5.0
8.0
8.0
3,000
1,000
1,000
–
–
–
–
–
–
3,000
1,000
1,000
30.06.2004
31.12.2004
30.06.2005
30.06.2007
31.12.2007
30.06.2008
D G Cooper
Standard
Super
Standard
Standard
Super
25.0
58.5
42.25
10.5
10.5
25
100
300
–
–
–
–
–
400
400
(25)
(100)
(300)
–
–
–
–
–
400
400
–
–
–
16.05.2008
16.05.2010
–
–
–
15.05.2015
15.05.2015
G Ghione
Standard
Super
10.5
10.5
–
–
150
150
–
–
150
150
16.05.2008
16.05.2010
15.05.2015
15.05.2015
(i)
The exercise of standard options is subject to the achievement of targets of sustained improvement in the underlying performance of the Group
as specified by the Directors at the date of grant.
(ii) The exercise of super options is subject to the achievement of targets of exceptional financial performance by the Group as specified by the Directors
at the date of grant.
(iii) The market price of the Company’s shares at the year end was 8.25 pence. The range during the year was 8.0 pence - 14.2 pence.
The auditors are required to report on the information contained in tables A - D.
By order of the Board
David Cooper, Secretary, 10 March 2006
Accounts
13
Statement of Directors’ Responsibilities in Respect
of the Directors’ Report and the Financial Statements
The Directors are responsible for preparing the
Directors’ Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare
financial statements for each financial year. Under
that law the directors have elected to prepare the
Group and parent company financial statements
in accordance with UK Accounting Standards.
The Group and parent Company financial
statements are required by law to give a true
and fair view of the state of affairs of the Group
and the parent Company and of the profit
or loss for that period.
Accounts
14
In preparing these financial statements,
the Directors are required to:
• select suitable accounting policies and then
apply them consistently;
• make judgments and estimates that are
reasonable and prudent;
• state whether applicable accounting standards
have been followed, subject to any material
departures disclosed and explained in the
financial statements;
• prepare the financial statements on the going
concern basis unless it is inappropriate
to presume that the Group and the parent
Company will continue in business.
The Directors are responsible for keeping proper
accounting records that disclose with reasonable
accuracy at any time the financial position of the
parent Company and enable them to ensure that
its financial statements comply with the Companies
Act 1985. They have general responsibility for
taking such steps as are reasonably open to them
to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance
and integrity of the corporate and financial
information included on the Company’s website.
Legislation in the UK governing the preparation
and dissemination of financial statements may
differ from legislation in other jurisdictions.
Independent Auditors’ Report to the Members
of Dawson International PLC
This report is made solely to the Company’s
members, as a body, in accordance with section
235 of the Companies Act 1985. Our audit work
has been undertaken so that we might state to
the Company’s members those matters we are
required to state to them in an auditor’s report
and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume
responsibility to anyone other than the Company
and the Company’s members as a body, for
our audit work, for this report, or for the opinions
we have formed.
Respective Responsibilities
of Directors and Auditors
The Directors’ responsibilities for preparing the
Annual Report, the Directors’ Remuneration Report
and the financial statements in accordance with
applicable law and UK Accounting Standards (UK
Generally Accepted Accounting Practice) are set
out in the Statement of Directors’ Responsibilities
on page 14.
Our responsibility is to audit the financial statements
and the part of the Directors’ Remuneration Report
to be audited in accordance with relevant legal and
regulatory requirements and International Standards
on Auditing (UK and Ireland).
We report to you our opinion as to whether the
financial statements give a true and fair view and
whether the parent Company financial statements
and the part of the Directors’ Remuneration
Report to be audited are properly prepared
in accordance with the Companies Act 1985.
We also report to you if, in our opinion,
the Directors’ Report is not consistent with
the financial statements, if the Company has not
kept proper accounting records, if we have not
received all the information and explanations we
require for our audit, or if information specified by
law regarding directors’ remuneration and other
transactions is not disclosed.
We read other information contained in the
Annual Report and consider whether it is
consistent with the audited financial statements.
We consider the implications for our report if we
become aware of any apparent misstatements
or material inconsistencies with the financial
statements. Our responsibilities do not extend
to any other information.
Basis of Audit Opinion
We conducted our audit in accordance with
International Standards on Auditing (UK and Ireland)
issued by the Auditing Practices Board. An audit
includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the
financial statements. It also includes an assessment
of the significant estimates and judgments made
by the directors in the preparation of the financial
statements, and of whether the accounting
policies are appropriate to the Group’s and
Company’s circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to
obtain all the information and explanations which
we considered necessary in order to provide
us with sufficient evidence to give reasonable
assurance that the financial statements and the
part of the Directors’ Remuneration Report to
be audited are free from material misstatement,
whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information
in the financial statements and the part of the
Directors’ Remuneration Report to be audited.
Opinion
In our opinion:
• the financial statements give a true and fair
view, in accordance with UK Generally
Accepted Accounting Practice, of the state
of the Group’s and the parent Company’s affairs
as at 31 December 2005 and of the Group’s
profit for the period then ended; and
• the financial statements and the part of the
Directors’ Remuneration Report to be audited
have been properly prepared in accordance
with the Companies Act 1985.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
Saltire Court
20 Castle Terrace
Edinburgh
EH1 2EG
10 March 2006
15
Accounts
We have audited the Group and parent Company
financial statements (the “financial statements’’)
of Dawson International PLC for the period ended
31 December 2005 which comprise the Group
Profit and Loss Account, the Group and Company
Balance Sheets, the Group Cash Flow Statement,
the Group Statement of Total Recognised Gains
and Losses and the related notes. These financial
statements have been prepared under the
accounting policies set out therein. We have
also audited the information in the Directors’
Remuneration Report that is described as having
been audited.
