TIDMSWL
RNS Number : 7656B
Swallowfield PLC
25 September 2018
Swallowfield plc
("Swallowfield" or the "Group")
Final results for the year-ended June 2018
Swallowfield plc, a market leader in the development,
formulation, and supply of personal care and beauty products,
including its own portfolio of brands, is pleased to announce its
final results for the 53 weeks ended 30 June 2018.
Financial highlights
-- Adjusted profit before taxation increased by 37% to GBP5.0m (2017: GBP3.6m).
-- Underlying operating profit was broadly level year on year at GBP5.5m (2017: GBP5.6m).
-- Adjusted EPS increased by 31% year on year to 23.2 pence (2017: 17.7 pence).
-- Revenues for the 52 weeks were GBP71.6m (GBP73.9m on a
statutory basis), a decline of 3.6% (2017: GBP74.3m). On a constant
currency basis the decline would have been less (3.0%). The
relative strength of sterling against the US dollar compared to
prior year has reduced the reported top-line revenue.
-- Brands represented 28% of revenues and 65% of underlying operational profits.
-- Proposed final dividend of 4.2p per share (2017: 3.5p), in
addition to the interim dividend of 2.0p already paid, to give a
full year dividend of 6.2p (2017: 5.2p), an increase of 19%.
-- Net Debt increased to GBP11.8m (2017: GBP3.6m), inclusive of
GBP5.0m of acquisition related payments and LTIP award
payments.
Operational highlights
-- Owned Brand business performing strongly, with sales up 15%,
driven by continued new product innovation, and increased
distribution of 'Drive' brands, both in UK and International
markets.
-- Significant improvements in margin delivered by Owned Brands,
achieved by New Product Development and by leveraging operational,
technical and supply chain resources in the Swallowfield Group.
-- The Manufacturing business was adversely impacted by material
cost inflation and delays to 3 major new contract wins with global
brand owners; mitigating actions underway.
-- Fish brand acquired in February fully integrated with
incremental new product lines developed for launch in Autumn
2018.
-- Further investment in Manufacturing including automation for
line efficiencies and an upgraded R&D facility.
-- Continued development of digital marketing with increased focus on brand communication.
Brendan Hynes, Non-Executive Chairman commented:
"Swallowfield has delivered another year of continued progress
against our strategic objectives with underlying profitability and
EPS performing strongly. We continue to strengthen the fundamental
capabilities of our business to deliver the innovation, quality and
service demanded by our customers. This combined with the strong
progress made on our Owned Brands, gives us confidence that our
strategy is delivering a more diversified and sustainable business
and we remain well positioned for the future."
Tim Perman, Chief Executive commented:
"Since taking over the role of CEO in July, I have been
impressed by the demonstrated success of the Group's stated
strategy leading to a securing of underlying profitability. Looking
ahead, I see a continuing emphasis on developing the Owned Brands
portfolio, supported by a more profitable performance from the
Manufacturing business."
For further information please contact:
Swallowfield plc
-------------------------- ---------------
Tim Perman Chief Executive Officer 01823 662 241
-------------------------- ---------------
Matthew Gazzard Group Finance Director 01823 662 241
-------------------------- ---------------
Jen Boorer / Mark Taylor N+1 Singer (Nomad) 0207 496 3000
-------------------------- ---------------
Josh Royston Alma PR 020 8004 4218
-------------------------- ---------------
Chairman's statement
I am pleased to report another year of continued progress for
Swallowfield. Our growth strategy of developing and driving our
Owned Brands portfolio has delivered increased profitability,
earnings per share and shareholder value for the Group. The fact
that this has been achieved against a more challenging backdrop for
our Manufacturing business reflects the success of our strategy to
build a more diversified and sustainable business.
Results
2018 2017
------------------------------------------- --------- ---------
Reported Results
--------- ---------
Revenue GBP73.9m GBP74.3m
--------- ---------
Adjusted revenue (constant currency) (1) GBP74.4m GBP70.9m
--------- ---------
Adjusted profit before taxation (2) GBP5.0m GBP3.6m
--------- ---------
Reported operating profit GBP4.7m GBP3.3m
--------- ---------
Profit before taxation GBP4.5m GBP3.1m
--------- ---------
Adjusted earnings per share (2) 23.2p 17.7p
--------- ---------
Basic earnings per share 20.9p 15.2p
--------- ---------
Total Dividend per share 6.2p 5.2p
--------- ---------
Net debt GBP11.8m GBP3.6m
--------- ---------
(1) Revenue translated at 2017 exchange rates
(2) Adjusted PBT and adjusted earnings per share are calculated
before exceptional items and amortisation of acquisition-related
intangibles.
