TIDMSWL
RNS Number : 9763F
Swallowfield PLC
27 February 2018
Swallowfield plc
("Swallowfield" or the "Group")
Interim results
Swallowfield plc, a market leader in the development,
formulation, and supply of personal care and beauty products,
including its own portfolio of brands, announces its interim
results for the 28 weeks ended 6 January 2018
GBPm unless otherwise stated 2018 2017
------------------------------- --------- ---------
Reported results (1)
------------------------------- --------- ---------
Revenue GBP40.0m GBP39.7m
------------------------------- --------- ---------
Underlying operating profit GBP3.40m GBP3.07m
(1)
------------------------------- --------- ---------
Adjusted basic earnings per
share (1) 13.7p 11.8p
------------------------------- --------- ---------
Statutory results
------------------------------- --------- ---------
Revenue GBP40.0m GBP39.7m
------------------------------- --------- ---------
Operating profit GBP3.00m GBP2.20m
------------------------------- --------- ---------
Basic earnings per share 13.1p 9.7p
------------------------------- --------- ---------
Total dividend per share 2.0p 1.7p
------------------------------- --------- ---------
Net debt GBP7.0m GBP5.5m
------------------------------- --------- ---------
(1) Underlying operating profit is calculated before exceptional
items, amortisation of acquisition related intangibles and LTIP
charges. Adjusted earnings per share is calculated using adjusted
operating profit, which is underlying operating profit less LTIP
charges.
Financial highlights
-- Group revenues increased to GBP40.0m (2017: GBP39.7m), as
expected and against a strong comparative period, driven by strong
growth (+25%) in owned brands.
-- Owned brands now representing 31% of Group revenues.
-- Manufacturing sales decreased by 6% against strong prior year
comparators as prior year launch volumes normalised as previously
signalled.
-- Contribution margin % improved, primarily due to increased owned brand sales.
-- Underlying operating profit increased by 11% year on year to GBP3.40m (2017: GBP3.07m).
-- Adjusted EPS increased by 16% year on year to 13.7 pence (2017: 11.8 pence).
-- Net Debt of GBP7.0m (2017: GBP5.5m), after final payment of
GBP1.85m deferred consideration on The Brand Architekts ("Brand
Architekts") acquisition.
-- Interim dividend increased by 18% to 2.0 pence (2017: 1.7 pence).
CEO Succession and Acquisition
-- A well-planned CEO succession process has been put in place
following Chris How's decision to step down from the Board to
pursue a non-executive portfolio career later in the year. His
successor, Tim Perman (currently group Brand Director, PZ Cussons
plc), will become Chief Executive on 1 July 2018. Chris will
continue full time until the end of the current financial year
during which he will assist and support the Company and Tim through
the handover process.
-- Acquisition of men's grooming brand 'Fish', a
well-established and successful style-led brand with distribution
in many UK retailers, financed via a new term loan.
Brendan Hynes, Non-executive Chairman, commented: "The first
half year has seen further, positive progress which continues to
make Swallowfield plc a stronger, more profitable business and
provides a solid platform for a well-planned CEO succession. Strong
momentum in our branded business, which will be enhanced by the
acquisition of the Fish brand and the steady underlying performance
in our manufacturing business, means Swallowfield is well
positioned to maintain its positive momentum."
Chris How, Chief Executive, commented: "We are pleased with the
continuing strong performance of the Group. Brand Architekts is
performing positively and combining well with the supply chain
expertise of Swallowfield to deliver, at pace, a stream of consumer
relevant new products to market which has translated into improved
profit margins for the Group. The exciting acquisition of the Fish
brand will further accelerate this positive momentum. The
capability within the manufacturing business to satisfy the
innovation, service and quality requirements of our customer base
has enabled us to secure a number of new contracts in the period.
This positions the manufacturing business to quickly return to
growth following the well signalled normalisation in sales for this
six-month period against strong prior year comparatives."
Operational highlights
-- Strong growth momentum continued in our portfolio of
owned-brands, boosted by strong Christmas gifting performance,
further retail distribution gains in the UK and Western Europe, and
several successful new product launches.
-- Manufacturing business maintained % contribution margins as
cost optimisation programmes and drive category focus offset
materials and labour inflationary pressure.
-- A number of significant new manufacturing contracts have been
secured and work progressed in the period in readiness for launches
in the second half.
-- Increase in working capital driven by stock build to support
new launches and later Christmas deliveries.
-- Further increase in Brand Architekts products produced in Swallowfield sites.
-- Further investment in brand marketing support (particularly
digital), organisational capability and operating efficiencies that
positions the business for sustained future growth.
-- E-commerce sales continued to grow significantly, albeit from a relatively modest base.
For further information please contact:
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Swallowfield plc
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01823 662
Chris How Chief Executive Officer 241
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01823 662
Matthew Gazzard Group Finance Director 241
------------------------- -------------------------- --------------
0207 496
Alex Price / Jen Boorer N+1 Singer 3000
------------------------- -------------------------- --------------
Josh Royston / Hilary
Buchanan / Sam Modlin Alma PR 07780 901979
------------------------- -------------------------- --------------
Business review
Group revenue growth in the period was 1% at GBP40.0m (2017:
GBP39.7m). This was driven by 25% growth in our owned brands
business offset by a 6% revenue decline in our manufacturing
business.
Branded sales growth was driven in particular by UK growth of
key brands Dirty Works, Dr.Salts and SuperFacialist and another
very successful Christmas gifting period. Internationally, good
growth in Western Europe was offset by softer sales in North
America. Increased focus on supply chain efficiency and an improved
mix resulting from a clearer brand portfolio prioritisation
strategy, supported an increase in contribution margin.