Consolidated Profit and Loss Account
Period ended 31 December 2005
Acquisitions
Ongoing
operations
2005
Total
Note
£m
£m
£m
2004
Total
restated
£m
2
47.7
63.9
111.6
70.2
2
4
10
3
(0.3)
(0.7)
3.0
2.0
2.4
(0.3)
(0.2)
1.9
2.1
(1.0)
2.8
3.9
0.9
(0.8)
–
0.1
4
–
–
–
–
3.9
3.0
(0.8)
2.2
0.3
2.6
Interest and similar charges
Profit on ordinary activities before taxation
7
(1.0)
2.9
(2.5)
0.1
Taxation
Profit for the financial period transferred to reserves
8
(0.5)
2.4
–
0.1
9
9
9
2.1p
2.0p
0.6p
0.1p
0.1p
(1.4)p
Turnover
Operating profit
– base
– exceptional
– goodwill amortisation
Exceptional gain on sale of operations
Goodwill previously written off to reserves
Profit on disposal of fixed assets
Profit on ordinary activities before interest
Earnings/(loss) per share (pence)
Basic
Diluted
Adjusted
Accounts
16
Balance Sheets
At 31 December 2005
£m
10
11
12
(3.6)
5.5
–
1.9
–
2.6
–
2.6
–
–
43.5
43.5
–
–
43.5
43.5
13
14
21.1
18.5
13.2
52.8
11.7
13.1
11.9
36.7
–
56.6
5.9
62.5
–
56.8
0.1
56.9
16(a)
15
(3.9)
(16.5)
(20.4)
–
(9.3)
(9.3)
–
(78.6)
(78.6)
–
(77.3)
(77.3)
Net current assets/(liabilities)
32.4
27.4
(16.1)
(20.4)
Total assets less current liabilities
34.3
30.0
27.4
23.1
16(a)
–
(5.7)
–
(5.7)
17
(2.6)
(2.7)
–
–
31.7
21.6
27.4
17.4
(29.7)
(29.3)
–
–
2.0
(7.7)
27.4
17.4
52.0
5.5
(55.5)
50.8
–
(58.5)
52.0
5.5
(30.1)
50.8
–
(33.4)
2.0
(7.7)
27.4
17.4
Fixed assets
Intangible fixed assets
Tangible fixed assets
Investments
Current assets
Stocks
Debtors
Cash and deposits
Creditors – amounts falling due within one year
– borrowings
– other creditors
Creditors – amounts falling due after more than one year
– borrowings
Provisions for liabilities and charges
Net assets excluding pension liability
Pension liability
18
Net assets/(liabilities)
Capital and reserves
Called up share capital
Share premium
Profit and loss account
20
21
21
Equity shareholders’ funds/(deficit)
These financial statements were approved by the Board of Directors on 10 March 2006 and signed on its behalf by:
Michael G Hartley, Chairman
David Cooper, Director
2005
Company
2004
£m
£m
17
Accounts
Note
Group
2004
restated
£m
2005
Consolidated Cash Flow Statement
2005
Note
£m
2004
restated
£m
2.1
1.1
–
2.8
3.3
(0.8)
8.5
(1.9)
6.6
0.9
0.8
0.1
(2.9)
0.3
2.8
2.0
(1.6)
0.4
(0.7)
(1.2)
(0.5)
0.3
(2.4)
0.1
(2.3)
(0.5)
0.8
0.3
(8.7)
–
1.8
(6.9)
(3.8)
–
16.7
(0.2)
16.5
16.3
1.4
(0.7)
–
–
0.7
(3.1)
–
5.3
(3.3)
(0.2)
1.8
18.1
Reconciliation of operating profit to net cash inflow from operating activities
Operating profit before exceptional charges and goodwill
Depreciation
Loss on disposal of fixed assets
Decrease/(increase) in stocks
Decrease in debtors
(Decrease)/increase in creditors
Net cash inflow from operating activities before exceptional charges
Reorganisation costs and utilisation of closure provisions
Net cash inflow from operating activities
Returns on investments and servicing of finance
22(a)
Taxation
Capital expenditure
– purchase of tangible fixed assets
– sale of tangible fixed assets
Acquisitions and disposals
– acquisition of Dorma Group Limited
– disposals
– cash balances acquired/(disposed of)
22(a)
Accounts
18
Net cash (outflow)/inflow before management of liquid resources and financing
Financing
– share capital issued
– Loan Stock (redeemed)/issued
– shareholder loan repaid
– net movement in other loans
Net cash inflow from financing
(Decrease)/increase in cash
22(a)
Reconciliation of Net Cash Flow to Movement
in Net Funds
(Decrease)/increase in cash
Decrease in debt
(Decrease)/increase in net funds resulting from cashflows
Loans disposed of
Loan Stock, net of issue costs, converted and redeemed/(issued)
Translation adjustments
Movement in net funds
Net funds/(debt) at beginning of period
Net funds at end of period
2005
2004
Note
£m
£m
22(b)
(3.1)
–
(3.1)
–
5.7
0.5
3.1
6.2
9.3
18.1
3.5
21.6
0.7
(5.7)
(0.3)
16.3
(10.1)
6.2
Consolidated Statement of Total Recognised
Gains and Losses
2005
Note
Profit/(loss) for financial period reported
Adjustment to pension costs
As restated
Actuarial loss recognised in respect of pension funds
Total recognised gains/(losses) for the financial period
Prior year adjustment
Total recognised gains/(losses) for the financial period
1
1
1
£m
2004
restated
£m
2.4
–
2.4
(0.3)
0.9
3.0
3.0
(2.0)
2.1
0.1
(11.0)
(0.3)
(11.2)
(21.1)
(32.3)
2005
£m
2004
restated
£m
(7.7)
–
(7.7)
6.7
2.4
(0.3)
–
–
0.9
2.0
23.7
(21.1)
2.6
–
0.1
(11.0)
0.8
0.1
(0.3)
(7.7)
Consolidated Reconciliation of Movements
in Equity Shareholders’ Funds
At beginning of period
Prior year adjustment
As restated
New share capital subscribed
Profit for the financial period
Actuarial loss recognised in respect of pension funds
Goodwill relating to operations sold previously written off to reserves
Fair value adjustment in respect of share options granted in the period
Equity shareholders’ funds/(deficit) at end of period
1
19
Accounts
Note
1
Accounting policies
The financial statements have been
prepared in accordance with applicable
UK Accounting Standards.
The following accounting policies have been
applied consistently in dealing with items
which are considered material in relation to
the Group’s financial statements except for
the adoption of FRS17 – Retirement Benefits
and FRS20 – Share Based Payments.
The accounting policies under these new
standards are set out below together with
an indication of the effect of their adoption.
The corresponding amounts in these financial
statements are restated in accordance with
the new policies.
1.1 Accounting convention and basis
of consolidation
The consolidated financial statements are
prepared on the historical cost convention.
Accounts
20
The financial statements consolidate the
accounts of the Company and its subsidiary
undertakings for the 52 weeks ended 31
December 2005. Comparative figures are for
the 52 weeks ended 1 January 2005. Unless
otherwise stated, the acquisition method
of accounting has been adopted. Under this
method the results of subsidiary undertakings
acquired or disposed of in the year are
included in the consolidated profit and loss
account from the date of acquisition or up
to the date of their disposal.
The Company does not present its own profit
and loss account, as permitted by Section
230 of the Companies Act 1985.
1.2 Turnover
Turnover represents the net invoice value of
goods and services supplied to customers
and royalty income from licensing, excluding
value added tax and other sales taxes.
1.3 Foreign currency translation
Transactions in foreign currencies are
recorded at the rate of exchange at the date
of the transaction or, if hedged, at the rate of
exchange under the related forward currency
contract. Assets and liabilities in foreign
currencies are translated into Sterling at
the financial period end exchange rate or,
if hedged, at the related forward currency
contract rate.
Profits and losses of overseas subsidiary
undertakings are translated into Sterling
at average exchange rates for the period.
Gains and losses arising on translation of net
assets, net of exchange differences arising
on related foreign currency borrowings
and financial instruments, are taken direct
to reserves.
1.4 Financial instruments
Forward foreign exchange contracts may
be used to hedge a proportion of the
exchange exposures arising on forecast
foreign currency transactions. On maturity
of the contracts, gains and losses are taken
to the profit and loss account where they
offset the gains and losses arising on the
underlying transaction. Provision is made
for unrealised losses.
Foreign exchange contracts may be used
to eliminate the translation exposure arising
on loans between the parent company and
overseas subsidiaries where the loans are
denominated in the functional currency of
the subsidiary. Gains and losses arising on
translation of the foreign exchange contracts
are taken to the profit and loss account
where they offset the gains and losses
arising on the inter-company loans.
1.5 Goodwill
Positive goodwill, being the excess of the
fair value of purchase consideration over
the fair value of net assets of subsidiary
undertakings and interests in associated
undertakings acquired, is charged directly
to reserves if arising prior to the introduction
of FRS10. Goodwill arising subsequent
to the introduction of FRS10 is capitalised
and amortised over its estimated useful
life. The reported profit or loss on sale or
termination of a subsidiary or associated
undertaking includes any goodwill previously
charged directly to reserves. Negative
goodwill arising on consolidation in respect
of acquisitions is included as a credit balance
within fixed assets and released to profit and
loss account in the periods in which the fair
values of the non monetary assets purchased
are recovered either through depreciation or
sale. Any negative goodwill in excess of these
amounts is released over the period which
is the directors’ estimate of the time required
to turn the acquired business to profit.
1.6 Tangible fixed assets
Depreciation is calculated to write off the
cost less expected residual value of tangible
fixed assets on a straight line basis over their
expected useful lives. The annual rates used
are as follows:
Land
Freehold buildings
Leasehold buildings
– nil
– 2% - 4%
– over the term of the
lease, minimum 2%
Plant and machinery – 10% - 25%
Computer equipment – 25%
Motor vehicles
– 25%
1.7 Fixed asset investments
Fixed asset investments in the Company
balance sheet, are stated at cost less,
where appropriate, provisions for diminution
in value, where such diminution is expected
to be permanent.
