UK: Dawson H1 profit slumps amid rising cashmere costs

First-half profit at cashmere and knitwear specialist Dawson International Plc has more than halved after margins continue to be hurt by higher raw material prices.

The group today (1 December) said profit for the six months to 1 October fell 52% to GBP0.62m (US$0.97m) from GBP1.3m in the same period last year. Turnover dropped 7.9% to GBP19.8m from GBP21.5m in 2010.

It reported an operating profit before exceptional items of GBP0.3m in its continuing operations, compared with a profit of GBP1.2m last year.

The decision by US retailer Talbots to source directly has contributed to a 5% fall in US sales to $1.2m while margins in this market are down 6% as a result of a significant increase in cashmere price over the past two years. Higher domestic consumption within China has also impacted demand for the fibre.

Following the sale of its Home Furnishings business in May for net proceeds of around GBP6.5m, Dawson says it is now strategically positioned as a specialist cashmere business.

"We entered this financial year recognising that difficult global economic conditions coupled with significant raw material price increases in each of the last two years would have a negative impact on our results," said chairman David Bolton.

"We have traded ahead of our expectations in the first half of the year but this is due at least in part to the timing of sales and our expectations for the full year remain broadly unchanged.

"Our focus is now on growing our cashmere business by expanding our customer base in both new and existing geographical areas and expanding our product offering in both cashmere and complementary accessories."