Dawson International has reported an improved performance in the first half of the year, but says it is con-sidering �all possible options� for its Todd & Duncan spinning mill at Kinross.

Dawson International has reported an improved performance in the first half of the year, but says it is con-sidering "all possible options" for its Todd & Duncan spinning mill at Kinross.

Dawson is also still in negotiations with its pension fund trustees over an annual cost burden of some £1.75m, after reporting a half-year operating loss of £1.1m.

The cashmere group in July acquired two new board members, successfully installed against the then board's wishes by new 29% shareholder Peter Gyllenhammar through his Leeds Group.

Dawson chairman Mike Hartley said the board had since met with the new directors present, adding: "There is a positive working relationship, I have had a number of meetings with them."

He said Leeds Group had still not given any indications as to its strategic intentions. The shareholding was acquired at 1.5p. Dawson shares have since rallied and were unchanged at 2.25p yesterday.

Hartley said: "I am encouraged by the performance of all of our businesses in the first half of 2008. Despite challenging economic conditions turnover has increased from £40.1m to £41.7m and the first-half operating loss before non-recurring items has reduced from £3.8m to £1.1m with all divisions improving their results."

Net debt increased by £4m, compared with an £8.7m increase a year ago before the group netted £3.5m from the sale and leaseback of its Lochleven Mills headquarters at Kinross.

That deal prompted questions over the future of the site's trading business Todd & Duncan, which employs 250.

Andy Bartmess, chief executive, commented: "We have some businesses now that are operating very well." He said the group's Barrie and US-based Forte knitwear businesses were trading "well by any standards" while the home furnishings arm had performed well following the sale of the branded Dorma business, leaving only private label bedlinen manufacture.

At Todd & Duncan, he went on, "we have made a great deal of improvement, we still have a way to go." As well as operational changes, the group was "taking a look at corporate activity as well".

Sales at Todd & Duncan increased by £1.2m to £15.8m while operating profit, before reorganisation costs, improved from £100,000 to £700,000.

The sale of the Dorma trademark to Dunelm group for £5m will incur cash exit costs of £3.3m.

Bartmess commented: "Dorma was a great brand and had good promise but unfortunately we didn't have an appropriate distribution network, or the resources to get into (that). We were in a situation where we were trading mainly through concessions, which is very expensive."

On whether Dawson would be able to survive as an entity, Hartley said: "It has to survive as an entity it is a total entity with a substantial pension scheme which is linked to that entity, we have got some good trading businesses within that."

He said the scheme's accounting deficit had reduced to £4.7m, while the group's cash contributions deferred last year had now caught up. The total burden including the Pension Protection Fund levy and other costs was around £1.75m a year.

Hartley added: "We hope that burden will decrease a bit but it will be a significant burden this is very much a legacy pension scheme."

The scheme had some 3000 members, only 150 of whom were active. The group was continuing to investigate with the trustees "all the possibilities" for managing the liabilities.