1.8 Stocks
Stocks are stated at the lower of cost,
including manufacturing overheads where
appropriate, and net realisable value.
1.9 Deferred taxation
Deferred taxation is recognised, without
discounting, in respect of all timing differences
between the treatment of certain items for
taxation and accounting purposes which have
arisen but not reversed by the balance sheet
date, except as otherwise required by FRS19.
1.10 Post retirement benefits
The Group operates a number of pension
schemes providing benefits based on final
pensionable pay. The assets of the schemes
are held separately from those of the Group.
Pension scheme assets are measured using
market values. Pension scheme liabilities are
measured using a projected unit method and
discounted at the current rate of return on
a high quality corporate bond of equivalent
term and currency to the liability.
The pension scheme deficits are recognised
in full. The movement in the scheme deficit
is split between operating charges, finance
items and, in the statement of total recognised
gains and losses, actuarial gains and losses.
The parent Company is a participating
employer in these pension schemes
but it is unable to identify its share of the
underlying assets and liabilities of the
schemes on a consistent and reasonable
basis and therefore, as required by FRS17
‘Retirement Benefits’, accounts for the
scheme as if it were a defined contribution
scheme. As a result, the amount charged
to the parent’s profit and loss account
represents the contributions payable to the
scheme in respect of the accounting period
and no deficit is reflected in the parent
Company balance sheet.
The effect of the change in policy on adoption
of FRS17 has been to increase the profit after
tax for the period to 1 January 2005 by £2.1
million. It is not possible to state the effect
on the profit after tax for the period to 31
December 2005 as the charge under SSAP
24 has not been calculated. Net assets
at 1 January 2005 have been reduced by
£0.7 million following the reversal of a net
prepayment arising under SSAP 24 and were
further reduced by the inclusion of the FRS17
pension deficit at that date of £29.3 million.
1.11 Leases
Payments under operating leases are charged
to the profit and loss account in the period to
which they relate. Reverse lease premiums and
similar incentives are spread on a straight line
basis over the lease term or, if shorter than the
full lease term, over the period to the review
date on which the rent is first expected to be
adjusted to the prevailing market rate.
1.12 Employee share schemes
The share option programme allows
employees to acquire shares of the Company.
On adoption of FRS20 the fair value of
options granted is recognised as an employee
expense with a corresponding increase
in equity. The fair value is measured at grant
date and spread over the period during which
the employees become unconditionally
entitled to the options. The fair value of the
options granted is measured using an option
price model, taking into account the terms
and conditions upon which the share options
were granted. The amount recognised as
an expense is adjusted to reflect the actual
number of share options that vest except
where variations are due only to share prices
not achieving the threshold for vesting.
The effect of this change in policy had
no material impact on reported figures.
Segmental analysis
(a) Class of business
2005
Operating
profit excluding
goodwill and
Turnover exceptionals
Fibres & Yarns
Knitwear
Sourced Garments
Home Furnishings
Central overheads
Intra Group turnover
Profit
before
interest
£m
£m
£m
24.6
7.3
33.4
47.7
–
(1.4)
111.6
1.6
0.8
2.7
(0.3)
(2.7)
–
2.1
1.4
0.8
2.7
(1.0)
(2.8)
–
1.1
Exceptional gain on disposal and termination of operations
Goodwill amortisation
2004
Operating
profit excluding
goodwill and
Turnover
exceptionals
restated
£m
£m
31.3
10.1
31.1
–
–
(2.3)
70.2
0.7
(0.6)
3.1
–
(2.3)
–
0.9
Profit
before
interest
restated
£m
0.4
(0.6)
4.6
–
(4.3)
–
0.1
–
2.8
–
–
3.9
3.0
–
(0.8)
0.3
2.6
Net assets
£m
Net liabilities
restated
£m
Fibres & Yarns
Knitwear
Sourced Garments
Home Furnishings
Central
Net operating assets
18.8
(0.6)
1.5
9.9
(4.9)
24.7
15.0
0.2
2.5
–
(3.7)
14.0
Goodwill
Pension liability
Taxation
Net funds
(3.6)
(29.7)
1.3
9.3
2.0
–
(29.3)
1.4
6.2
(7.7)
It is not considered appropriate or meaningful to allocate interest across segments in order to give a segmental analysis of profit before taxation
as borrowing requirements are managed on a Group wide basis.
The Fibres & Yarns segment includes the Joseph Dawson business which was disposed of on 15 October 2004. The Knitwear segment includes the
Ballantyne business which was disposed of on 31 March 2004. As it was not possible to clearly distinguish the results of either the Joseph Dawson
business or the Ballantyne business beyond turnover for financial reporting purposes neither has been reported as a discontinued activity.
21
Accounts
2
Notes to the Financial Statements (continued)
2
Segmental analysis (continued)
(b) Geographical segments
2005
Operating
profit excluding
goodwill and
Turnover exceptionals
United Kingdom
£m
£m
£m
80.5
31.1
111.6
(0.4)
2.5
2.1
(1.4)
2.5
1.1
Exceptional gain on disposal and termination of operations
Accounts
22
Profit
before
interest
2004
Operating
profit excluding
goodwill and
Turnover
exceptionals
restated
£m
£m
39.1
31.1
70.2
(0.8)
1.7
0.9
Profit
before
interest
restated
£m
(3.1)
3.2
0.1
–
2.8
–
–
3.9
3.0
–
(0.8)
0.3
2.6
Net assets
£m
Net liabilities
restated
£m
United Kingdom
24.6
0.1
24.7
12.2
1.8
14.0
Goodwill
Pension liability
Taxation
Net funds
(3.6)
(29.7)
1.3
9.3
2.0
–
(29.3)
1.4
6.2
(7.7)
(c) Turnover by geographical destination
United Kingdom
Other European countries
Middle East and Asia
Rest of the World
2005
2004
£m
£m
54.4
22.2
33.3
1.4
0.3
111.6
9.9
25.8
31.1
2.9
0.5
70.2
2005
Operating profit
Turnover
Cost of sales
– base
– exceptional (Note 4)
Gross profit
Distribution costs
Administration expenses
– base
– exceptional (Note 4)
Other operating income
Operating profit
£m
111.6
70.2
(80.8)
(0.9)
29.9
(17.2)
(55.1)
(0.2)
14.9
(6.5)
(11.6)
(0.1)
2.8
0.1
3.9
(8.0)
(0.6)
–
0.3
0.1
As stated in Note 2 to the accounts it was not possible to clearly distinguish the results of either the Joseph Dawson business or the Ballantyne business
for financial reporting purposes and so neither has been reported as a discontinued activity. The operating profit in 2004 and 2005 therefore all relates
to continuing operations.
Operating profit is stated after charging:
Depreciation
Operating lease rentals – plant and machinery
– other
Auditors’ remuneration – audit services – Group
– Company
– other fees paid to the auditors and their associates
1.1
0.4
0.4
0.2
–
0.1
0.8
0.1
0.3
0.2
–
0.3
In addition, KPMG, the auditors of the Group, earned fees of £0.3 million in connection with the acquisition of Dorma Group Limited.
