Sri Lankan clothing producer Timex is expanding its own brands in Asia and Europe as part of plans to move into higher margin areas to offset rising costs in its domestic manufacturing operations.

The manufacturer, which makes private label apparel for retailers like M&S, Arcadia, BHS and House of Fraser, is looking to increase the proportion of its own branded product to 35-40%, up from 20% at present.

The company currently operates two brands, A-Dress, which is sold through BHS stores in the UK, and Avirate, a retail chain which is set to have 12 stores by the end of the year, including five in Sri Lanka and seven in India.

It is also in talks to set up another brand for a retailer, the group's managing director Arshad Sattar told just-style.

The Avirate brand is positioned as a high street fashion line, offering a range of lingerie and clothing made in Sri Lanka and accessories that are manufactured in China or imported from Singapore.

In the longer term, Timex will look to expand the Avirate brand in Asia and the Middle East, giving it another source of revenue as "business is pretty bad" in the EU, said Sattar.

Sattar told just-style the shift into into higher margin brands is helping the company to keep its production in Sri Lanka, where wages are rising. "It's not just about running after cheap," he said. 

The idea for A-Dress came about because BHS wanted more branded products, "so Timex stepped in".

The A-Dress line is now in its third season, and currently focuses on cocktail and evening dresses. "It is doing really well, with good sell through," says Sattar. There are plans to extend the range into sportswear, casual clothing, accessories and jewellery. 

In terms of its private label business, Sattar says retailers "need ideas" from their suppliers. To that end, Timex operates design studios in the UK, the Sri Lankan capital Colombo, and another in the US as part of a strategic alliance. This means that it can come up with some 400 new styles every five weeks.

While he admits the loss of GSP+ preferential duty treatment has meant Sri Lanka lost market share, Sattar is adamant the company has "not lost hugely".

The EU withdrew the GSP+ facility in August 2010, blaming alleged human rights abuses during the final stages of Sri Lanka's 30-year civil war. The system had given the country's apparel exports zero duty access to the EU since 2005, and meant many exports faced a duty hike of up to 9.6%.

Sattar said the companies hit hardest by GSP+ were those producing "competitive price" products. But because Timex caters to a "very niche market", with orders ranging from 300-10,000 pieces, it "hasn't lost hugely".

The EU market is tough, Sattar said, "but we are still growing". Beyond the UK design and sales offices, the company has a sales office in Germany, and plans to open another in Spain to work with Spanish retailers.

It is also in the process of opening two new factories in Sri Lanka's northern province, the battlefront in the country's long-running civil war, which ended in 2009.

The two factories are set to begin operations from February 2013, and Sattar expects that from 2015 the region will begin to see large-scale development with a number of hotels set to open. 

"In the north where we are opening, the infrastructure is being developed at the moment, so it will be tough at the beginning but the government is working at speed to develop it," he explained.