Troubled textiles conglomerate Coats Viyella has unveiled a massive shake-up of its UK and worldwide operations and management.

Issuing a warning that year-end group operating profits may slump by £40m against last year, the company said it would slice its European garments division from its global engineering and textile manufacturing unit.

European clothing and home furnishings will be demerged into a separate public company to be tagged Viyella.

It will include retail clothing brands like Jaeger and Viyella, as well as supply products for Marks & Spencer.

Thread and zip manufacture and precision engineering will be carved off into a company called Coats, which will also manage Coats Viyella India, in which the company holds a 51.5% stake.

It is planned the precision engineering business will be demerged later.

Coats will move head office functions from Saville Row in London to Stockley Park, near Heathrow Airport, where the thread operation is based. Precision engineering is expected to stay in Alcester, Warwickshire.

Viyella will be chaired by current group chairman Sir David Alliance. The company is scouring the market for a new chief executive.

Sir David said: "The demerger of Viyella, a dedicated UK European clothing and household textiles group, will enable its new management team to focus on its core activities, thereby creating significant opportunities for improved performance across its businesses."

The company is also to quit its non-Marks & Spencer retailer supply company, Counterpart.

Michael Ost, appointed group chief executive of Coats Viyella in May, will continue as chief executive of Coats.

He said job losses among the 65,000-strong workforce would not necessarily arise out of the demerger, but he warned the sale of Counterpart could result in job cuts for those in divisions where no buyer could be found.

The company estimated the full year group operating profits before restructuring costs would be around £40m below the £174.3m posted in 1996.

Restructuring costs for 1997 are expected to tot up a bill of around £30m, compared to £55m in 1996.

A strong pound and volatility in South East Asia and South America hit profits.

And provisions against Berghaus losses, Counterpart, Calprina and a further subsidiary, Australasian Crafts, were expected to cost up to £20m.

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