DAWSON INTERNATIONAL PLC HALF YEAR RESULTS 2009 David Bolton, Chairman Andy Bartmess, CEO Dave Cooper, CFO

DAWSON INTERNATIONAL PLC

HALF YEAR RESULTS 2009

David Bolton, ChairmanAndy Bartmess, CEODave Cooper, CFO

1 Continuing operations exclude Todd & Duncan and Home Furnishings - Branded

2

DAWSON INTERNATIONAL PLCIntroduction

Key messages

Half year results

Full year outlook

Pensions


3

DAWSON INTERNATIONAL PLCKEY MESSAGES

Results in line with expectations

Revenues from continuing operations1 £17.5m (2008: £17.6m).

Operating loss from continuing operations1 £1.9m (2008: £0.4m)

Cash outflow £9.7m (2008: £4.0m)

Net debt £4.0m (2008: £9.7m)

Key objective to reduce exposure to DB pension schemes

Phased exit from Dorma branded business on schedule

Disposal of Todd & Duncan achieved a critical strategic objective and will generate c. £11m cash

Platform of profitable businesses and sound funding

4


Half Year Results Profit & Loss

CONSOLIDATED INCOME STATEMENTFor the period ended 4 July 2009

6 months to 6 months to4 July 28 June2009 2008

re-presented£000 £000

Continuing operations

Revenue 24,091 28,164

Cost of sales (19,222) (19,589)

Gross profit 4,869 8,575

Other income 343 -

Selling and distribution costs (4,162) (6,032)

Administrative expenses (3,796) (4,293)

Operating (loss) profit before exceptional items (2,746) (1,750)

Exceptional items (125) -

Operating (loss) profit (2,871) (1,750)

Finance income 6 22

Finance costs (262) (573)

Net finance income on pension assets/liabilities - -

(Loss) profit before taxation (3,127) (2,301)

Taxation (595) -

(Loss) profit for the period from continuing operations (3,722) (2,301)

Discontinued operations

(Loss) profit for the period from discontinued operations (5,282) 662(Loss) profit for the period (9,004) (1,639)

OPERATING RESULTS OF CONTINUING BUSINESSES

sales Profit (loss)

2009

£000s

2008

£000s

2009

£000s

2008

£000s

UK Knitwear 2,859 4,254 (124) 443

US Knitwear 1,652 2,048 (1,171) (843)

Home Furnishings (PL) 12,998 11,287 244 1,665

Central costs - - (828) (1,667)

Ongoing businesses 17,509 17,589 (1,879) (402)

Home Furnishings (Br) 6,582 10,575 (867) (1,348)

Reported 24,091 28,164 (2,746) (1,750)

5


Half Year ResultsProfit & Loss

Both knitwear businesses reported lower turnover and profits • Last year was a record year for both businesses, customers well/over stocked

• Both are seasonally biased to the second half, particularly the US business.

• Order books indicate that sales for the full year will be well down on last year’s levels.

Home Furnishings (Private Label) sales up 15% but operating profit well down.• 25% strengthening of the USD increased sourced product cost which had to be absorbed.

Net central costs halved to £0.8m• £0.3m King Deer proceeds, £0.3m reduction in professional fees (pensions), £0.2m FX.

Home Furnishings (Branded) sales down £4m, losses reduced by £0.5m• Phased exit from concession stores on track

Exceptional charge of £0.1m incurred by UK Knitwear (redundancies) Interest cost halved due to lower average borrowings Tax charge of £0.6m incurred by US Knitwear business

• Profits of $6.5m only partly offset by capped losses brought forward.

Discontinued business reviewed on following slide

6


Half Year ResultsTodd & Duncan disposal

£million

2009

6 months

2008

Year

2007

Year

2006

Year

2005

Year

2004

Year

Turnover 12.4 21.5 19.9 20.0 24.6 23.1

Operating profit (loss) (0.3) 0.5 (0.7) (0.6) 1.6 0.6

Interest (10% ACE) (0.9) (1.6) (1.9) (2.0) (1.8) (1.5)

Exceptional charges - - (0.2) - (0.2) (0.3)

PBT (1.2) (1.1) (2.8) (2.6) (0.4) (1.2)

Average capital employed 18.8 16.3 19.0 20.2 18.1 17.3

Capital expenditure 0.3 - 0.2 0.6 2.0

7


Half Year ResultsTodd & Duncan disposal

Transaction completed on 28th August 2009 Reasons for the disposal:

• Business consistently loss making after financing charges• Many strategic challenges, including excess worldwide capacity, need to relocate, downsize and re-equip.