23
Accounts
3
2004
restated
£m
2005
4
£m
2004
restated
£m
(0.7)
(0.2)
(0.1)
–
–
–
(1.0)
–
(0.2)
–
(0.6)
(1.5)
1.5
(0.8)
–
–
–
4.3
(1.3)
3.0
2005
2004
Number
Number
392
844
122
1,358
465
62
65
592
Aggregate employment costs
£m
restated
£m
Wages and salaries
Social security costs
Other pension costs (see below)
18.8
1.3
1.7
21.8
11.8
1.0
0.3
13.1
0.8
–
0.7
1.5
0.2
1.7
0.9
(0.8)
0.2
0.3
–
0.3
2005
Exceptional items
Operating
Reorganisation of the Dorma business
Reorganisation of the Fibres & Yarns business
Transfer to the AIM
Refinancing costs
Exceptional debtor provision
Release of supplier provision
Exceptional gain/(loss) on sale and termination of operations
Disposal of the Ballantyne business
Disposal of the Joseph Dawson business
5
Employees
Average number of persons employed
Production
Distribution
Administration
Accounts
24
Other pension costs comprise:
Regular pension cost (Note 18(d))
Curtailments (Note 18(d))
Other finance expense (Note 18(d))
Defined benefit pension costs
Defined contribution pension costs
6
Directors
Details of the remuneration of the Directors are contained in the Directors’ Report on Remuneration on pages 11 to 13.
7
£m
2004
restated
£m
Interest receivable on short-term deposits
Interest payable on bank loans and overdrafts
Loan Stock premium
Loan Stock issue costs amortisation
Interest payable on other loans
Other finance expense
0.1
(0.6)
0.5
(0.3)
–
(0.7)
(1.0)
0.2
(0.8)
(1.1)
(0.4)
(0.2)
(0.2)
(2.5)
(i)
(ii)
(i)
(ii)
Loan Stock premium accrued from the date of issue on 25 June 2004 to the date of redemption.
When redemption notices were issued for tranches 2 and 3 of the Loan Stock in 2005 a high proportion of Loan Stock holders elected to convert their
Loan Stock to Ordinary Share Capital resulting in a credit of £0.6 million for premium which had been accrued in 2004. This was partly offset by £0.1 million
of Loan Stock premium charged in the year.
Other finance expense is the interest cost on defined benefit pension scheme liabilities offset by the expected return on assets of the schemes for the period.
2005
8
£m
2004
restated
£m
–
0.5
0.5
–
–
–
–
–
Profit on ordinary activities before tax
2.9
0.1
Profit on ordinary activities before tax at UK corporation tax rate of 30%
Effects of:
Non-deductible expenditure
Non-taxable goodwill amortisation
Depreciation in excess of capital allowances and other timing differences
Differences in effective overseas tax rates
Tax losses available for carry forward
0.9
–
0.5
(0.8)
–
–
(0.6)
–
0.9
–
–
–
(0.9)
–
Taxation
(a) Analysis of charge in the period
Current tax
UK corporation tax at 30%
Overseas taxation
Total current tax
Deferred tax
Tax on profit on ordinary activities
(b) Factors affecting tax charge for the period
(c) Factors that may affect future tax charges
As detailed in Note 14 there are significant tax losses available for carry forward in both the UK and USA for which no benefit has been recognised.
9
pence
2004
restated
pence
Basic earnings per share
Goodwill
Exceptional profit on disposal of fixed assets
Profit on sale of operations
Other exceptional charges
2.1
(2.4)
–
–
0.9
0.6
0.1
0.8
(0.3)
(3.0)
1.0
(1.4)
Diluted earnings per share
2.0
0.1
000s
000s
116,308
1,925
118,233
101,506
–
101,506
Earnings per share
Weighted average number of shares
Basic weighted average shares in issue during the period
Dilutive potential ordinary shares
Basic earnings per share are calculated on the profit for the financial period of £2.4 million (restated 2004: £0.1 million) and the weighted average number
of shares during the period calculated in accordance with Financial Reporting Standard 14.
Diluted earnings per share adjusts for share options granted to employees and warrants issued where the exercise price is less than the average price of the
Company’s shares during the period and when their exercise would reduce earnings per share or increase loss per share.
Adjusted earnings/(loss) per share is calculated on the profit/(loss) for the period before exceptional items and goodwill.
25
Accounts
2005
Amortisation
Period
10
Intangible fixed assets – goodwill
Dorma Group Limited
Dawson Sourced Cashmere
11
26
Opening
balance
Arising in
period
Amortisation
Closing
balance
£m
£m
£m
£m
–
–
–
(6.6)
0.2
(6.4)
3.0
(0.2)
2.8
(3.6)
–
(3.6)
Land and buildings
Freehold
Leasehold
Plant and
machinery
Total
22 months
Immediate
£m
£m
£m
£m
Cost
Additions
Acquisitions
Disposals
At end of period
3.9
–
–
–
–
3.9
0.6
–
–
–
–
0.6
15.3
2.6
8.7
(2.0)
0.1
24.7
19.8
2.6
8.7
(2.0)
0.1
29.2
Depreciation
Charge for the period
Acquisitions
Disposals
At end of period
2.8
0.1
–
–
–
2.9
0.6
–
–
–
–
0.6
13.8
1.0
7.0
(1.7)
0.1
20.2
17.2
1.1
7.0
(1.7)
0.1
23.7
Net book value
At end of period
1.1
1.0
–
–
1.5
4.5
2.6
5.5
Accounts
The cost of freehold land included in freehold land and buildings was £0.1 million (2004: £0.1 million).
Company
Subsidiary
undertakings
12
Fixed asset investments
£m
Gross carrying value
At beginning and end of period
156.4
Provision for permanent diminution in value
112.9
Net book value
Particulars of the principal subsidiary undertakings are set out on page 37.
43.5
Stocks
Raw materials
Work in progress
Finished goods
Group
2004
2005
Company
2004
£m
£m
£m
£m
4.3
3.5
13.3
21.1
4.1
1.6
6.0
11.7
–
–
–
–
–
–
–
–
2005
Company
2004
£m
£m
£m
Group
2004
restated
£m
15.2
–
0.9
0.9
–
17.0
9.2
–
2.1
0.2
0.1
11.6
–
56.6
–
–
–
56.6
–
56.6
0.2
–
–
56.8
1.5
18.5
1.5
13.1
–
56.6
–
56.8
1.8
(1.3)
23.1
23.6
1.8
(1.3)
23.3
23.8
–
–
12.0
12.0
–
–
11.6
11.6
(17.6)
(4.5)
1.5
(16.6)
(5.7)
1.5
(12.0)
–
–
(11.6)
–
–
2005
Company
2004
£m
£m
–
77.6
1.0
–
–
–
78.6
–
76.5
0.1
–
0.7
–
77.3
2005
14 Debtors
Due within one year
Trade debtors
Owed by subsidiary undertakings
Other debtors
Prepayments and accrued income
Taxation recoverable
Due after more than one year
Deferred tax (see below)
The deferred tax asset calculated at a rate of 30% comprises:
Accelerated capital allowances
Other timing differences
Tax losses available to carry forward
Total deferred tax asset
Deferred tax asset not recognised
– UK
– USA
Deferred tax asset recognised
There was no movement in the deferred tax balance.
£m
Group
2004
restated
£m
8.0
–
2.5
1.5
4.4
0.1
16.5
3.0
–
2.3
0.3
3.6
0.1
9.3
2005
15 Creditors – amounts falling due within one year
Trade creditors
Owed to subsidiary undertakings
Other creditors
Other taxation and social security costs
Accruals and deferred income
Corporation tax payable
27
Accounts
13
2005
16
Financial instruments
The information in this note should be read in conjunction with page 7 of the Financial Review which discusses funding and the management of currency risk.
Short-term debtors and creditors have been excluded from the disclosures in this note.
2005
Group
2004
2005
Company
2004
(a) Maturity of financial liabilities
£m
£m
£m
£m
Borrowings due within one year
– bank loans and overdrafts
3.9
–
–
–
–
5.7
–
5.7
Borrowings due after more than one year
– Loan Stock
(b) Group borrowing facilities
On 6 May 2004 Dawson Cashmere LLC (the Forte business) agreed a working capital facility with Bank of America to fund the trading operations
of that business. The initial term of the facility is three years and the maximum drawdown, subject to asset cover, is $25 million. The facility is secured
against the assets of that company.
