A success born out of failure

by BUSINESS STAFF

As administrators of the doomed Dawson International Group of textile and knitwear businesses continue the process of winding up and dissolving the failed giant, a survivor of the mayhem which engulfed a vital Borders industry a decade ago continues to prosper.

Back in 2012 at the time of Dawson's spectacular collapse strong fears were being voiced over the possible fate of Hawick based Barrie Knitwear and its workforce of 176 which had been producing top of the range cashmere garments for iconic French fashion house Chanel.

But it was Chanel themselves who saved the day by purchasing Barrie - founded in 1903 - in a £4.8 million deal with the Dawson administrators. The price, which was not disclosed at the time, looks to have been a real bargain given subsequent events.

Today Barrie continues to manufacture premium cashmere goods for the world's leading fashion brands with 266 on the payroll, consistent profits and a healthy order book.

However, the latest set of accounts show Barrie has not escaped the ravages of Covid-19, and there are concerns over the fall-out from Brexit.

The figures for 2020 show turnover at £16.298 million (down £2.449 million or 13 per cent on the 2019 total of £18.747 million. As a result last year's operating profit of £604,000 was considerably less than the £1.178 million recorded the previous year.

The company's report says turnover fell due to lower demand following the Covid outbreak. There was a five week halt to production which impacted manufacturing efficiency.

"The company welcomed the announcement of a trade deal between the UK and the European Union meaning there are generally no tariffs on goods traded between territories", adds the report. "Nevertheless, there remains a risk to the business from additional bureaucracy for the company and its customers seeking to move goods across borders. The economic implications resulting from the impact of Brexit are largely beyond the control of the company".

In a section covering the effect of Covid, Barrie's directors explain: "Following a strong start to 2020 the pandemic had a significant impact on the business, resulting in the temporary closure of production facilities and boutiques of our customers worldwide. There has been no use of government support schemes such as 'furlough'.

"The full financial impact of the health crisis is impossible to predict with a high degree of certainty. Our production facilities and boutiques are open and operating in accordance with local government guidelines. Furthermore, we have seen a good increase in orders from customers since summer 2020 and for 2021 are forecasting a return to similar levels of turnover and profitability experienced prior to the pandemic.

"The company continues to have a strong balance sheet and benefits from the support of its parent Chanel Ltd."

Barrie, with production centres in Hawick and Arbroath, reported an annual wage bill of £7.3 million for 2020. The sole survivor from the Dawson wreckage continues to flourish.

Meanwhile administrators of Dawson companies which once employed 12,000 people and whose presence was inextricably linked to the economic wellbeing of the the Scottish Borders, have produced their latest 'progress reports' on the administration procedure with the end of the saga apparently in sight.

Dawson's core business was also in cashmere which expanded significantly in the 1960s. A programme of diversification in the '70s and '80s fuelled growth in the UK and in the USA and saw annual turnover reach £400 million.

But problems flowed from the acquisition of businesses in the US, sharply reversing the fortunes of the textile giant, according to insolvency experts.

A report produced shortly after the administration began includes the following: "In 1986 a shower curtain manufacturing business was acquired and in 1989 an apparel business was purchased. These businesses were disposed of at significant loss in 1994.

"Compounding this problem, the textile industry, and in particular the cashmere industry developed in China and eroded the margins the (Dawson) group was able to generate in its businesses. Over the period 1999 to 2011 most of the group's businesses, including Todd & Duncan, Pringle and Ballantyne were sold to repay debt".

By 2012 the group comprised a UK knitwear business, Dawson International Trading Ltd., and a US sourcing business, Dawson Forte which brought Chinese-made cashmere goods into the States for local retailers.

But as the administrators make clear, the major issue for insolvency was the UK pension scheme liabilities and associated costs. In the years leading up to 2012 the combined deficit was fluctuating between £5 million and £30 million annually. It had reached £129 million when the administrators moved in.

Documents show the pension scheme actuary served contribution notices for the £129 million - the full buy-out deficit of the UK schemes - on the company.

"The directors concluded there was no alternative to appointing administrators for both companies". By now Barrie Knitwear was the only operational part of Dawson's once vast UK textile and cashmere operation.