Over the last four years we have developed, both organically and
through acquisition, a growing portfolio of brands that are owned
and managed by the Group and which we control from formulation
development through to distribution. The acquisition of Brand
Architekts in June 2016 significantly accelerated this strategy and
brought both additional critical mass and accretive margins to our
Group portfolio. Owned Brands now represent 28% of Group revenues
and 65% of Group underlying operating profits in the period.
Dividend
Further evidence of our confidence in the business can be seen
in the Board's intention to propose a final dividend of 4.2 pence.
Together with the interim dividend already paid of 2.0 pence, this
represents a total dividend for the year of 6.2 pence, an
improvement of 19% over the prior year (2017: 5.2p).
It remains the directors' intention to align future dividend
payments to the underlying earnings and cash flow of the business,
taking into account the gearing and the operational requirements of
the business.
Board succession
After five successful years as Chief Executive Officer, Chris
How decided to retire from his full-time executive career and
stepped down from the Board at the end of the financial year. Chris
played a significant role in helping the business grow and develop
over his 5 year tenure and the Board and his colleagues are
grateful for his contribution and wish him continued success in the
future.
Advanced notice of Chris's intentions allowed the Board to
engage in a thorough and structured search for his successor and,
as a result, we were delighted to appoint Tim Perman as Chief
Executive. Tim has extensive experience in senior leadership roles
within the consumer products industry, having held various General
Management and Marketing positions at PZ Cussons, Seven Seas,
Campbells Grocery Products and Clairol. In his last role at PZ
Cussons, Tim was Group Category & Brand Director and Global
Beauty Director.
Tim joined Swallowfield in May 2018, becoming CEO on 1 July
2018, following a smooth and thorough handover.
Outlook
We expect the strong momentum in our Owned Brands business to
continue, supported by an exciting stream of new products,
innovation and continued support from our retail customers.
The Manufacturing business is expected to remain challenging due
to prevailing market conditions and ongoing cost inflation.
Significant actions are being taken to mitigate these challenges
and we expect the profitability in this segment of our business to
improve in the second half of the new financial year.
Following the success of the Brand Architekts acquisition and
the seamless integration of the recent Fish acquisition, we remain
alert to further acquisition opportunities should they offer the
potential to build incremental shareholder value.
We continue to strengthen the fundamental capabilities of our
business to deliver the innovation, quality and service demanded by
our customers. This combined with the strong progress made on our
Owned Brands, gives us confidence that our strategy to build a more
diversified and sustainable business is delivering results and we
remain well positioned for the future.
Chief Executive's review
It has been my great pleasure to take over the role of Chief
Executive from Chris How and I want to thank him for his leadership
and contribution to the development of the Swallowfield Group.
This has been another year of continued progress. It is pleasing
to report that our Owned Brands portfolio is working very
successfully, with new product launches delivering double digit
increases in revenue and underlying operating profits. All major
brands and major customers are showing year on year growth and the
Fish acquisition has been integrated successfully into the
portfolio during the second half of the fiscal year.
The Manufacturing business has faced a more challenging year,
against a set of strong prior year comparators, and our teams have
worked hard to generate new sales opportunities. Despite a
satisfactory first half business performance, Manufacturing was
adversely affected by material cost inflation and this, combined
with delays in the production of 3 major new contracts resulted in
lower revenues and underlying profits for the full year. Actions
have been taken to mitigate the inflationary headwinds and the new
contracts will contribute to the business results in the new
financial year. It is pleasing to note that our Manufacturing
business has also continued to successfully support the development
of our Owned Brands portfolio.
Looking Ahead
Since officially taking over the role of CEO in July, I have had
the opportunity for a full in-depth and thorough induction to the
Swallowfield Group. I have been impressed by the strength and
capability of the team and appreciated the support and continuity
of the Board and my executive colleagues.
Over the past 4 years, Swallowfield has successfully
transitioned from being a Contract Manufacturer to a company that
now generates 65% of its profits from its own portfolio of brands,
a strategy that has delivered superior financial returns and gives
the Group greater control over its own destiny.
Looking ahead, I see a continuing emphasis on developing the
brand portfolio, a greater focus on marketing support for our
'Drive' brands, expansion of our International footprint and
extending distribution across both retail and on-line channels. Our
appetite for further earnings accretive acquisitions remains
strong.
This will be supported by delivering a more profitable
performance from the Manufacturing business, with a continued focus
on a portfolio of added-value product categories and cost base
optimisation.
In line with the rest of the industry the Group continues to be
challenged by low consumer confidence, global inflationary
pressures and the uncertainty of Brexit. That said, I am impressed
with the extensive range of opportunities presented by the
Swallowfield business and remain positive and confident in the
future prospects for the Group.
I look forward to updating shareholders on our plans and
progress over the course of the new financial year.