On 26 June 2004 the Company issued £10 million zero coupon, redeemable, convertible Loan Stock comprising three tranches of £4 million, £2.5 million
and £3.5 million which attracted premia payable on maturity or redemption of respectively 15 per cent, 20 per cent and 26 per cent per annum. Tranche 1
of the Loan Stock was redeemed in December 2004 and tranches 2 and 3 were redeemed in November 2005 and December 2005 respectively. Further
details are given in Note 22(a).
On 15 October 2004 Dawson International Trading Limited agreed a working capital facility with GMAC Commercial Finance PLC to fund the trading
operations of that business. The initial term of the facility is three years and the maximum drawdown, subject to asset cover, is £8.5 million. The facility
is secured against the assets of that company and by cross guarantees.
Accounts
28
On 15 February 2005 Dorma Group Limited agreed a working capital facility with GMAC Commercial Finance PLC to fund the trading operations of
that business. The initial term of the facility is three years and the maximum drawdown, subject to asset cover, is £13.2 million. The facility is secured
against the assets of that company and by cross guarantees.
(c) Currency and interest rate profile of Group financial assets and liabilities
Sterling
US dollar
Euro
Financial
assets
2005
Financial
liabilities
Financial
assets
2004
Financial
liabilities
£m
£m
£m
£m
7.1
5.6
0.5
13.2
2.9
0.1
0.9
3.9
5.8
4.4
1.7
11.9
5.7
–
–
5.7
All financial liabilities attract floating rates of interest based on LIBOR plus a margin ranging from 2 per cent - 2.5 per cent.
Where possible, financial assets are placed on short-term deposit.
16
Financial instruments (continued)
(d) Fair values
The fair value of the Group’s financial assets and liabilities are not significantly different to their book values.
(e) Gains/losses on hedges
The Group secured a forward foreign exchange contract facility in the second half of the year and placed £10 million of forward exchange contracts
in December to partially hedge projected cashflows in 2006. There were no unrealised gains or losses arising during the period on these contracts.
(f)
Monetary assets and liabilities
The main functional currencies of the Group are Sterling and US dollars. US dollar functional businesses have only US dollar denominated monetary
assets and liabilities. For Sterling functional businesses net foreign currency monetary assets and liabilities, after taking account of forward foreign
currency contracts, were as follows:
2005
2004
17
Provisions for Liabilities and Charges
Losses on disposal
Post retirement benefits
Opening
restated
£m
2.6
0.1
2.7
£m
–
3.0
–
3.0
(2.0)
5.1
0.7
3.8
Charged/
(released)
Utilised
Other
movements
Closing
£m
£m
£m
£m
0.5
–
0.5
(0.7)
–
(0.7)
0.1
–
0.1
2.5
0.1
2.6
The opening balance is restated to exclude the US discontinued pension scheme provision now reported as part of the pension liability under FRS17.
The losses on disposal provision relates mainly to environmental clean up costs in the US and property commitments which are long-term in nature.
29
Accounts
US dollar
Euro
Other
£m
18
Post retirement benefits
The Group operates a number of pension plans, the assets of which are held independently from the Group in trustee administered funds.
The principal plans are:
• Three defined benefit plans in the UK which were closed to new members in January 2005.
• A defined contribution plan in the UK which commenced in January 2005.
• A defined benefit plan in the USA which has been closed to all members for a number of years.
Defined contribution plan
The Group operates a defined contribution pension scheme. The pension costs charge for the period represents contributions payable by the Group
to the scheme which amounted to £0.2 million (2004: nil).
Defined benefit plans
In the UK full actuarial valuations are made triennially by an independent, professionally qualified actuary using the projected unit method. Between valuations
the actuary performs regular funding updates which reassess the funding position of the plans. In the US, full actuarial valuations are made annually by an
independent, professionally qualified actuary using the projected unit method. Based on these, together with any other significant factors affecting the profile
of the plans, the actuaries recommend variations to the funding rates to be applied in the year. As the plans are closed to new members it is likely that the
current service cost will increase as the members of the plan approach retirement.
Profiles of the defined benefit plans are as follows:
Membership as at 5 April 2005
Staff
Works
Executive
UK Total
US
Active
Deferred
Retired
87
807
666
1,560
194
1,565
426
2,185
1
3
3
7
282
2,375
1,095
3,752
–
304
779
1,083
5 Apr 03
£m
5 Apr 04
£m
5 Apr 03
£m
£m
31 Dec 05
£m
Market value of assets
MFR deficit
Ongoing funding deficit
59.7
(6.4)
(12.9)
17.6
(3.2)
(4.7)
2.0
(0.7)
(1.0)
79.3
(10.3)
(18.6)
4.5
n/a
n/a
FRS17 deficit at 31 December 2005 (Note 18(b))
(14.6)
(12.4)
(0.9)
(27.9)
(1.8)
0.5
0.1
0.6
0.7
0.1
0.8
0.1
–
0.1
1.3
0.2
1.5
0.3
–
0.3
Summary of latest full actuarial valuations
Accounts
30
Contributions paid in the year
Employer
Employees
Total
Post retirement benefits (continued)
FRS17 Disclosures:
(a) Principal assumptions underlying FRS17 valuations
Principal actuarial assumptions
Salary growth
Pension increases
(i)
Discount rate for liabilities
Retail price inflation
(ii)
Mortality Rates : UK PA92C2010/2004
US 1983 GAM
Expected future return on plan assets
Equities
Bonds
Other
Weighted average return on UK plan assets
UK plans
Discontinued US plan
2005
2004
2003
2005
2004
2003
3.40%
3.25%
4.95%
2.90%
3.80%
3.35%
5.30%
2.80%
3.50%
3.00%
5.50%
2.50%
n/a
n/a
5.25%
n/a
n/a
n/a
5.25%
n/a
n/a
n/a
5.50%
n/a
7.50%
4.50%
5.50%
6.28%
7.20%
4.70%
5.70%
6.55%
6.25%
5.25%
3.50%
6.25%
5.25%
3.50%
6.50%
5.50%
3.75%
(iii)
–
(iii)
–
(iii)
6.45%
(iii)
6.45%
(i)
Discount rate for liabilities
As prescribed by FRS17 this is based on AA corporate bond rates. The valuation of the plan deficits is particularly sensitive to movements in these
rates which are used to discount projected future payments to retirees. As indicated in table (a) above, bond rates have fallen significantly in recent
years resulting in a significant increase in deficits.
(ii)
Mortality rate
The UK rates are based on the 1992 series of mortality tables considered to be the industry standard tables. They were derived from the period 1990
to 1992. A methodology for projecting these tables to allow for future improvements in life expectancy has been produced alongside these tables to allow
for improvements in post retirement mortality over the period between 1992 and 2004 and this has been used as the basis for current pensioners’ mortality.
For current and deferred members, the tables have been projected to allow for improvements up to the year 2010. The tables used are based on the
UK population as a whole. They have been the focus of much public debate due to the general trend of increasing life expectancy and to the impact
of regional variations. The average life expectancy of a 65 year old man under the 2010 projection is 83.5 years (a woman is expected to live to 86.4).
In comparison, the mortality basis used to calculate the value of liabilities for the Pension Protection Fund levy is based on the life expectancy for a 65
year old man retiring in 2006, as 86.3 (and a woman 89.2).
(iii) Expected future return on assets
Since the last accounting date the investment strategies of the three UK plans have been changed to investment in a Total Investment Governance
Solution (TIGS). Only the weighted average return on assets is shown due to the dynamic nature of the underlying investments.