Sales in our manufacturing business reflect the well signalled
normalisation of volumes on a number of major new product launches
for global brand owners that peaked in the first half of the prior
year. Outside of this normalisation effect we were pleased to see
solid growth across the remainder of the customer base and a good
performance at the contribution margin level being maintained as
continued focus on our drive product categories and a series of
cost optimisation projects were able to offset broader inflationary
pressures on materials.
We are very pleased that during the period a number of
significant new contracts and product launches have been confirmed
and we have either commenced production or received purchase orders
in the weeks since the period end.
The net effect is that the Group made an underlying operating
profit of GBP3.40m, an 11% increase on the comparable period (2017:
GBP3.07m). Adjusted profit before tax increased by 19% to GBP2.84m
(2017: GBP2.38m).
The overall effective rate of Group taxation for the period was
19.0% (2017: 19.6%) of pre-tax profits. The current year tax charge
reflects standard UK and the Czech Republic rates of taxation.
This resulted in adjusted earnings per share of 13.7p (2017:
11.8p). An increase of 16%.
Progress vs strategy
Our business strategy, which is now well established, is to
drive growth by building two complementary value streams,
Manufacturing and Owned Brands, that leverage the common capability
platform of Group resources.
Our owned brands business develops and markets a portfolio of
personal care and beauty brands that are distributed across major
retailers in the UK and internationally. In this business we focus
on three strategic pillars:
-- New product development
-- Leverage Swallowfield resources
-- International expansion
Our manufacturing business formulates and manufactures personal
care and beauty products for a customer base that includes many of
the world's leading beauty brands. Within this business we also
focus on three strategic pillars:
-- Innovation, quality and service to global brand owners
-- Drive category focus
-- Cost base optimisation
The following is a review of progress against these strategic
pillars in the period:
Owned brands
The performance of The Brand Architekts portfolio acquired in
June 2016 continues to be very positive. The momentum is continuing
with all key brands in growth. The sell through of Christmas gift
ranges was particularly strong.
One of the key opportunities presented by the acquisition was
the critical mass it provided through a proven brand management
team. The original Swallowfield owned brands (Real Shaving Company,
Bagsy, MR., Tru) have prospered under this brand and retailer
focused environment and we are pleased to report strong combined
revenue growth of c. 50% across this part of the portfolio
New product development
Fast paced new product development that quickly identifies and
responds to market trends is a core element of the Brand Architekts
business model. 47 new products were launched in the reporting
period across 9 different brands. Particular successes include
SuperFacialist Hyluronic and Retinol ranges, Dirty Works Foaming
Sugar Scrub, which was one of only 3 winners in the Sainsbury's
Beauty Awards, and Quick Fix Facials Black Peel Mask.
Leverage Swallowfield resources
Further products in the Brand Architekts range have been
produced at Swallowfield Group sites in the period. A major
initiative to take further products into in-house manufacture is
already underway and will follow in the second half. On an
annualised basis we expect to be producing in excess of 1.5m units
of the acquired Brand Architekts brands at Swallowfield sites in
the next financial year.
Further investment and improvements in relation to our
e-commerce capability for key brands such as Dirty Works,
SuperFacilaist, Dr.Salts, Kind Natured and Quick Fix, is in place
with a dedicated team based in our new Exeter office driving strong
sales growth and developing engaging digital marketing
activities.
We continue to leverage our materials and packaging sourcing
network (including our China purchasing office), our knowledge of
best practice production processes, and our expertise in product
design and formulation to drive cost improvements. Further, we have
identified significant annual savings in freight and duty on
shipments from China by combining our expertise and our buying
power.
International Expansion
Highlights in the period include the launch of Dirty Works in
France and Belgium and the extension of our Bagsy brand in France.
This growth has been more than offset by some trading challenges in
North America.
Following our participation in major trade shows in 2017 there
are a number of new opportunities being progressed that we expect
will bring new customers and geographies in the months ahead.
Manufacturing
Innovation
Our manufacturing business relies on our ability to bring a
steady stream of innovative new products to our customer base. In
the period, we again increased the number of Swallowfield developed
new products introduced. Our innovation capability has been key in
securing our first orders with a major US global consumer group
who, like others, are extending their search for fast to market New
Product Development by partnering with third parties such as
Swallowfield.
Sales of plastic aerosol products continued to grow in the
period and we are pleased that this technology will be extended to
another brand in the second half of the financial year.
A significant refurbishment of our R&D laboratory in
Wellington has been completed including investment in specialist
equipment which will underpin future innovation activities.
Drive category focus
Personal Care Aerosols, Cosmetic Pencils, and hot pour products
remain our key focus. Further contract wins within the period,
supported by new product launches, will deliver ongoing growth.
Following new business wins last year, capital investment to
increase wood pencil capacity and cost efficiency at our Bideford
site has been fully completed. Further investment to deliver
improvements in capacity and cost competitiveness are scheduled,
with particular focus on Personal Care Aerosols which, although
recording a sales decrease in the period due to a peak period of
launches last year, continue to offer strong growth opportunities
based on our industry leading capabilities and reputation.
Cost base optimisation
Investment in line efficiency and automation programmes continue
to contribute to margin improvement across all sites. Of particular
note has been the introduction of robotics technology at our Tabor
site to manage labour costs and increase reliability. The expertise
of the supply chain has delivered real cost savings in the
Company's logistic requirements which have assisted in offsetting
ongoing material inflationary pressures. The agility within our
Group sites has led to global brand leaders recognising the value
of our established expertise and manufacturing capabilities which
has led to a further strengthening of our established
partnerships.
We have continued to steadily increase the number of Brand
Architekts products produced in-house and expect this to gain
further momentum in the second half.
Net debt and cash flow
Net debt increased from a year-end position of GBP3.6m to
GBP7.0m (2017: GBP5.5m) following the final contingent payment
(GBP1.85m) in relation to the 2016 acquisition of The Brand
Architekts. Working capital increased as material and component
inventory increased in the manufacturing business to support future
launches and ensure optimum customer service. Within the branded
business there was also an increase as finished goods stocks
increased to support continued growth and debtors peaked in line
with the timing of Christmas gifting deliveries.