Financial consequences of the sale:• Business, fixed assets and stocks sold, debtors and creditors retained.• £6.1 million initial sale proceeds for the business, fixed assets and stocks (to be adjusted based on agreed

completion account balances)• Four year trading agreements between Todd & Duncan/Barrie and Forte/Zhongyin• c. £5.5 million working capital to be realised, funding capacity on stocks and debtors lost.• Loss on disposal of £5.0m (£4.2m book loss on assets sold and £0.8m costs)

Operating losses of £0.3m in the (normally profitable) first half and will incur further losses in July/August.

Reported loss on discontinued operations £5.3m, £5.0m loss on disposal and £0.3m first half operating losses.

8


Half Year ResultsSummary Balance Sheet

£000s 2009 2008

Fixed assets- Continuing- Todd & Duncan

1,083

1,353

2,015

2,401

Working Capital- UK Knitwear- US Knitwear- Home Furnishings (Private Label)- Home Furnishings (Branded)- Todd & Duncan- Central

349

1,835

3,794

3,754

15,965

(911)

1,725

4,341

4,180

5,957

14,224

(1,431)

Provisions- Loss on sale of Todd & Duncan- Dorma closure costs- Other

(4,842)

(989)

(1,471)

-

-

(1,515)

Retirement benefit obligations (6,306) (4,701)

Tax 1,374 1,404

Net debt (3,963) (9,678)

Net assets 11,025 18,922

9


Half Year ResultsSummary Balance Sheet Fixed assets reduce from £4.4m to £2.4m due to sale of Dorma Brand and Todd & Duncan impairment

charge of £1m in 2008.

Working capital reduces £4.2m from £29.0m to £24.8m

• £3.9m reduction at the Knitwear businesses reflecting lower activity this year

• £2.2m reduction at Home Furnishings (Branded) as we exit that business

• £1.7m increase at Todd & Duncan due to higher stocks

Provisions established for loss on sale of T&D and for Dorma closure costs.

Retirement Benefit obligations discussed on slide 15

No significant change in the tax balance which relates mainly to £1.5m deferred tax asset in respect of

US Knitwear

Net debt/Cash flow discussed on slide 11

Net assets reduced by £7.9m

• 2nd half profit 2008 £2.1m

• 1st half loss 2009 £(9.0)m

• Actuarial loss on DB schemes £(2.5)m

• Exchange £1.4m

• Share based payments adjustment £0.1m

10


Half Year ResultsSummary Cash Flow

£000s

2009

H1

2008

H2 TOTAL

EBITDA (2,826) 2,337 (489)

Working capital (3,430) 7,967 4,537

Provisions (1,430) 61 (1,369)

Pension contributions (175) (887) (1,062)

Capital expenditure (317) (175) (492)

Interest (256) (314) (570)

Tax (565) (210) (775)

Sale of Todd & Duncan/Dorma Brand (176) 4,523 4,347

Exchange (476) 2,064 1,588

Change in net debt (9,651) 15,366 5,715

Opening Net debt 5,688 (9,678) (9,678)

Closing net debt (3,963) 5,688 (3,963)

11


Half Year ResultsSummary Cash Flow

Cash flows are highly seasonal• Loss making 1st half, profitable 2nd half

• Build working capital 1st half, release working capital second half.

• This will become less pronounced with the sale of Todd & Duncan

£5.7m funds generated over 12 month period• Net proceeds of Dorma brand sale c. £3 million.

• Reduction of working capital £4.5m.

Pension deficit contributions reduced from £887k (all paid in 2nd half in 2008) to £350k p.a.

2nd half 2009 will benefit from the disposal of Todd & Duncan

12


Full Year OutlookRevenues

£ million

H1

Actual

H2

Broker’s

Forecast

2009

Year

Estimate

2008

H2

2008

YEAR

+/-

H2

+/-

Year

UK Knitwear 2.9 4.1 7.0 5.8 10.0 (1.7) (3.0)

US Knitwear 1.6 24.4 26.0 32.0 34.0 (7.6) (8.0)

Home Furnishings (PL) 13.0 12.5 25.5 11.9 23.1 0.6 2.4

Central - - - - - - -

Ongoing 17.5 41.0 58.5 49.7 67.1 (8.7) (8.6)

Home Furnishings (Br) 6.6 4.9 11.5 9.6 20.2 (4.7) (8.7)

Reported 24.1 45.9 70.0 59.3 87.3 (13.4) (17.3)

• UK Knitwear factory loaded through to year end with lower value business taken to maintain production

• US Knitwear sales reduction reflects order book position at end June.