(b) Analysis of balance sheet deficit
Equities
Bonds
Other
Total market value of assets
Actuarial value of liabilities
Net liability before deferred tax
2005
2004
2003
UK
£m
US
£m
Total
£m
UK
£m
US
£m
Total
£m
UK
£m
US
£m
Total
£m
42.4
40.6
16.4
99.4
(127.3)
(27.9)
1.7
1.9
0.9
4.5
(6.3)
(1.8)
44.1
42.5
17.3
103.9
(133.6)
(29.7)
49.8
30.0
9.1
88.9
(116.5)
(27.6)
1.5
1.7
0.8
4.0
(5.7)
(1.7)
51.3
31.7
9.9
92.9
(122.2)
(29.3)
60.3
16.7
9.8
86.8
(105.0)
(18.2)
1.6
1.7
0.9
4.2
(5.9)
(1.7)
61.9
18.4
10.7
91.0
(110.9)
(19.9)
No deferred tax asset has been recognised on the basis that the Group has yet to demonstrate a sufficient future income stream to utilise that asset.
Sensitivity of the balance sheet deficit to changes in the principal actuarial assumptions
Pension Plans Deficit
Decrease Increase
£m
£m
Corporate bond rates increase/(decrease) by 0.5%
Life expectancy reduces/(increases) by 1 year
Pension increases reduces/(increases) by 0.25%
10.9
4.3
2.6
(12.7)
(4.3)
(2.8)
31
Accounts
18
18
Post retirement benefits (continued)
2005
2004
£m
£m
(29.3)
(19.9)
(0.8)
–
(0.7)
1.6
(0.3)
(0.2)
(29.7)
(0.9)
0.8
(0.2)
1.9
(11.2)
0.2
(29.3)
£m
£m
Operating profit
Current service cost
Settlements/curtailments
Net charge on operating profit
(0.8)
–
(0.8)
(0.9)
0.8
(0.1)
Other finance costs
Expected return on pension plan assets
Interest on pension plan liabilities
Net charge on other finance costs
5.7
(6.4)
(0.7)
5.8
(6.0)
(0.2)
(c) Analysis of pension plan movements in the period
Deficit in plans at beginning of period
Movement in period:
Current service cost
Past service costs/curtailment
Other finance expense
Contributions paid
Actuarial loss
Exchange (loss)/gain
Deficit in plans at end of period
(d) Analysis of profit and loss account items
Accounts
32
2005
2004
2003
2002
History of amounts recognised in the
Statement of Total Recognised Gains and Losses
£m
£m
£m
£m
Actual return less expected return on pension plan assets
Percentage of plan assets
7.6
7%
(0.6)
-1%
7.8
9%
(18.9)
-23%
Experience gains and losses arising on plan liabilities
Percentage of actuarial value of plan liabilities
(1.1)
-1%
(2.2)
-2%
(0.4)
0%
0.5
0.5%
Changes in financial assumptions underlying plan liabilities
(6.8)
(8.4)
(3.9)
(6.8)
Exchange (loss)/gain on discontinued US plan
Net (charge)/credit
Percentage of actuarial value of plan liabilities
(0.2)
(0.5)
0%
0.2
(11.0)
-9%
0.2
3.7
3%
0.1
(25.1)
-24%
19
Employee share option schemes
Employees and directors held options to subscribe for ordinary shares under discretionary schemes as follows:
Number of share options
000s
Granted
Surrendered
Lapsed
At end of period
7,100
3,550
(1,400)
(475)
8,775
Options outstanding at 31 December 2005:
– exercise price range
– average exercise price
– latest exercise date
5p - 58.5p
9.2p
15.05.15
This note should be read in conjunction with the disclosures in the Directors’ Report on Remuneration on page 13.
Discretionary options are normally exercisable between three and ten years from the date of grant save for the options granted to Mr Hartley,
the details of which are disclosed on page 13 in the Directors’ Report on Remuneration.
Options normally lapse on the holder leaving the employment of the Group.
2005
20 Share capital
Authorised share capital
2,526,207,225 ordinary shares of 1 pence each
101,505,975 deferred shares of 49 pence each
50,000,000 preference shares of £1 each
75,000,000 preference shares of $1 each
2004
£m
£m
25.2
49.8
50.0
46.0
171.0
25.2
49.8
50.0
46.0
171.0
2.2
49.8
52.0
1.0
49.8
50.8
During the year 123,652,567 shares were issued, 106,287,860 as a result of Loan Stock conversions and 17,364,707 as the result of a share placement.
Pursuant to the terms of a loan agreement entered into with GPG Holdings (UK) Limited in 2003, the Company issued warrants to GPG Holdings (UK) Limited
on 26 June 2004 to subscribe for up to 10 per cent of the fully diluted ordinary share capital of the Company immediately after the exercise of the warrants
at a warrant price of 11 pence per ordinary share. The warrants expire three years following the date of issue.
21 Reserves
Share
Profit and
Premium Loss account
£m
£m
Group
At beginning of period (restated)
Retained profit for the period
Actuarial loss on defined benefit pension schemes
Loan Stock conversion
Share placing
At end of period
Total
£m
–
–
–
4.2
1.3
–
5.5
(58.5)
2.4
(0.3)
–
–
0.9
(55.5)
(58.5)
2.4
(0.3)
4.2
1.3
0.9
(50.0)
–
–
4.2
1.3
5.5
(33.4)
3.3
–
–
(30.1)
(33.4)
3.3
4.2
1.3
(24.6)
The profit and loss account reserve is stated after deducting a pension deficit of £29.7 million (2004: £29.3 million).
Company
Retained profit for the period
Loan Stock conversion
Share placing
At end of period
The cumulative amount of positive goodwill written off to reserves in respect of subsidiary and associated undertakings is £1.3 million (2004: £1.3 million).
The financial statements of the Company deal with a profit for the financial period of £3.0 million (2004: loss £6.3 million).
Accounts
33
Issued equity share capital
Allotted, called up and fully paid:
225,158,542 ordinary shares of 1 pence each (2004: 101,505,975 shares of 1 pence each)
101,505,975 deferred shares of 49 pence each
22 Consolidated cash flow
2005
2004
£m
£m
0.1
(0.8)
(0.7)
0.2
(1.4)
(1.2)
(a) Gross cash flows
Net interest paid
Interest received
Interest paid
Acquisitions and disposals
Acquisition
On 15 February 2005 the Group purchased the trade and assets of Dorma Group Limited. The purchase consideration, including fees and costs,
amounted to £8.9 million, of which £0.2 million was deferred.
Book
Fair value
Fair
value
adjustments
value
Fixed assets
Working capital
Cash
£m
£m
£m
2.0
12.4
1.8
16.2
(0.3)
(0.4)
–
(0.7)
1.7
12.0
1.8
15.5
(6.6)
8.9
(0.2)
(1.8)
6.9
Negative goodwill
Total consideration (net of costs)
Less deferred consideration
Less cash acquired
Net cash outflow from acquisition of subsidiary
34
Disposals
31 March 2004 the Group disposed of the Ballantyne business and on 15 October 2004 disposed of the Joseph Dawson business.
The net consideration, after fees and costs amounted to £16.7 million.
Accounts
£m
Fixed assets
Working capital
Cash
Loans
Goodwill
2.4
11.5
0.2
(0.7)
3.3
16.7
(0.2)
16.5
Less cash disposed of
Net cash inflow from disposal of subsidiaries
2005
2004
Loan Stock
£m
£m
Issued
Redeemed
Issue costs paid
Net cash flow
Amortisation of issue costs
Converted to equity
Movement in Loan Stock
Balance at start of period
Balance at end of period
–
(0.7)
–
(0.7)
0.3
(5.3)
(5.7)
5.7
–
10.0
(4.0)
(0.7)
5.3
0.4
–
5.7
–
5.7
22 Consolidated cash flow (continued)
Opening balance
Cash flow
Loan Stock
– redeemed
– converted
– issue costs amortisation
Translation
Closing balance
Overdrafts
Net
cash
Loan
Stock
Net
Funds
£m
£m
£m
£m
£m
11.9
0.8
–
(3.9)
11.9
(3.1)
(5.7)
–
6.2
(3.1)
0.5
9.3
0.7
5.3
(0.3)
–
–
0.7
5.3
(0.3)
0.5
9.3
2005
2004
£m
£m
0.4
0.1
0.5
13.2
–
(3.9)
23 Capital commitments
Capital expenditure contracted
2005
24 Operating lease commitments
Commitments payable in the next financial year
under operating leases which expire:
– within one year
– between two and five years
– after five years
Land and
buildings
2004
Other
Land and
buildings
Other
£m
£m
£m
£m
0.2
0.3
0.1
0.6
–
–
–
–
0.2
–
–
0.2
–
–
–
–
25 Contingent liabilities
The Company is party to cash offset arrangements on banking facilities made available to the Group.