Financing costs of GBP0.17m (2017: GBP0.16m) comprised interest
expense of GBP0.09m (2017: GBP0.09m) plus a pension scheme notional
finance charge of GBP0.08m (2017: charge GBP0.07m).
Capital expenditure was GBP1.1m which was GBP0.4m above
depreciation. We expect capital expenditure to be higher than
depreciation in this financial year as we have made a number of
investments to improve line efficiencies and support incremental
new customer contracts which will positively impact the second-half
and beyond.
Defined benefit pension scheme
The defined benefit pension scheme underwent its last triennial
valuation as of 5 April 2017. The deficit on a statutory funding
basis was GBP2.6m and the Group is entering into a revised deficit
recovery plan and schedule of contributions. The deficit reduction
payment will continue to be GBP108k per annum for the current year.
Whilst contributions are likely to increase next year, any increase
is expected to be offset in part by the reduction in the PPF
levy.
For accounting purposes at 6 January 2018, the Group recognised
under IAS19 'employee benefits', a deficit of GBP5.7m (June 2017:
GBP6.13m). The Accounting Standards require the discount rate to be
based on yields on high quality (usually AA-rated) corporate bonds
of appropriate currency, taking into account the term of the
relevant pension scheme's liabilities. Corporate bond indices are
used as a proxy to determine the discount rate. At the reporting
date, the yields on bonds of all types were slightly higher than
they were at 24 June 2017. This has resulted in marginally higher
discount rates being adopted for accounting purposes compared to
last year, which has been coupled with a small increase in
expectations of long term inflation, the combined effect leaving
the fair value of the scheme liabilities materially unchanged, with
the strong investment return performance increasing the value of
the schemes assets. This has translated into a decrease in
liability under the IAS19 methodology.
Dividends
The Board is pleased to announce that it has approved an interim
dividend of 2.0 pence per share (2017: 1.7 pence). This dividend
will be paid on 26 May 2018 to shareholders on the register on 4
May 2018.
The Directors' intention is to have a progressive dividend
policy that aligns future dividend payments to the underlying
earnings and cash flow of the business, taking in to account the
gearing and the operational requirements of the business.
Board succession
After five successful years leading Swallowfield, Chris How,
Chief Executive Officer, has informed the Board of his intention to
step down from his role in order to pursue a non-executive
portfolio career subject to the company finding a suitable
successor.
Advanced notice of Chris's intentions enabled the Board,
including Chris, to engage in a thorough search for his successor
and we are pleased to announce that Chris will be succeeded by Tim
Perman.
Tim will be appointed Chief Executive Officer with effect from 1
July 2018. He is currently Group Category & Brand Director and
Divisional Director, Global Beauty at PZ Cussons and has more than
30 years' experience in the consumer products industry. Previously,
he has held senior leadership roles at Seven Seas Healthcare,
Campbells Grocery Products and Bristol Myers Squibb. Tim will join
the business on 2 May 2018 and work for 2 months alongside Chris to
affect a smooth transition.
Chris How will continue full time until the end of the current
financial year on 30 June 2018 and will be available to help and
support the business in the following months.
Brendan Hynes, Non-Executive Chairman commented:
"Chris has been instrumental in the transformation of the
Swallowfield Group into a successful and growing business with
strong complimentary value streams in both owned brands and
contract manufacturing. He has also built a strong team who have
the skills and experience to scale the business further. I would
like to thank him for his outstanding contribution to the
development and growth of our Company during the last five years
and wish him every success as he moves into a new phase in his
career.
I am delighted that Tim Perman will succeed Chris. Tim's deep
understanding of personal care and beauty brands, combined with
first-hand experience of running high quality manufacturing
operations, means that he is well positioned to drive our continued
success, while ensuring a seamless transition."
Chris How, Chief Executive, commented:
"After five happy years with the Swallowfield Group, I have
taken the difficult decision to leave a highly successful business
and move onto the next stage of my career. The business has changed
beyond all recognition over the last five years and it has been a
real pleasure to have worked with a great team and to have played a
part in building the strong, successful business that we are today.
I am sure that Tim will continue to develop the business further
with great success."
Acquisition Update
As separately announced today, the Group has completed the
earnings enhancing acquisition of the men's grooming brand
'Fish'.
'Fish' is a well-established, authentic, contemporary brand with
a 'born in Soho' positioning reflecting a close connection with
London style trends through its link to the original Fish salon in
D'Arblay Street. This heritage underpins a range of high
performance men's hair styling products which were launched more
than 15 years ago and currently retail in Boots, Superdrug, Tesco
and Waitrose and therefore have a good complementary fit to the
rest of our owned brand portfolio.
All related trademarks have been acquired from Fish London
Limited and stock, website domains, and other marketing collateral
has been acquired from KMI Brands Limited.
The consideration for the acquisition involves an upfront cash
consideration of GBP2.7m, with a further GBP0.3m 12 month
performance based earn out, and was financed via a new term loan.
For the year to 31 December 2017, the 'Fish' brand generated net
sales of GBP1.7m and achieved GBP0.4m EBITDA.
The brand will be managed by our team at Brand Architekts in
Teddington who will seek to leverage our growing expertise in male
grooming products where our portfolio of MR., The Real Shaving
Company and Tru is seeing good growth. We see many opportunities to
accelerate the growth of the brand in the UK and beyond both in
terms of adding innovative new products to the brand and also
broadening retail distribution.
As we work to deliver these growth opportunities we are
delighted to confirm that we have engaged the founder of the brand,
Paul Burfoot, to work with us as a consultant. Paul continues to
own and operate the iconic 'Fish' salon in Soho and is renowned for
his innovative creativity as a trend setter in hair styling. His
expertise and passion for style and product will help us drive and
develop credible, ongoing innovation as well as taking an active
role in supporting the digital and social media brand
communication.