Executing our strategy
'Building a better Swallowfield'
Our business strategy is to leverage our Group expertise,
resources and assets across two complementary and connected value
streams, Owned Brands and Manufacturing. Each value stream has
strategic pillars which we believe are the critical focus areas to
ensure we continue to grow these businesses in the medium and long
term.
Owned Brands
The strategic pillars that we are focusing on within our Owned
Brands business are:
-- New Product Development (NPD)
A passion to develop new products to excite and attract both
retailers and consumers drives the Owned Brands business model and
we are pleased that the pace of this continues. 89 new lines were
launched over the 12 month period across 11 of our brands.
We continue to evaluate and develop the brand portfolio to
ensure that we are focusing the appropriate level of resource and
support to drive maximum performance and growth. Within the
portfolio we have defined a number of 'Drive' brands where we are
specifically focused on extending distribution, new product
development, International growth and increasing support through
both instore and digital promotion.
On 27(th) February 2018 we were pleased to announce the
acquisition of the Fish brand, a range of male haircare and styling
products. Fish is an authentic, contemporary brand with a 'born in
Soho' positioning reflecting a close connection with London style
trends. This heritage underpins a range of high-performance men's
hair styling products and has a strong complementary fit to the
rest of our Owned Brand portfolio.
-- Leverage Swallowfield resources
Strong progress has continued in leveraging the existing
resources and capabilities within the Manufacturing part of the
Group to further support the Owned Brand business. This is focused
on both driving new product development opportunities alongside
utilising our operational and supply chain knowledge and skills.
Our supply chain team continue to drive cost savings opportunities,
ensuring that we maximise all synergies and work has started on
further consolidation within the logistics area.
We now have 8 of our brand websites with full e-commerce
functionality and sales via these are being fulfilled from our
internal distribution centre. We have put in place dedicated
customer service resources to support this rapidly increasing
source of revenue for the Group.
-- International expansion
Our focus continues on developing sales in new International
markets and building relationships with appropriate distribution
and retail partners for our brand portfolio. Bi-lingual pack
formats have been developed for specific brands, allowing us to
maximise opportunity whilst carefully managing inventory levels.
The launch of the Dirty Works brand into France and Belgium has
been followed by new distribution in the Middle East. Our range of
therapeutic bath solutions, Dr Salts, has launched successfully in
South Africa; the Real Shaving Company has launched in New
Zealand.
Manufacturing
Our focus has continued on our strategic pillars within the
Manufacturing business:
-- Innovation
Further establishing our position as a first-choice partner for
global brands within the beauty and personal care categories
remains a priority. We have continued to drive innovation and
product development within our areas of core strength, particularly
personal care aerosols, hot pour products and premium liquids and
during the financial year we have launched over 470 new products.
We have won significant volumes within the aerosol category, with 2
brand owners where we have been first choice supplier due to our
global reputation for formulation, quality and service. We have
also been successful in developing and producing a new lip care
line for a major global brand; a significant win in our role as
category innovation partner. All 3 contracts went into full
production as we entered the new financial year.
We are very pleased to have completed a major refurbishment of
our Research and Development laboratory at our Wellington site and
this investment has significantly improved the facilities for the
team ensuring they have the appropriate environment for
formulating, developing and testing the highest quality products to
excite our customer base and drive future sales.
-- Drive category focus
Growth in the year has been in the product categories where we
have the greatest expertise, particularly aerosols, hot pour
products and fragrance & gifting. We continue to ensure that we
focus a high percentage of our time, energy and investment within
these specialist areas. This strategy is supported by our customer
base who confirm their desire to work and partner with suppliers
who have highly recognisable product proficiency. Our reputation
and strength in formulating aerosol foaming gels in 'bag-on-valve'
formats have also led to a significant new win, which has enabled
us to make further investment in capacity to meet increased demand.
We have increased our capacity to produce 'compressed air'
propelled aerosols, an innovative format with increasing
demand.
-- Cost base optimisation
Due to the challenges of a volatile external environment, this
has been a more challenging year with cost price inflation
impacting the business. We continue to focus on driving cost
savings and utilising Group capabilities to optimise our cost base.
The transfer of appropriate products from the Owned Brands
portfolio for manufacture in-house continues and is progressing
well. We have invested in both new robotics to drive line
efficiency and improved packing automation for hot pour products at
our Tabor site in the Czech Republic. At the UK sites we have made
specific investments to improve capacity and flexibility to support
new customer requirements.
Financial review
Group statutory revenue at GBP73.9m was slightly down on last
year. The Owned Brands business performed strongly, growing by 18%,
driven by the continued momentum of our own 'Drive and Build'
brands. In the Group's Manufacturing business, revenues declined
against strong prior year comparators given the 'normalisation' of
launch volumes dispatched in the first half of 2017 and delays in
the launch of three new contract wins originally scheduled for the
second half of 2018.
