Designer's ripping yarn

By IRENE CHAPPLE

Most of New Zealand's knitting machines were trashed as scrap metal more than a decade ago.

But in a cavernous Otara factory a cluster of machines has continued to chug through the years - proving there can be life after tariff cuts.

Around 30 of them now pump out 2 million metres of fabric a year and, in dramatic contrast to 2001, they recently provided owner Designer Textiles with a solid profit.

If business goes according to plan, another couple of dozen machines kept out back may be revved back into life.

So how did Designer Textiles survive the loss of protection in the eighties which decimated so many other textile companies?

Managing director Murray Clarke gives a wry smile. In the last few years, this company has been flipped inside out. During restructurings of the last two years, 40 people have been made redundant, leaving just over a hundred employees. Half the company's machines were sold or scrapped, and part of the company's land was subleased off.

Cotton is no longer the focus for this plant. It was, until the tariffs of the 80s were ground down and an influx of cheap foreign goods flooded the New Zealand market.

During that time, nine of the country's dozen or so knitters were pushed out of business, and within the last eight years Clarke estimates his company's cotton production dropped by two-thirds, although it remains New Zealand's largest knitter.

Indeed, since its NZSE listing in 1993 Designer Textiles' parent company, Designer Textiles New Zealand, has struggled.

Its share price high of $2.20 was reached seven weeks after listing and for most of the time since then, it has slid downward. But now - with the clout of fresh management and majority shareholder George Gould, who bought in during 2000 - Designer Textiles is capitalising on ideas that germinated some time ago.

Six years ago the subsidiary company was playing with the idea of exporting merino to the United States.

Just over two years ago it struck a deal with the New Zealand Merino Company. The merino marketer now offers Designer Textiles marketing expertise and access to research.

Designer Textiles is forging into the multibillion-dollar United States sportswear market, and can offer the merino growers a consistent price and security of sales.

"We were looking for something with a New Zealand story," says Clarke, who takes his US customers on trips to the South Island to show them the merino sheep. Marketing and sales staff have also been employed overseas as the company targets a close relationship with its consumers.

In a shiny new marketing booklet, Designer Textiles blatantly rides on New Zealand's international image: "Because we source merino only from the unpolluted isolation of New Zealand's Southern Alps," it says, "we know it is the whitest, purest fibre, recognised as the most superior in the world."

Designer Textiles' ideal is to have a swing tag, recording : "Designer Merino", for its 200-odd clients, who have their own garment brands. A swing tag alongside the retailer's brand would add value to garments, bumping up the premium.

Designer Textiles is now pushing $10 million in merino garment sales a year, on top of its traditional output of cotton, polyester and nylon output. Alongside its knitting and dying facilities, it has added a garments division.

Without merino, Designer Textiles could have been another of the textile industry's failures.

Clarke recalls company meetings when he began at Designer Textiles four years ago where, "We ended up talking about machine number 23 and how to make it work better. It was not about the market. Now, it's very market focused." And merino, he says simply, "is the future".

The brighter outlook is attributed by the company largely to chief executive Philip Moller, who was brought in after Designer Textiles New Zealand purchased his family business, Mollers Textiles.

That company already had a successful niche market in ready-made drapes, and Moller, with a mandate from Gould, led the restructuring of Designer Textiles.

Physical changes to Designer Textiles, says Moller, were easy to make. The difficult part was changing the culture. "We've taken the Moller example - it is more of a solutions provider. It's about providing more than just what is coming out of the mill."

Designer Textiles New Zealand's nous is starting to show in the books.

Recently it cracked its highest share price for five years after turning 2001's loss of $11.6 million - after $12 million in restructuring costs and write-offs, including $3.5 million of good-will - into a profit of $3.26 million.

Revenue rose from $57.99 million to $63.08 million and debt was almost halved.

The sharemarket responded enthusiastically. Last year Designer Textiles was the best-performing share on the NZSE with gross returns of 161 per cent.

A breakdown of the subsidiaries' figures are not available, but Designer Textiles turned a profit in the latest year, in sharp contrast to a disastrous previous year.

"It was a major turnaround," says Clarke.

In a sector that was, for years, lumped with the sunset industry tag, Designer Textiles appears to be showing exactly the gumption lauded during the Knowledge Wave summit. It is moving from a staid manufacturing mentality to the slick business of marketing.

According to industry consultant Paul Blomfield, Designer Textiles is an example of the old school adapting to the new. "They have focused on the products that are exportable, and merino has given them a competitive advantage. Cotton was a road to nowhere."

New entrants into the sector - which lumps textiles, clothing, footwear and carpet manufacturing together - are successfully focusing on niche markets, using aggressive marketing, says Blomfield.

The Government is also recognising the industry as having huge potential. The sector itself has set a goal of increasing exports to $1 billion in the next five years, up from $390 million at the end of last year.

An industry development organisation is being advocated, to get firms to co-operate so they can target new customers in new markets, build distribution networks, improve management and develop an industry ethical behaviour code.

Industry New Zealand has now agreed to seed fund an industry body to a maximum of $100,000.

Moller is currently looking at the industry body's strategy. He's cautious about signing up, saying it may not be necessary for his company.

If he joined, it would be to support the industry. But for Designer Textiles: "We've got our own business plans," says Moller.