The brand's product formulations and packaging formats have a
strong fit with the technical and production expertise in our
manufacturing business and therefore offer further value creation
opportunities on the supply side.
Chris How, Chief Executive Officer, commented:
"Following the acquisitions of Real Shaving Company in 2015 and
The Brand Architekts in 2016 we have been delighted to have seen
strong growth momentum in our owned brand portfolio. This segment
of our business showed sales growth of 25% in the first half of our
current financial year and in that same period contributed 31% of
Group sales. The addition of 'Fish' to this vibrant portfolio will
add further strength and growth potential."
Outlook
The Board is pleased to report that trading since the end of the
reporting period has been in line with expectations.
We expect the positive momentum seen in our owned brands
business to continue, albeit without the boost from Christmas
gifting experienced in the first half. Further new product launches
and retail distribution gains have been secured in the UK and
internationally which will contribute to growth in the second half
and into the next financial year. The earnings enhancing
acquisition of the 'Fish' brand will add further to this
momentum,
In our manufacturing business, the second half will see the
start-up of production on a number of significant new contract wins
which will contribute positively to the second half of this year
and next.
We are seeing upward pressure on material and operational costs
but have put in place a range of projects to mitigate. This
combined with strong trading momentum, leaves us well placed to
achieve planned profits for the full year.
Group Statement of Comprehensive Income
28 weeks 28 weeks 12 months
ended ended ended
6 Jan 2018 7 Jan 2017 24 June
2017
(unaudited) (unaudited) (audited)
Continuing operations Notes GBP'000 GBP'000 GBP'000
Revenue 2 39,962 39,708 74,314
Cost of sales (32,012) (32,264) (60,404)
------------------------------- ------ ------------ ------------ ----------
Gross profit 7,950 7,444 13,910
Commercial and administrative
costs (4,953) (4,905) (10,235)
------------------------------- ------ ------------ ------------ ----------
Operating profit
before exceptional
items 2,997 2,539 3,675
Exceptional items 3 (25) (343) (343)
------------------------------- ------ ------------ ------------ ----------
Operating profit 2,972 2,196 3,332
Finance income - 1 97
Finance costs 4 (175) (163) (314)
Profit before taxation 2,797 2,034 3,115
Taxation (532) (398) (543)
------------------------------- ------ ------------ ------------ ----------
Profit after taxation 2,265 1,636 2,572
Other comprehensive
income / (loss) for
the period:
Re-measurement of
defined benefit liability 407 (3,469) (1,697)
Items that will be
reclassified subsequently
to profit or loss
Exchange differences
on translating foreign
operations 54 79 148
Gain on available
for sale financial
assets 158 256 675
Other comprehensive
income / (loss) for
the period 619 (3,134) (874)
------------------------------- ------ ------------ ------------ ----------
Total comprehensive
income / (loss) for
the period 2,884 (1,498) 1,698
=============================== ====== ============ ============ ==========
Profit attributable
to:
------------------------------- ------ ------------ ------------ ----------
Equity shareholders 2,205 1,636 2,554
------------------------------- ------ ------------ ------------ ----------
Non-controlling interests 60 - 18
Total comprehensive
income / (loss) attributable
to:
------------------------------- ------ ------------ ------------ ----------
Equity shareholders 2,824 (1,498) 1,680
------------------------------- ------ ------------ ------------ ----------
Non-controlling interests 60 - 18
Earnings per share
- basic 5 13.1p 9.7p 15.2p
- diluted 5 12.7p 9.5p 14.7p
Dividend
Paid in period (GBP'000) 590 388 675
Paid in period (pence
per share) 3.5p 2.3p 4.0p
Proposed (GBP'000) 337 287 590
Proposed (pence per
share) 6 2.0p 1.7p 3.5p
Group Statement of Changes in Equity
Share Share Revaluation Exchange Pension Retained Non-controlling Total
Capital Premium of Reserve re-measurement Earnings interest Equity
investment reserve
reserve
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- --------- ------------ --------- --------------- --------- ---------------- ---------
Balance as
at June 2017 844 11,744 1,091 (142) (3,894) 12,404 18 22,065
----------------- -------- --------- ------------ --------- --------------- --------- ---------------- ---------
Dividends - - - - - (590) - (590)
Non-controlling
interest - - - - - - 60 60
Share based
payments - - - - - 47 - 47
Transactions
with owners - - - - - (543) 60 (483)
----------------- -------- --------- ------------ --------- --------------- --------- ---------------- ---------
Profit for
the period - - - - - 2,205 - 2,205
Other
comprehensive
income:
Re-measurement
of defined
benefit
liability - - - - 407 - - 407
Exchange
difference
on translating
foreign
operations - - - 54 - - - 54
Gain on
available
for sale
financial
assets - - 158 - - - - 158
Total
comprehensive
income for
the year - - 158 54 407 2,205 - 2,824
----------------- -------- --------- ------------ --------- --------------- --------- ---------------- ---------
Balance as
at 6 January
2018 844 11,744 1,249 (88) (3,487) 14,066 78 24,406
----------------- -------- --------- ------------ --------- --------------- --------- ---------------- ---------
Balance as
at June 2016 566 3,830 416 (290) (2,197) 10,467 - 12,792
--------------------- ------ --------- ------ -------- ---------- --------- ---- ---------
Dividends - - - - - (388) - (388)
Issue of new
shares 278 7,914 - 8,192
Share based
payments - - - - - 28 - 28
Transactions
with owners 278 7,914 - - - (360) - 7,832
--------------------- ------ --------- ------ -------- ---------- --------- ---- ---------
Profit for
the period - - - - - 1,636 - 1,636
Other comprehensive
income:
Re-measurement
of defined
benefit liability - - - - (3,469) - - (3,469)
Exchange difference
on translating
foreign operations - - - 79 - - - 79
Gain on available
for sale financial
assets - - 256 - - - - 256
Total comprehensive
income for
the year - - 256 79 (3,469) 1,636 - (1,498)
--------------------- ------ --------- ------ -------- ---------- --------- ---- ---------