• Home Furnishings (Private Label) increase consistent with first half performance

• Home Furnishings (Branded) reduction reflects phased exit from the business

13


Full Year OutlookOperating Profit /(Loss)

£ million

H1

Actual

H2

Broker’s

Forecast

2009

Year

Estimate

2008

H2

2008

YEAR

+/-

H2

+/-

Year

UK Knitwear (0.1) 0.3 0.2 1.1 1.5 (0.8) (1.3)

US Knitwear (1.2) 2.9 1.7 4.4 3.6 (1.5) (1.9)

Home Furnishings (PL) 0.2 0.4 0.6 1.2 2.8 (0.8) (2.2)

Central (0.8) (1.3) (2.1) (3.4) (5.0) 2.1 2.9

Ongoing (1.9) 2.3 0.4 3.3 2.9 (1.0) (2.5)

Home Furnishings (Br) (0.9) (0.6) (1.5) (1.1) (2.4) 0.5 0.9

Reported (2.8) 1.7 (1.1) 2.2 0.5 (0.5) (1.4)

• UK Knitwear profit reduction reflects low margin business accepted to maintain production

• US Knitwear profit reduction a function of their lower sales

• Home Furnishings (Private Label) shows some margin recovery from weaker USD with higher second half profit on lower sales.

• H1 central costs benefited from King Deer receipt of $0.5m. A further payment of $1.0m is due at the end of December but is not assumed in the forecast.

• Home Furnishings (Branded) losses decline as the business is exited.

14

DAWSON INTERNATIONAL PLCPensions

UK US TOTAL

Scheme membership

Active

Deferred

Pensioner

155(i)

1,849

1,503

-

149

849

155(i)

1,998

2,352

Total 3,507 998 4,505

IAS19 valuation (December 2008)

Assets

Liabilities

£m

93.7

(98.2)

£m

4.7

(6.9)

£m

98.4

(105.1)

Deficit (4.5) (2.2) (6.7)

(i) Includes 84 members at Todd & Duncan who became deferred members on the sale of the business

15

DAWSON INTERNATIONAL PLCPensions

The IAS 19 deficit has fluctuated between £30m and £5m in the past 5 years. There is a disconnect between the IAS19 valuation and the actuarial valuation which

forms the basis of any recovery plan. The 2009 triennial actuarial valuation is in progress and is likely to result in a

significant increase in the deficit because of • asset values at the valuation date (April)

• revised mortality assumptions

• guidance from the Regulator in assessing the covenant of the Company

Associated costs (professional fees and PPF levy) are high Key objectives are therefore

• To manage down the size of the schemes by offering e.g. enhanced transfer values, cash commutations, early retirement options.

• To agree a recovery plan and schedule of contributions with the Trustee and Regulator based on the principle of affordability but recognising the need to invest in and grow the Company and provide shareholders with a return on their investment.


16

DAWSON INTERNATIONAL PLCSummary

H1 2009 results disappointing• Operating loss from Todd & Duncan in normally profitable period• Losses from Todd & Duncan disposal and Home Furnishings (Branded) exit• Knitwear businesses experienced significant reduction in demand due to economic conditions• USD exchange rate impacted Home Furnishings (Private Label) margins

Continuing operations1 expected to be in operating profit for the year despite economic conditions• However insufficient to offset losses from T&D and Home Furnishings (Branded)

Completion of the Todd & Duncan sale was a critical achievement • Leaves Dawson with a strong core of businesses with a history of excellent returns • Platform for future growth

Managing the pension scheme deficits is a key objective• Reducing the overall size of the schemes• Agreeing an affordable recovery plan/schedule of contributions• Minimising associated costs

Documents

DAWSON INTERNATIONAL PLC HALF YEAR RESULTS 2009 David Bolton, Chairman Andy Bartmess, CEO Dave Cooper, CFO