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Designer Textiles Limited Reports Strong Results


Designer Textiles Limited Reports Strong Annual Results

Outlook of positive growth for leading fashion management company

AUCKLAND, New Zealand – Thursday, 26 August 2004 – Designer Textiles Limited, a leading Australasian fashion management group, today announced an audited net surplus after tax for the 12 months to 30 June 2004 of $3.701 million, an increase of 7.5% on the $3.443 million reported for the 2003 year. The operating surplus before amortisation and tax of $6.13 million was a 37.4% improvement. The lower increase in net surplus after tax was due to tax credits available last year and amortisation of goodwill.

Designer Textiles Managing Director, Mark Bilton, said that whilst the bottom line result was in line with expectation, underlying performance was significantly ahead of last year. He referred to improved performances from Designer Textiles International, Mollers Homewares and the acquisition of Michele Ann, which has performed strongly since its purchase in December last year. He said that although Logan Textiles incurred losses in the first six months, it has now stabilised to a break-even position.

“It is a pleasing result to deliver our shareholders with earnings per share of 11.5 cents. This compares with 9.8 cents for the previous year and amounts to an increase of 17.3%.”

“During the past year we have acquired both the Logan brand and Michele Ann and have sourced new manufacturing channels in China and Pakistan,” Mr Bilton said.

“We have also continued to see our merino garment business flourish with growth in the active outdoor and leisurewear markets. Mollers Homewares has now established an excellent reputation as an outstanding marketer of soft furnishings.”

Highlights during the 12 months include:

• Following a review of all four businesses, new strategic plans have been developed to drive the businesses forward with an emphasis on growth and a focus on core competencies;

• Selection of a leading Enterprise Resource Planning technology infrastructure to support the group’s existing manufacturing business processes and to position it for global expansion;

• Extension of Mollers Homewares from ready-made curtains and nets into soft furnishings and linen;

• Acquisition of Michele Ann in December 2003 and the opening of a second factory in China by its supply chain partner;

• Designer Textiles International sourcing garments in China from Michele Ann’s supply chain partner;

• Development of the fabric brand Merino Advanced Performance Programme (MAPP) product – a warm and completely natural merino fabric range suitable for use in outdoor active wear.

Mollers Homewares

In addition to increasing its onshore capacity to meet growing production demands for curtains, the company has successfully expanded into soft furnishings and linen, including duvets, towels and fully-lined curtains.

To support the extension of its range, Mollers has established offshore manufacturing supply chain partners in Pakistan and China for non-curtain products. The company is now also exporting directly from China into Australia, substantially streamlining the supply chain and reducing costs.

The Warehouse New Zealand Limited recently acknowledged Mollers by awarding the company the coveted “Manufacturer of the Year” award for 2004. “We are proud of our longstanding relationship with The Warehouse,” Mr Bilton said.

Designer Textiles International

Sales of merino garments continued to show strong growth.

“We believe merino products have enormous potential in both the fashion wear and active leisurewear categories,” says Bilton. “Merino’s popularity in the fashion sector continues to flourish, but we are now putting a greater emphasis on developing products for the fast moving outdoor active wear market. The 100% merino MAPP branded product is one example of this focus.”

Michele Ann

Michele Ann, a leading supplier of women’s fashion wear, has been successfully integrated into the group since it was acquired in December last year. Since its acquisition, Michele Ann’s partner has set up a second factory in China to meet the additional requirements of Michele Ann, enabling it to extend its offering by supplying denim apparel. Production of Logan branded clothing is also now being handled by Michele Ann, resulting in greater efficiencies in production and delivery.

In New Zealand, the Logan brand of clothing is now being distributed through The Farmers Trading Company Limited.

Logan Textiles

A key achievement for Logan Textiles in Brisbane has been the appointment of a new management team and a restructure of operations aimed at improving the company’s financial performance.

A substantial reduction in operating costs has helped bring this business back to a break-even position in the last few months of the year. Emphasis will now switch to growing sales levels.

Financial Position

The financial position of the company remains strong. Shareholders’ equity was $17.698 million compared to $12.869 million last year. The increase includes $2.034 of revaluation increase on the land and buildings situated at the Lovegrove Crescent, Otara, following an independent valuation of the site. Equity as a percentage of total assets of $48.451 million was 36.5% at 30 June 2004.

Net borrowings increased by $5.018 million, from $10.138 million to $15.156 million as a result of the purchase of Michele Ann Limited.

Cash Flows

Net operating cash flows were strong at $5.046 million for the year. This compares with $3.0 million last year.

Dividend

The directors have declared a final dividend of 3.0 cents per share, fully imputed for tax purposes. The dividend paid is approximately 25% of net surplus after tax, as indicated at the time the interim financial results were announced last February. The directors reaffirm that the company is focussing on long term growth opportunities rather than short term dividend yield. The record date for the dividend will be 17 September 2004 with payment being made on 24 September 2004.

Outlook

Looking ahead, Designer Textiles Limited is now in a position to focus on its growth as a fashion management company and to further develop the core competencies of its businesses.

“Our key focus is growth – both organic expansion into new products, categories and ranges which extend our existing offering and through the acquisition of textile related businesses,” says Bilton. “In achieving this, we will continue to ensure our business strategy remains balanced to minimise risk whilst continuing to diversify and expand.”

“We will retain local production where it is internationally competitive. With the international trend towards the removal of trade barriers and tariffs, we will also look for a competitive advantage in sourcing from cost-effective manufacturing facilities overseas. These trends are also creating exciting new opportunities in global markets in addition to the existing ones we have in New Zealand and Australia.”

“With increasing pressure on margins we are moving to a value added model that will help us provide complete solutions for distributors, retailers and consumers with an emphasis on design and delivery.”

Issue of Options to Managing Director

The company will issue options to its Managing Director, Mark Bilton, subject to shareholder approval at the forthcoming annual meeting.

Further details will be announced in due course, however, the proposal will be that 300,000 options will be issued with an exercise price of $1.20, and a further 400,000 options will be issued with an exercise price of $1.53.

About Designer Textiles Ltd

Designer Textiles Limited is a fashion management group comprised of four fashion clothing and home furnishing companies including:

• Designer Textiles International, New Zealand’s world leading supplier of high quality fine merino fabrics and garments;

• Mollers Homewares, a marketer of home furnishings;

• Michele Ann, specialising in the design and supply of fashion garments;

• Logan Textiles, specialising in the design and supply of lycra fabrics for swimwear, fashion, sports and intimate apparel.


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