Balance as
at 7 January
2017 844 11,744 672 (211) (5,666) 11,743 - 19,126
--------------------- ------ --------- ------ -------- ---------- --------- ---- ---------
Balance as at
June 2016 566 3,830 416 (290) (2,197) 10,467 - 12,792
--------------------- ---- ------- ------ ------ -------- ------- --- --------
Dividends - - - - - (675) - (675)
Issue of new
shares 278 7,914 - - - - - 8,192
Non-controlling
interest - - - - - - 18 18
Share based
payments - - - - - 58 - 58
Transactions
with owners 278 7,914 - - - (617) 18 7,593
--------------------- ---- ------- ------ ------ -------- ------- --- --------
Profit for the
year - - - - - 2,554 - 2,554
Other comprehensive
income:
Re-measurement
of defined benefit
liability - - - - (1,697) - - (1,697)
Exchange difference
on translating
foreign operations - - - 148 - - - 148
Gain on available
for sale financial
assets - - 675 - - - - 675
Total comprehensive
income for the
year - - 675 148 (1,697) 2,554 - 1,680
--------------------- ---- ------- ------ ------ -------- ------- --- --------
Balance as at
June 2017 844 11,744 1,091 (142) (3,894) 12,404 18 22,065
--------------------- ---- ------- ------ ------ -------- ------- --- --------
Group Statement of Financial Position
As at As at As at
6 Jan 2018 7 Jan 2017 24 June
2017
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant
and equipment 11,491 10,754 11,076
Intangible assets 9,042 9,231 9,145
Deferred tax assets 666 1,472 1,088
Investments 1,442 816 1,235
--------------------------- ------ ------------ ------------ ----------
Total non-current
assets 22,641 22,273 22,544
--------------------------- ------ ------------ ------------ ----------
Current assets
Inventories 13,537 12,096 11,430
Trade and other
receivables 17,325 15,892 16,345
Cash and cash equivalents 425 825 4,057
Current tax receivable 70 166 88
--------------------------- ------ ------------ ------------ ----------
Total current assets 31,357 28,979 31,920
--------------------------- ------ ------------ ------------ ----------
Total assets 53,998 51,252 54,464
--------------------------- ------ ------------ ------------ ----------
LIABILITIES
Current liabilities
Trade and other
payables 21,521 18,728 21,674
Deferred consideration - 1,850 1,850
Interest-bearing
loans and borrowings 541 529 534
Current tax payable 552 426 243
--------------------------- ------ ------------ ------------ ----------
Total current liabilities 22,614 21,533 24,301
--------------------------- ------ ------------ ------------ ----------
Non-current liabilities
Interest-bearing
loans and borrowings 1,242 1,783 1,559
Post-retirement
benefit obligations 8 5,665 8,745 6,132
Deferred tax liabilities 71 65 407
Total non-current
liabilities 6,978 10,593 8,098
--------------------------- ------ ------------ ------------ ----------
Total liabilities 29,592 32,126 32,399
--------------------------- ------ ------------ ------------ ----------
Net assets 24,406 19,126 22,065
--------------------------- ------ ------------ ------------ ----------
EQUITY
Share capital 844 844 844
Share premium 11,744 11,744 11,744
Revaluation of investment
reserve 1,249 672 1,091
Exchange reserve (88) (211) (142)
Re-measurement of
defined benefit
liability (3,487) (5,666) (3,894)
Retained earnings 14,066 11,743 12,404
--------------------------- ------ ------------ ------------ ----------
Total equity 24,328 19,126 22,047
--------------------------- ------ ------------ ------------ ----------
Non-controlling
interest 78 - 18
--------------------------- ------ ------------ ------------ ----------
Total equity 24,406 19,126 22,065
--------------------------- ------ ------------ ------------ ----------
Group Cash Flow Statement
28 weeks 28 weeks 12 months
ended ended ended
6 Jan 2018 7 Jan 2017 24 June
2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash flow from operating
activities
Profit before taxation 2,797 2,034 3,115
Depreciation 651 661 1,249
Amortisation 122 123 239
Finance income - (1) (97)
Finance cost 175 163 314
(Increase) in inventories (2,107) (637) (2,387)
(Increase) / decrease
in trade and other receivables (540) 1,974 (995)
(Decrease) / increase
in trade and other payables (310) (2,818) 2,074
(Decrease) / increase
in share-based payments
provision (48) 246 1,755
Contributions to defined
benefit plan (54) (54) (108)
Cash generated from
operations 686 1,691 5,159
---------------------------------- ------------ ------------ ----------
Finance expense paid (97) (89) (165)
Taxation (paid) (321) (724) (1,142)
---------------------------------- ------------ ------------ ----------
Net cash flow from operating
activities 268 878 3,852
---------------------------------- ------------ ------------ ----------
Cash flow from investing
activities
Dividend income received - 1 97
Purchase of property,
plant and equipment (1,067) (432) (1,367)
Purchase of intangibles (18) - (8)
Purchase of subsidiary (1,925) (9,378) (9,401)
Net cash flow from investing
activities (3,010) (9,809) (10,679)
---------------------------------- ------------ ------------ ----------
Cash flow from financing
activities
Proceeds / (repayment)
of invoice discounting
facility 10 (575) 1,059
Proceeds from new loan - 2,000 2,000
Issue of new share capital - 8,192 8,192
Repayment of loans (310) (271) (490)
Dividends paid (590) (388) (675)
---------------------------------- ------------ ------------ ----------
Net cash flow from financing
activities (890) 8,958 10,086
---------------------------------- ------------ ------------ ----------
Net (decrease) / increase
in cash and cash equivalents (3,632) 27 3,259
Cash and cash equivalents
at beginning of period 4,057 798 798
---------------------------------- ------------ ------------ ----------
Cash and cash equivalents
at end of period 425 825 4,057
---------------------------------- ------------ ------------ ----------
Notes to the Accounts
Note 1 Basis of preparation
The Group has prepared its interim results for the 28-week
period ended 6 January 2018 in accordance with the recognition and
measurement principles of International Financial Reporting
Standards (IFRS) as adopted by the European Union and also in
accordance with the recognition and measurement principles of IFRS
issued by the International Accounting Standards Board.