35
Accounts
(b) Analysis of net cash and deposits/(debt)
Cash and
Deposits
Financial Period
2005
£m
Results
Turnover
Operating profit/(loss) before goodwill and exceptional charges
Exceptional charges
Profit/(loss) on ordinary activities before interest
Profit/(loss) on ordinary activities before taxation
Taxation
Profit/(loss) after taxation
Dividends per share
Net Assets
Working capital
Taxation and dividends
Intangible fixed assets
Fixed asset investments
Net funds/(debt)
Net assets excluding pension liability
Pension liability
(i)
(ii)
(iii)
(iv)
Capital expenditure
Net gearing
Accounts
36
(i)
(ii)
(iii)
(iv)
(v)
(v)
2004
(iv)
restated
£m
2003
2002
2001
£m
£m
£m
111.6
2.1
2.8
(1.0)
3.9
(1.0)
2.9
(0.5)
2.4
0.6p
nil p
70.2
0.9
–
2.5
3.4
(2.5)
0.9
–
0.9
(1.4)p
nil p
68.3
(9.6)
(1.5)
(7.0)
(18.1)
(1.0)
(19.1)
(0.1)
(19.2)
(10.5)p
nil p
61.2
(4.9)
–
(2.1)
(7.0)
(0.2)
(7.2)
(0.1)
(7.3)
(5.1)p
nil p
75.5
(0.9)
–
(3.4)
(4.3)
0.1
(4.2)
–
(4.2)
(0.8)p
nil p
5.5
19.2
24.7
1.3
(3.6)
–
9.3
31.7
(29.7)
2.0
2.6
11.4
14.0
1.4
–
–
6.2
21.6
(29.3)
(7.7)
5.9
26.3
32.2
1.6
–
–
(10.1)
23.7
–
23.7
7.3
36.7
44.0
1.8
1.5
–
(4.2)
43.1
–
43.1
9.1
24.9
34.0
1.9
–
6.7
9.4
52.0
–
52.0
2.6
0.5
1.8
1.5
3.0
nil
nil
43%
10%
nil
Goodwill amortisation excludes goodwill previously written off against reserves.
Profit/(loss) after taxation excludes goodwill previously written off against reserves.
Adjusted earnings per share are based on the results of continuing operations before exceptional items and goodwill.
2004 figures have been restated to reflect the impact of FRS17 – Retirement Benefits. Prior years are not restated.
Net gearing is defined as the ratio of total borrowings net of short-term investments, cash and deposits to equity shareholders funds.
Business
Country of
registration/
incorporation
Principal activity
Fibres & Yarns
Todd & Duncan+
Scotland
Spinning of cashmere and blended yarns
Knitwear
Barrie Knitwear+
Scotland
Manufacture, sourcing, distribution and marketing of Barrie, Glenmac
and John Laing cashmere knitwear and contract haute couture
Sourced Garments
Dawson Forte*
USA
Sourcing, distribution and marketing of Chinese cashmere knitwear
Kinross Cashmere Europe+
Scotland
Dawson Cashmere Company*
Hong Kong
Home Furnishings
Dorma Group Limited*
England
Design, sourcing, distribution and marketing of branded and
private label bed linen
Other
Dawson International Holdings (UK) Ltd
Scotland
Management services and holding company
Dawson International Trading Ltd*
Scotland
Holding company
All companies’ share capital is wholly owned and all operate principally in their country of incorporation.
+
Divisions of Dawson International Trading Ltd
* Not directly owned by Dawson International PLC
Financial calendar
Annual General Meeting
3 May 2006
2006 interim results
announcement
September 2006
End of financial period
30 December 2006
2006 preliminary results
announcement
March 2007
Capital gains tax
The market price of the Company’s ordinary shares
at 31 March 1982, adjusted for the bonus issue in
1985, was 87.33 pence per share. The base price
for capital gains tax purposes of shares held in
1982 will depend on whether shareholders took
up their entitlement under the rights issue in
May 1994 of one new share for every four held
at a price of 120 pence per share.
Share dealing service
Stocktrade, the sister company of Bell Lawrie,
the Company’s brokers, operate a telephone share
dealing service which provides shareholders with
a simple way of buying or selling the Company’s
shares or any other UK listed company shares.
Commission is 0.5 per cent up to £10,000 and
0.2 per cent thereafter, subject to a £15 minimum.
To use this service please call 0845 601 0995
and quote LOW C0175. Postal dealing packs
are available on request.
Registrars and dividend payments
Enquiries regarding shareholdings, lost certificates,
change of address and dividend payments should
be addressed to the Company’s registrars,
Capita Registrars, The Registry, 34 Beckenham
Road, Beckenham, Kent, BR3 4TU. Telephone
0870 162 3100. Requests for dividend payments
to be made direct to a bank or building society
account should also be made to the registrars.
Accounts
37
NOTICE IS HEREBY GIVEN that the thirty-third
Annual General Meeting of Dawson International
PLC will be held at the offices of Dundas & Wilson
CS LLP, 4th Floor, Saltire Court, 20 Castle Terrace,
Edinburgh EH1 2EN on 3 May 2006 at 12.00 noon
for the following purposes:
As ordinary business
1. To receive and consider the Directors’ Report
and financial statements for the financial period
ended 31 December 2005 (Resolution 1).
2. To adopt the Directors’ Report on
Remuneration for the financial period ended
31 December 2005 (Resolution 2).
3. To re-elect Michael G Hartley as a director
of the Company (Resolution 3).
4. To elect Andrew Bartmess as a director
5. To elect Scott Malvenan as a director
6. To elect Patrick Mechoulam as a director
7. To elect Stephen Russell as a director
Accounts
38
8. To elect J Andrew Smith as a director
9. To consider and, if thought fit, pass the
following resolution as an ordinary resolution
of the Company:
“That KPMG Audit Plc be and are hereby
appointed auditors of the Company to hold
office from the conclusion of this meeting until
the conclusion of the next general meeting
at which financial statements are laid before
the Company at a remuneration to be fixed
by the Directors” (Resolution 9).
As special business
To consider and, if thought fit, pass the following
resolutions, Resolution 10 as an ordinary resolution
of the Company and Resolutions 11, 12 and 13 as
special resolutions of the Company:
10. That the Directors of the Company be and
they are hereby generally and unconditionally
authorised pursuant to Section 80 of the
Companies Act 1985 (the “Act”) (and in
addition to any existing such authority which
they may have under such section) to allot
relevant securities (as defined in Section
80(2) of the Act) up to an aggregate nominal
amount of £749,777.94, being 33.3 per cent
of the issued ordinary share capital of the
Company as at 10 March 2006, provided
that the authority hereby given shall expire
five years after the passing of this resolution
unless previously revoked, varied or extended
by the Company in general meeting save
that the Company may at any time prior to
the expiry of such authority make an offer or
enter into an agreement which would or might
require relevant securities to be allotted after
the expiry of such authority and the Directors
may allot relevant securities in pursuance of
such an offer or agreement as if such authority
had not expired and so that this authority shall
be in substitution for all previous authorities
conferred upon the Directors pursuant to
Section 80 of the Act but without prejudice
to the allotment of any relevant securities
already made or to be made pursuant
to such authorities (Resolution 10).
