Clothing manufacturer the Dewhirst Group is in a more optimistic mood - even though its major customer, Marks & Spencer, last week announced plans to axe most of its overseas operations.

More than 90 per cent of women's wear, men's wear and children's wear manufactured in Dewhirst's factories goes to the troubled high street giant. The company says trading conditions continue to be difficult in a market suffering from price deflation and pressure on margins. Results for the year to January 12, however, show pre-tax profits up to £22.3m from £18.8m the previous year, and a company spokesman says the latest decision by M&S is not all bad news.

"It's true that the announcement made clear there would be less space for clothing after the overseas closures, but M&S made a very positive statement on supplier relationships. The decision to focus on clothing, its core business, is also good news for us," said the spokesman.

Over the last 12 months the company has increased market share with M&S in ladies' wear, following the demise of other suppliers. As a result of changes in fashion, trousers and denim sold particularly well. Light sewing and tailoring saw slower growth. Dewhirst said the children's wear division had had a good year, although profits were down following a reorganisation which saw its withdrawal from girls' wear at the end of the year. In the men's wear division, better suit and trouser sales offset disappointing formal and casual shirt sales. Corporatewear had a successful year after the group managed the contract to clothe the British Olympic Team.

Only tailored products are now manufactured in the United Kingdom, however. Dewhirst has been moving production to low cost countries overseas. At the end of the financial year, UK manufacturing accounted for only 30 per cent of sales.

By Clive Hinchliffe.