The Directors have considered trading and cash flow forecasts
prepared for the Group, and based on these, and the confirmed
banking facilities, are satisfied that the Group will continue to
be able to meet its liabilities as they fall due for at least one
year from the date of approval of the Interim Report. On this
basis, they consider it appropriate to adopt the going concern
basis in the preparation of these accounts.
As permitted, this interim report has been prepared in
accordance with the AIM rules and not in accordance with IAS34
'Interim Financial Reporting'.
These interim financial statements do not constitute full
statutory accounts within the meaning of section 434 of the
Companies Act 2006 and are unaudited. The unaudited interim
financial statements were approved by the Board of Directors on 21
February 2018.
The consolidated financial statements are prepared under the
historical cost convention as modified to include the revaluation
of certain non-current assets. The accounting policies used in the
interim financial statements are consistent with IFRS and those
which will be adopted in the preparation of the Group's Annual
Report and Financial Statements for the year ended June 2018.
The statutory accounts for the year ended June 2017, which were
prepared under IFRS, have been filed with the Registrar of
Companies. These statutory accounts carried an unqualified Auditors
Report and did not contain a statement under Section 498(2) or
498(3) of the Companies Act 2006.
Note 2 Segmental analysis
The Group is a market leader in the development, formulation,
and supply of personal care and beauty products.
The reportable segments of the Group are aggregated as
follows:
-- Brands - we leverage our skilled resources to develop and
market a growing portfolio of Swallowfield owned and managed
brands. These include organically developed Bagsy, MR. and Tru,
plus the acquisitions of The Real Shaving Company (in 2015) and the
portfolio of brands included in The Brand Architekts acquisition
(in 2016).
-- Manufacturing - the development, formulation and production
of quality products for many of the world's leading personal care
and beauty brands.
-- Eliminations and Central Costs - other Group-wide activities
and expenses, including defined benefit pension costs (closed
defined benefit scheme), LTIP expenses, amortisation of
acquisition-related intangibles, interest, taxation and
eliminations of intersegment items, are presented within
'Eliminations and central costs'.
This is the basis on which the Group presents its operating
results to the Board of Directors, which is considered to be the
CODM for the purposes of IFRS 8.
a) Principal measures of profit and loss - Income Statement segmental information:
28 weeks ended 6 January 2018 28 weeks ended 7 January
2017
Brands Manufacturing Eliminations Total Brands Manufacturing Eliminations Total
and Central and Central
Costs Costs
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- -------------- ------------- -------- -------- -------------- ------------- --------
UK revenue 10,111 17,734 - 27,845 7,543 17,283 - 24,826
International
revenue 2,186 9,931 - 12,117 2,289 12,593 - 14,882
--------------------- -------- -------------- ------------- -------- -------- -------------- ------------- --------
Revenue
- External 12,297 27,665 - 39,962 9,832 29,876 - 39,708
Revenue
- Internal - 1,037 (1,037) - - 605 (605) -
--------------------- -------- -------------- ------------- -------- -------- -------------- ------------- --------
Total revenue 12,297 28,702 (1,037) 39,962 9,832 30,481 (605) 39,708
--------------------- -------- ------------- -------- -------------
Underlying
operating
profit/(loss) 2,575 1,918 (1,089) 3,404 1,845 2,104 (882) 3,067
--------------------- -------- -------------- ------------- -------- -------- -------------- ------------- --------
Charge for
share based
payments - - (307) (307) - - (434) (434)
Amortisation
of
acquisition-related
intangibles - - (100) (100) - - (94) (94)
Exceptional
costs - - (25) (25) - - (343) (343)
Net borrowing
costs - - (175) (175) - - (162) (162)
--------------------- -------- -------------- ------------- -------- -------- -------------- ------------- --------
Profit/(loss)
before taxation 2,575 1,918 (1,696) 2,797 1,845 2,104 (1,915) 2,034
--------------------- -------- -------------- ------------- -------- -------- -------------- ------------- --------
Tax charge - - (532) (532) - - (398) (398)
--------------------- -------- -------------- ------------- -------- -------- -------------- ------------- --------
Profit/(loss)
for the
period 2,575 1,918 (2,228) 2,265 1,845 2,104 (2,313) 1,636
--------------------- -------- -------------- ------------- -------- -------- -------------- ------------- --------
The segmental Income Statement disclosures are measured in
accordance with the Group's accounting policies as set out in note
1.
Inter segment revenue earned by Manufacturing from sales to
Brands is determined on normal commercial trading terms as if
Brands were any other third party customer.