11. That the Company be and is hereby generally
and unconditionally authorised in accordance
with Section 166 of the Companies Act 1985
(as amended) (the “Act”) to make market
purchases (within the meaning of Section
163 of the Act) of ordinary share capital
of the Company (“shares”) provided that:
(a) the maximum number of shares hereby
authorised to be purchased shall be
22,515,854, representing 10 per cent
of the issued ordinary share capital
of the Company as at 10 March 2006;
(b) the maximum price which may be paid
for a share shall be not more than five per
cent above the average of the middle
market quotations derived from the Daily
Official List of the London Stock Exchange
for the five business days immediately
preceding the date of purchase of the share;
(c) unless renewed the authority hereby
conferred shall expire 15 months after
the passing of this resolution or at the
conclusion of the next Annual General
Meeting of the Company, whichever is
the earlier, save that the Company may,
prior to such expiry, enter into a contract
to purchase shares which will or may be
executed wholly or partly after such expiry
and purchase shares pursuant to such
contract (Resolution 11).
(ii) to holders of ordinary shares who
shall have elected to receive an
allotment of equity securities in lieu
of any dividend pursuant to authority
given to the Directors; or
(iii) (otherwise than pursuant to subparagraphs (i) and (ii) above) up to
an aggregate nominal amount of
£562,896 – being 25 per cent of the
issued ordinary share capital of the
Company as at 10 March 2006; and
(b) unless renewed, expire 15 months after
the passing of this resolution or at the
conclusion of the next Annual General
Meeting of the Company, whichever
is the earlier, save that the Company may,
prior to such expiry, make an offer or
agreement which would or might require
equity securities to be allotted after such
expiry and the Directors may allot equity
securities in pursuance of such offer or
agreement as if the power conferred
hereby had not expired (Resolution 12).
13. That Article 96(F) of the Articles of Association
of the Company be and is hereby deleted in
its entirety and replaced with the following text:
“If he shall be removed from office by notice
in writing served upon him signed by a simple
majority of his co-Directors, (excluding the
Director to be removed), but, so that in the
case of a Director holding an executive office
which automatically terminates on ceasing to
be a Director, such removal shall be deemed
an act of the Company and shall have effect
without prejudice to any claim for damages
in respect of the consequential termination
of his executive office; or” (Resolution 13).
Notes
12. That where they are generally authorised for the
purpose of Section 80 of the Act the Directors
be and they are hereby empowered pursuant to
Section 95 of the Act (in addition to any existing
such authority which they may have pursuant to
Section 95 of the Act) to allot equity securities
(within the meaning of Section 94 of the Act)
for cash, as if Section 89 (1) of the Act did not
apply to any such allotment provided that this
power shall:
(a) be limited to the allotment of equity
securities:
(i) in connection with an offer of
securities, open for acceptance for a
period fixed by the Directors, by way
of rights to holders of ordinary shares
in proportion (as near as may be) to
their holdings on a record date fixed
by the Directors (subject to such
exclusions or other arrangements
as the Directors may deem necessary
or expedient to deal with problems
under the laws of any territory or the
requirements of any regulatory body
or any stock exchange in any territory
or in connection with any fractional
entitlements or otherwise howsoever);
Proxies
Members entitled to vote at the meeting may
appoint a proxy or proxies to attend and vote
on their behalf. Such a proxy need not be a
member of the Company and the appointment
of such proxy does not preclude members from
subsequently attending and voting in person.
Detailed instructions are included on the proxy card.
Directors’ interests and service contracts
The register of Directors’ interests and copies
of their service contracts are available for inspection
by members at the registered office of the Company
during normal working hours on any weekday from
the date of this notice until the date of the meeting
and will be available for inspection at the place of
the meeting from 15 minutes prior to the meeting
until its conclusion.
Form of Proxy
(For use at the Annual General Meeting of Dawson International PLC (“the Company”) to be held on 3 May 2006 and at any adjournment thereof.)
I/We being a member of the Company, holding
Ordinary Shares of one pence each in the capital of the Company (see Note 5) hereby
appoint Michael G Hartley, the Chairman of the Company, or
(see Note 3) or failing him, the chairman of the meeting as my/our proxy
vote for me/us on my/our behalf as indicated below at the Annual General Meeting of the Company to be held on 3 May 2006 and at any adjournment thereof.
Ordinary Resolutions
For
Against
Vote Withheld (see Note 7)
1 Adoption of Directors’ Report and financial statements
2 Adoption of Directors’ Report on Remuneration
3 Re-election of Michael G Hartley~ as a Director
4 Election of Andrew Bartmess as a Director
5 Election of Scott Malvenan as a Director +*~
6 Election of Patrick Mechoulam as a Director +*~
7 Election of Stephen Russell as a Director +*~
8 Election of J Andrew Smith as a Director +*~
9 Appointment of KPMG Audit Plc as auditors
10 Authorisation to allot relevant securities
Special Resolutions
11 Authorisation to make market purchases of shares
12 Limited authorisation to disapply statutory pre-emption rights
13 Alteration to Articles of Association
Unless otherwise indicated, the proxy may vote as he thinks fit, or withhold his vote, on the above resolutions or on other business conducted at the meeting.
39
Signed this
Accounts
+ Member of Audit Committee
* Member of Remuneration Committee
~ Member of Nominations Committee
day of
2006 (Please insert date and sign. If a corporation, see Note 4)
Signature
Name of registered holder
(IN BLOCK CAPITALS, PLEASE)
Notes
1. To be valid this proxy form must be completed, signed and deposited at the Company’s registrars, Capita Registrars, The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU, not later than 48 hours before the time for the holding of the meeting or the adjourned meeting, together with any Power of
Attorney or other written authority (if any) under which it is executed or a notarially certified copy of such Power of Attorney or other authority. Any alteration to
this form of proxy must be initialled. CREST members should also refer to paragraph 6 below in relation to the submission of a proxy appointment via CREST.
2. In the case of joint holdings the signature of any holder is sufficient but the vote of the senior holder who tenders a vote (whether in person or by proxy) shall be
accepted to the exclusion of the other joint holders. For this purpose seniority shall be deemed by the order in which the names stand in the register of members.
3. If you wish to appoint a proxy other than Michael G Hartley, please delete the reference to the Chairman, insert the proxy’s name here and initial the change.
A proxy need not be a member of the Company and must attend the meeting in person to represent you. Unless you insert another name on the form,
the Chairman will act as your proxy. Completion and return of a proxy does not preclude a member subsequently attending and voting at the meeting in person.
4. Where the form is executed by a corporation, it must be under the hand of an officer or attorney duly authorised.
5. Please enter number of ordinary shares of one pence each in the capital of the Company held by you. If no number is entered, it shall be presumed that the
proxy is entitled to vote in respect of all such ordinary shares held by you as registered holder.
6. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by utilising the procedures
described in the CREST manual. CREST personal members or other CREST sponsored members and those CREST members who have appointed a voting
service provider(s) should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for
a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in
accordance with CRESTCo’s specifications and must contain the information required for such instructions, as described in the CREST manual. The message,
regardless of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy must, in order to be
valid, be transmitted so as to be received by the issuer’s agent (ID) by the latest time(s) for receipt of proxy appointments as specified in Note 1 above. For this
purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which
the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. The Company may treat as invalid a CREST Proxy
Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. CREST members and, where applicable,
their CREST sponsors or voting service providers should note that CRESTCo does not make available special procedures in CREST for any particular
messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST
member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s),
to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means
of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are
referred, in particular, to those sections of the CREST manual concerning practical limitations of the CREST system and timings.
7. The “vote withheld” option is provided to enable you to abstain on any particular resolution, however, it should be noted that a “vote withheld” is not a vote
in law and will not be counted in the calculation of the proportion of the votes “for” and “against” a resolution.
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4BR
BUSINESS REPLY SERVICE
Licence No. MB122
Third fold and tuck in
Second fold
First fold
navyblue design group edinburgh
DAWSON INTERNATIONAL PLC,
Lochleven Mills, Kinross,
KY13 8GL, Scotland

Annual Report 2005

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