Dyson may only operate with fiber in future

Jan. 27, 2010
HIGH TECH materials firm Dyson is believed to be on the verge of a debt-for-equity swap with its banks, after reporting "significant progress" on debt talks.
The Sheffield-based company, which has struggled with a heavy debt burden and its exposure to the automotive industry, yesterday gave the clearest indication yet that its banks are willing to keep the 200-year-old company trading.
"Significant progress has been made in ongoing negotiations with banks and key stakeholders towards agreeing a solvent debt and capital restructuring," Dyson said in a statement.
A debt-for-equity swap is likely to mean significant dilution for shareholders. Dyson said it will write to shareholders with a set of proposals once detailed terms have been agreed.
However, the company declined to say whether it will be able to continue with a stock exchange listing. Its shares have been suspended since last summer.
Dyson has been locked in talks with its banks Lloyds TSB and Svenska Handelsbanken for about a year over refinancing its debt, which stood at 38.8m in March.
The Yorkshire Post understands terms on the restructuring have been agreed in principle but not yet signed.
Chairman Christopher Honeyborne yesterday insisted shareholders will play a part in the group's future.
"They (shareholders) have a future on a reduced basis but there will still be some outside shareholders," he said.
The chances of any other restructuring look remote. By March last year the group's assets had slumped in value to no more than 5m, from 38.1m a year earlier.
Its value by market capitalisation is just 5.8m.
If a debt swap goes ahead, Dyson would follow the path of Leeds-based consultancy WYG, which was recently forced to restructure its debts, leaving shareholders with just 15 per cent of its equity.
Former Dyson directors had complained of banks being obstructive over the refinancing, but Dr Honeyborne said the firm now has "a positive working relationship with the banks". "To make progress of this sort takes two to tango," he said.
Dyson added restructuring expert Julian Cooper has joined its board as interim chief executive.
"His experience of turnaround situations and restructuring companies is ideally suited to Dyson's needs," it said.
Alongside the debt talks Dyson has sold businesses and sites and cut jobs to reduce costs.
It said this plan continues to make good progress, and is due to be substantially complete by April.
By then the firm will be mainly focused on its Saffil fibre operation, which supplies engineered fibre products into a number of sectors, including iron and steel, with a "substantially reduced cost base and a much simplified business structure".
"There's definitely light at the end of the tunnel," said Dr Honeyborne.
Dyson said Saffil has been helped by a recovery in global automotive markets, winning significant new Ecoflex business.
Ecoflex increases the efficiency of catalytic converters and makes trucks more environmentally friendly, and this business is expected to lead to further growth in 2010 and 2011.
Dyson said Saffil sales in the three months to December rose by 18 per cent on the previous quarter and by 35 per cent on a year earlier. Meanwhile, Saffil headcount has been cut by 38 per cent.
The group added despite continued margin pressure, "the above factors have led to significant improvements in profitability and cash generation in the Saffil business and give cause for optimism on the future prospects for this business".
Lloyds declined to comment.
From ceramics to high-tech
Dyson's origins date back to the 19th Century, when a ceramics factory opened in Sheffield in 1810.
It became a leading producer of refractories and related ceramics products. It floated on the London Stock Exchange in 1958.
After predominantly supplying the steel industry, the group began diversifying in the 1970s into the general ceramics industry.
In 1999 it bough Saffil, a pioneer in heat-resistant fibres.
It continued with acquisitions over the next decade until the recession hit, forcing it to sell its headquarters in December 2008 for working capital.
Its shares were suspended in July, and in December it sold its loss
making kiln furniture business to management for 1, saving 70 jobs.