Pittards firm up Asian base

During the APLF show, Pittards signed a partnership and licensed manufacturing agreement with the Taiwan-based leather group Tehchang Leather Products Co Ltd. This is part of the Pittards restructuring programme which will see the closure of the Leeds tannery with production of bovine leather switching to Yeovil and also to Taiwan. A similar move was undertaken a year earlier with some of the Yeovil production of hairsheep reverting to Ethiopia. The choice of Tehchang is an excellent one. Owned and run by the Pai family, this is a progressive organisation which found success by pursuing the global footwear brands. Founded in 1982, they use US raw and wet-blue hides (70-75% raw) and work throughout the year, only shutting down for the New Year holidays. The beamhouse operates on a 24-hour daily basis while the rest of the tannery conforms to a normal five-day working week. They expanded into China eleven years ago by opening a finishing plant in Dongguan. A tannery in Zhuhai followed in October 2003 and they are now building the second phase which includes a beamhouse. Completion is scheduled for July/August this year. They currently finish from crust in Dongguan using some of their own production and importing basic colours from New Zealand and Argentina. Pittards and Tehchang have been working together for more than a year to broker the deal. 'We see the new arrangement as a marriage of the strengths of Pittards and Tehchang which will bring real benefit to both parties', says Pittards footwear leather sales director Chris Sudborough. 'Product development will continue to be driven from our UK manufacturing facility which will become our long planned centre of excellence. Through our Asian partnership with Tehchang, we will be producing premium category bovine leathers with all the unique technical advantages that have made Pittards the world leader in specialist leathers.' Establishing a key Asian partnership is one of the main elements in Pittards long term business plan which includes moves to reduce UK costs whilst offering a broader range of services to customers. Stephen Boyd, executive chairman of Pittards, said: 'Tehchang has an excellent reputation and we have already developed a strong partnership. The new agreement will help both our businesses to progress and will also be of real benefit to our customers. It really is a win win situation for everyone concerned.' The news came hard on the heels of an announcement that Pittards are to restructure finance and operational bases. They have been struggling with increased competition in the international markets and a major pension deficit. As a result, Boyd announced that the company intends to enter into a company voluntary arrangement in order to enable the company to move forward. 'It is a time of immense change for Pittards', said Boyd. 'In recent months we have been working on a new business model to enable the company to compete in an increasingly competitive global market. We have downsized our staffing and with the closure of the Leeds factory and the relocation of its activities to Yeovil and overseas, the company will become profitable. We will continue to invest heavily in our research and development division at our Yeovil head office to ensure we remain world leaders in the development of technical leathers.' Entering into company voluntary arrangement is a complex step which will allow Pittards to continue without interruption while the pension deficit is addressed. Pittards have agreed a deal with the Pension Protection Fund securing for the pensions scheme a lump sum and share allocation and enhanced security over the Yeovil factory to protect some of the shortfall. As a result of the CVA the trustees will apply for entry into the PPF. According to Boyd, 'Entering CVA is a radical step which means that trading in our shares is suspended. However, without doubt it is the best way to deal with the current situation facing the company and its creditors. It is good news for everyone involved with the company. All external trade creditors will be paid in full, shareholders will have a continuing stake in the company and the pension scheme will receive a cash injection. Our operations will continue, our workforce will have jobs and, as long as our pension schemes meet the criteria for entry to the PPF, members' benefits will be protected to the extent provided under PPF regulations.' The arrangements are expected to be finally ratified at a shareholder meeting in mid April. The company will remain AIM listed. Pittards annual results show an operating loss for the year of £2.5 million compared with £4 million for 2004. After taking account of an exceptional gain of £2.2 million from the October sale of their Kinghorn, Scotland, property and the exceptional costs of £7.9 million which include provisions for the closure of the Leeds site, the loss on ordinary activities before interest was £8.2 million. Turnover was up by 6.2% in comparison with sales by the same activities in 2004 to £62.1 million. Over 90% was for export, a record level for Pittards.