All defined benefit pension costs and LTIP expenses are
recognised for internal reporting to the CODM as part of Group-wide
activities and are included within 'Eliminations and central costs'
above. Other costs, such as Group insurance and auditors'
remuneration which are incurred on a Group-wide basis are recharged
by the head office to segments on a reasonable and consistent basis
for all periods presented and are included within segment results
above.
b) Other Income Statement segmental information
The following additional items are included in the measures of
profit and loss reported to the CODM and are included within (a)
above:
28 weeks ended 6 January Brands Manufacturing Eliminations Total
2018 and Central
Costs
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------------- --------------------- -------------------- ---------------
Depreciation 6 645 - 651
Amortisation - 22 - 22
c) Principal measures of assets and liabilities
The Groups assets and liabilities are managed centrally by the
CODM and consequently there is no reconciliation between the
Group's assets per the statement of financial position and the
segment assets.
d) Additional entity-wide disclosures
The distribution of the Group's external revenue by destination
is shown below:
Geographical segments 28 weeks 28 weeks 12 months
ended ended ended
6 Jan 2018 7 Jan 2017 24 June
2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------ ------------ ----------
UK 27,845 24,826 44,732
Other European Union
countries 9,156 11,619 23,012
Rest of the World 2,961 3,263 6,570
------------ ------------ ----------
39,962 39,708 74,314
------------ ------------ ----------
In the 28 weeks ended 6 January 2018, the Group had two
customers that exceeded 10% of total revenues, being 12.7% and
10.4% respectively. In the 28 weeks ended 7 January 2017, the Group
had two customers that exceeded 10% of total revenues, being 11.8%
and 11.2% respectively.
Note 3 Exceptional items
There was an exceptional item for the period ended 6 January
2018 of GBP25k. This is in relation to the applicable proportion of
the first consolidated period of trading for Sterling Shave Club
Limited which amounted to a loss of GBP25k.
The prior year exceptional items charge represents the costs
associated with The Brand Architekts acquisition which completed on
27 June 2016.
Note 4 Finance costs 28 weeks 28 weeks 12 months
ended ended ended
6 Jan 2018 7 Jan 2017 24 June
2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------ ------------ ----------
Finance costs
Bank loans and overdrafts 97 89 165
Notional pension scheme
costs 78 74 149
------------ ------------ ----------
175 163 314
------------ ------------ ----------
Note 5 Earnings per share 28 weeks 28 weeks 12 months
ended ended ended
6 Jan 2018 7 Jan 2017 24 June
2017
(unaudited) (unaudited) (audited)
------------ ------------ -----------
Basic and diluted
Profit for the period
(GBP'000) 2,205 1,636 2,554
Basic weighted average
number of
ordinary shares in issue
during the period 16,865,401 16,865,401 16,834,773
Diluted number of shares 17,413,330 17,182,330 17,382,702
Basic earnings per share 13.1p 9.7p 15.2p
---------------------------- ------------ ------------ -----------
Diluted earnings per
share 12.7p 9.5p 14.7p
---------------------------- ------------ ------------ -----------
Basic earnings per share has been calculated by dividing the
profit for each financial period by the weighted average number of
ordinary shares in issue in the period. There is a difference at 7
January 2017 between the basic net earnings per share and the
diluted net earnings per share due to the LTIP share options
awarded in July 2016, to give a total of 316,929 share options. The
difference at 6 January 2018 includes the LTIP share options
awarded in June 2017, to give a total of 547,929 share options that
could be issued.
Adjusted earnings per share
Profit for the period
(GBP'000) 2,205 1,636 2,554
Add back: Exceptional
items 25 343 343
Add back: Amortisation
of Acquisition Related
Intangibles 100 94 187
Notional tax charge on
above items (24) (83) (105)
--------------------------- ------------------------- ------------------------- -----------
Adjusted profit before
exceptional items 2,306 1,990 2,979
--------------------------- ------------------------- ------------------------- -----------
Basic weighted average
number of
ordinary shares in issue
during the period 16,865,401 16,865,401 16,834,773
Diluted number of shares 17,413,330 17,182,330 17,382,702
--------------------------- ------------------------- ------------------------- -----------
Adjusted basic earnings
per share 13.7p 11.8p 17.7p
--------------------------- ------------------------- ------------------------- -----------
Adjusted diluted earnings
per share 13.2p 11.6p 17.1p
--------------------------- ------------------------- ------------------------- -----------
Adjusted earnings per share has been calculated by dividing the
adjusted profit (after allowing for the notional tax charge on
exceptional items) by the weighted average number of shares in
issue in the period. There is a difference at 7 January 2017
between the basic net earnings per share and the diluted net
earnings per share due to the LTIP share options awarded in July
2016, to give a total of 316,929 share options. The difference at 6
January 2018 includes the LTIP share options awarded in June 2017,
to give a total of 547,929 share options that could be issued.
Note 6 Dividends
The Directors have declared an interim dividend payment of 2.0p
per share (2017: Interim: 1.7p; Final: 3.5p).
Note 7 Reconciliation of cash and cash equivalents to movement
in net debt
28 weeks 28 weeks 12 months
ended ended ended
6 Jan 2018 7 Jan 2017 24 June
2017
(unaudited) (unaudited) (audited)
GBP000's GBP000's GBP000's
------------ ------------ ----------
(Decrease) / increase
in cash and cash equivalents
in the period (3,632) 27 3,259
Net cash outflow / (inflow)
from decrease / (increase)
in borrowings 300 (1,154) (2,569)
------------------------------- ------------ ------------ ----------
Change in net debt resulting
from cash flows (3,332) (1,127) 690
Net debt at the beginning
of the period (3,641) (4,331) (4,331)
------------------------------- ------------ ------------ ----------
Net debt at the end of
the period (6,973) (5,458) (3,641)
------------------------------- ------------ ------------ ----------
Note 8 IAS 19 'Employee Benefits'
Expected future cash flows to and from the Scheme:
The Scheme is subject to the scheme funding requirements
outlined in UK legislation. The last scheme funding valuation of
the Scheme was as at 5 April 2017 and revealed a funding deficit of
GBP2.6m. The liabilities of the Scheme are based on the current
value of expected benefit payment cash flows to members of the
Scheme over the next 60 to 80 years. The average duration of the
liabilities is approximately 20 years.
