Pittards posts positive results
Tanning group Pittards has announced an operating profit of £1.35 million for 2008, compared to a loss of almost £2 million for the year before.
Company chairman, Stephen Boyd, commented: "I am pleased to report that the outturn for 2008 was much better than 2007 as the strategy we put in place in recent years is now coming to fruition. We have continued to reduce our UK cost base and have been assisted by the rapid weakening of sterling in the final quarter of the year."
After recognising bank interest and the loss on foreign exchange contracts, which had been taken out earlier in the year to try to protect the Group against any further weakening in the US dollar, the operating profit was reduced to a small operating loss before taxation of £0.367m.
Revenue amounted to £26.4m, lower than the £28.8m in 2007 due mainly to lower sales of leather for casual footwear and sports gloves. Sales were spread evenly across the first and second half of the year although the strengthening dollar increased the resultant sterling revenue. Export sales made up 91% of revenue.
Sales of dress glove leathers held up well in the year with strong demand from major customers as the colder weather started early in the season in both Europe and the US. Sales of military leathers were stable and Pittards continues to bid for new contracts as and when tenders arise. Sports glove sales were generally lower with the baseball sector particularly affected.
Bovine leather sales were lower than in 2007, but new linings products designed and manufactured in Ethiopia enabled the group to rebuild some customer relationships. In addition a new in-house 'innovation' team has developed a new range of leathers for leathergoods.
The transfer of production of some lower-priced leathers to ETSC, the tannery that the group manages in Ethiopia, has continued steadily. Mr Boyd said this move had made it easier for Pittards to compete with global competitors and allowed it to increase market share in some sectors.
The ETSC business continues to operate profitably following logistical and manufacturing improvements Pittards has introduced since taking over the management of the facility in late 2005. The Ethiopian government has recently introduced strict tariffs aimed at discouraging the export of raw and wet blue skins and hides. Pittards expects that this will bring further opportunities for ETSC as, unlike many tanneries in that part of the world, it has the capacity to process skins and hides through to finished leathers in volume. The tariffs should also lead to better availability of material as more skins should stay in the country for processing there.
In January 2008 the company signed a joint venture to form Pittards Global Sourcing Private Limited Company in Ethiopia in order to produce and source quality leather garments and other leathergoods in a low-cost environment. Work has now commenced on building new premises for this venture on the outskirts of Addis Ababa, and the Pittards Ethiopian office will be housed in the same building in due course.
Production at the company's Taiwanese subcontracting partner was significantly reduced over 2007. There were major changes in Chinese duty drawback procedures that, according to Mr Boyd, "appear to have unsettled the shoemaking supply chain". Additionally the impact of the global credit crunch on major footwear brands has caused them to order more cautiously and to reduce their stock levels.
The Pittards Shop, aretail venture opened in spring last year at the Yeovil site, is developing well as a new income stream and continues to broaden the range of products it offers, the chairman said. He called this "an important development for Pittards because for the first time we are making and selling our own branded products direct to the consumer". It has also added a distributorship for Tandy leathercraft products to the hide and skin store.
To complement this, in November the company took the opportunity to purchase a small business called Daines & Hathaway, which had been manufacturing quality leathergoods in the Walsall area of the English Midlands since 1922. There are many synergies between Pittards and Daines & Hathaway in terms of brand integrity, quality and heritage. "We believe there are strong opportunities to leverage the Daines & Hathaway brand both with premium UK retail customers and the export market," Mr Boyd commented.
Turning his attention to this year, he said: "The current turbulent economic climate is unprecedented, and it is therefore very difficult to predict how 2009 will turn out for the company. The stronger US dollar will be an advantage to us. We are working closely with our customers and are responding quickly and creatively to any changes in their requirements. In this recessionary climate we anticipate volumes will be compromised to some extent. We remain committed to reducing costs in all areas of the business and improving efficiencies whilst maintaining the high levels of innovation, quality and performance for which Pittards leathers are renowned."
