Textile firm beats expectations as knitwear divisions show strength

The Scottish firm, which is almost 29 per cent owned by Yorkshire's Leeds Group, said strong performance by both its UK and US knitwear businesses more than offset weakness in its home furnishings business.

But the group also warned its pension scheme liabilities are expected to show "significant deterioration".

Dawson said its UK knitwear business benefited from the timing of high margin sales to couture customers, which boosted margins in the fourth quarter, which ended on January 2. But it warned this is likely to hit margins in the first quarter of this year as the sales mix is impacted.

Its US knitwear business sustained sales and margins through the final quarter, "in spite of the fragile US economic environment". Dawson said sales of branded lines and overall margins were stronger than expected.

The group's private label home furnishings business experienced poor margins over the year it suffered from the decline in sterling against the dollar affecting the cost of sales.

"While this improved somewhat in the second half of the year it is anticipated that the business will report a small loss overall," Dawson said.

Last year Leeds Group ousted Dawson's chairman Michael Hartley and replaced him with David Bolton. The group's chief executive Andy Bartmess was appointed in 2007.

Dawson sold its Todd & Duncan textile business to a key supplier last year, China's Zhongyin Cashmere Company, for an initial sum of 6.15m.

Dawson said has had to make a 500,000 provision against the business for doubtful debts. Dawson also announced the appointment of Giovanni Ghione as non-executive deputy chairman. The Bahamas-registered business holds nearly eight per cent of Dawson shares.

The company added it is finalising accounts for 2009 and will include an updated valuation of its defined benefit pension scheme liabilities.

"This is expected to reflect the general market trend and therefore show a significant deterioration, principally due to lower corporate bond yields and increased longevity assumptions," the group said.