In accordance with the schedule of contributions dated 3 July
2015 the Company is expected to pay contributions to the Scheme to
make good any shortfalls in funding and has agreed to pay GBP108k
per annum for the current year. Contributions will subsequently
increase from FY19 to a sufficient level to eliminate the deficit
over the established 10 year recovery period. The magnitude of such
payments will be reviewed following the next scheme funding
valuation as at April 2020.
In addition, the Company has agreed to meet the cost of
administrative expenses and Pension Protection Fund insurance
premiums for the Scheme.
Payments made by the Company to the Scheme and in respect of
Scheme liabilities were:
28 weeks 28 weeks 12 months
ended ended ended
6 January 7 January 24 June 2017
2018 2017 GBP000's
GBP000's GBP000's
----------- ----------- --------------
Company pension - - -
contributions
Deficit recovery
payments 54 54 108
Scheme administrative
expenses 51 71 144
Pension Protection
Fund premium 222 240 240
----------------------- ----------- ----------- --------------
Total 327 365 492
----------------------- ----------- ----------- --------------
The amounts expensed in the Group Statement of Comprehensive
Income were:
28 weeks 28 weeks 12 months
ended ended ended
6 January 7 January 24 June 2017
2018 2017 GBP000's
GBP000's GBP000's
----------- ----------- --------------
In Operating profit:
Company pension - - -
contributions
Scheme administrative
expenses 88 71 154
Pension Protection
Fund premium 119 120 240
----------- ----------- --------------
207 191 394
In Finance costs:
Unwinding of notional
discount factor 78 74 149
----------------------- ----------- ----------- --------------
Total 285 265 543
----------------------- ----------- ----------- --------------
IAS 19 requires a separate valuation of the Scheme on a
different basis to the funding valuation referred to above.
The effects of the application of IAS19 on the statement of
financial position at 6 January 2018 are:
6 January
2018
GBP000's
----------
Reduction in net pension and
other benefit obligations 467
Increase in deferred tax (79)
Increase in equity 388
-------------------------------- ----------
The Accounting Standards require the discount rate to be based
on yields on high quality (usually AA-rated) corporate bonds of
appropriate currency, taking into account the term of the relevant
pension scheme's liabilities. Corporate bond indices are often used
as a proxy to determine the discount rate. At the reporting date,
the yields on bonds of all types were lower than they were at June
2017. This has resulted in lower discount rates being adopted for
accounting purposes compared to last year, this was coupled by an
increase in expectations of long term inflation, the combination of
these two factors has translated into a marginally increased
liability. The growth in the Fair Value of scheme assets has offset
this to result in a reduction in net liability.
The key assumptions used were:
As at 6 January As at 7 January As at 24 June
2018 2017 2017
---------------- ---------------- --------------
Discount Rate 2.60% 2.80% 2.55%
Rate of inflation
(RPI) 3.10% 3.45% 3.00%
Rate of inflation
(CPI) 2.10% 2.45% 2.00%
The amounts recognised in the Group statement of financial
position were:
As at 6 January As at 7 January As at 24 June
2018 2017 2017
GBP000's GBP000's GBP000's
---------------- ---------------- --------------
Present value of
funded obligations (29,471) (30,891) (29,438)
Fair value of scheme
assets 23,806 22,146 23,306
---------------------- ---------------- ---------------- --------------
(Deficit) (5,665) (8,745) (6,132)
---------------------- ---------------- ---------------- --------------
Note 9 Announcement of results
The Interim Report will be sent to shareholders and is available
to members of the public at the Company's Registered Office at
Swallowfield House, Station Road, Wellington, Somerset, TA21 8NL
and on the Company's website.
Regulatory disclosures
In accordance with Schedule 2(g) of the AIM Rules, Timothy James
Perman (aged 55) holds or has held in the past 5 years the
following directorships and partnerships:
Current Past
------------------------------- ---------------------------
PZ Cussons Beauty LLP Beauty Source Spray Booths
Ltd
------------------------------- ---------------------------
St Tropez Acquisition Co St Tropez Associates Ltd
Limited
------------------------------- ---------------------------
St Tropez Holdings Limited
------------------------------- ---------------------------
Thermocool Engineering Company
Limited
------------------------------- ---------------------------
Beauty Source Limited
------------------------------- ---------------------------
Save for the disclosures above, there are no further disclosures
to be made in accordance with Rule 17 and Schedule 2(g) of the AIM
Rules.
Independent review report to Swallowfield plc
Introduction
We have been engaged by the company to review the financial
information in the half-yearly financial report for the
twenty-eight weeks ended 6 January 2018 which comprises the Group
statement of comprehensive income, the Group statement of changes
in equity, the Group statement of financial position, the Group
cash flow statement and the related explanatory notes. We have read
the other information contained in the half yearly financial report
which comprises the Chief Executive's Statement and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the Group in accordance with
guidance contained in ISRE (UK and Ireland) 2410, 'Review of
Interim Financial Information performed by the Independent Auditor
of the Entity'. Our review work has been undertaken so that we
might state to the Group those matters we are required to state to
it in a review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Group for our review work, for this
report, or for the conclusion we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The AIM rules of the London
Stock Exchange require that the accounting policies and
presentation applied to the financial information in the
half-yearly financial report are consistent with those which will
be adopted in the annual accounts having regard to the accounting
standards applicable for such accounts.
As disclosed in Note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The financial information in the half-yearly
financial report has been prepared in accordance with the basis of
preparation in Note 1.
Our responsibility
Our responsibility is to express to the Group a conclusion on
the financial information in the half-yearly financial report based
on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the financial information in the
half-yearly financial report for the twenty-eight weeks ended 6
January 2018 is not prepared, in all material respects, in
accordance with the basis of accounting described in Note 1.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Bristol
27 February 2018
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FKADDOBKDNBB
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February 27, 2018 02:00 ET (07:00 GMT)
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