On a comparable 52-week basis, revenue declined by 3.6% to
GBP71.6m (2017: GBP74.3m), and by 4.3% excluding the acquisition of
Fish brand which completed on 27(th) February 2018. The strength of
Sterling against the US dollar has reduced sales revenue by
GBP0.7m, whilst weakness against the Euro has increased sales
revenue by GBP0.3m, giving an overall reduction of GBP0.4m. Revenue
decline on a constant currency basis would have been 3.0%, and 3.7%
excluding the Fish acquisition.
The adverse currency impact on revenue has been offset by an
equivalent favourable currency impact on cost of goods, reflecting
the Group's broadly natural hedge profile.
The overall re-shaping of the business towards stronger growth
and margins through our Owned Brands business has enabled us to
maintain underlying operating profit at GBP5.5m (2017: GBP5.6m), at
a time when we have experienced significant inflationary material
price pressures.
Underlying operating profit is shown before charges for
share-based payments, with a provision made of GBP0.3m (2017:
GBP1.76m). Share options are put in place in order to incentivise
the Group's wider management team (including the executive
directors of Swallowfield) and to ensure that their interests are
aligned with shareholders.
The net effect is that the Group made an adjusted operating
profit of GBP5.2m (2017: GBP3.9m). Adjusted profit before tax
increased to GBP5.0m (2017: GBP3.6m).
The exceptional item of GBP0.28m in the current period is due to
writing down the investment in Sterling Shave Club and "one off"
costs incurred in the succession planning for the replacement of
both the Group Finance Director and Chief Executive Officer. In
2017 there was an exceptional charge of GBP0.34m relating to the
acquisition of The Brand Architekts Ltd.
The overall effective rate of Group taxation for the period was
19.7% (2017: 17.4%) of pre-tax profits. The current year tax charge
reflects standard UK and the Czech Republic rates of taxation.
This results in adjusted earnings per share of 23.2p (2017:
17.7p).
A reconciliation of underlying operating profit to statutory
profit before taxation is shown below:
2018 2017
Total Total
GBP'000 GBP'000
------------------------------------------------- --------------------- ---------------------
Underlying profit from operations 5,470 5,617
------------------------------------------------- --------------------- ---------------------
Charge for share-based payments (297) (1,755)
------------------------------------------------- --------------------- ---------------------
Adjusted operating profit 5,173 3,862
Net borrowing costs (173) (217)
------------------------------------------------- --------------------- ---------------------
Adjusted profit before taxation 5,000 3,645
Amortisation of acquisition-related intangibles (197) (187)
Exceptional costs (279) (343)
Profit before taxation 4,524 3,115
------------------------------------------------- --------------------- ---------------------
The Group's strategic investment of a 19% shareholding in
Shanghai Colour Cosmetics Technology Company Limited (SCCTC) was
further re-valued upwards by GBP0.16m during the period, to fair
value based on SCCTC's June 2018 net assets. The initial cost of
this investment was GBP0.14m and this is now valued at GBP1.39m.
This improved valuation reflects a strong trading performance,
supplying customers in Europe and the USA. In addition, a dividend
of GBP0.19m was received in the year (2017: GBP0.10m).
Net debt and cash flow
Net debt increased to GBP11.8m (2017: GBP3.6m). This includes an
additional GBP3.0m five-year term loan facility taken out to
support the acquisition of the Fish brand. The Group maintains a
broadly natural hedge position on the Euro and US Dollar, and
manages timing differences through a multi-currency invoice finance
facility. At the reporting date, the Group was maintaining a hedged
position by holding Euro and US Dollar cash balances, whilst
drawing on its GBP facility. In year payments included a deferred
consideration for Brand Architekts (GBP1.85m) and an LTIP award
(GBP1.7m). Note 10 provides an analysis of net debt.
The movement in the components of working capital reflect the
impact of the introduction of the three new major account wins in
our Manufacturing business that will benefit 2019. Timing of debtor
payments have also impacted the total working capital invested at
year end. These are expected to unwind during Q1 of FY19.
Financing costs of GBP0.36m (2017: GBP0.31m) comprised interest
expense of GBP0.21m (2017: GBP0.16m) plus a pension scheme notional
finance charge of GBP0.15m (2017: charge GBP0.15m). Finance income
is the receipt of GBP0.19m (2017: GBP0.10m) dividend income from
our investment holding in SCCTC.
Capital expenditure was GBP1.6m which was ahead of depreciation.
We have made a number of investments to improve line efficiencies
and support incremental new customer contracts and have an active
capital investment programme planned for the new year.
Defined benefit pension scheme
The defined benefit pension scheme underwent its last triennial
valuation on 5 April 2017. The deficit on a statutory funding basis
was GBP2.6m and the Group entered into a revised deficit recovery
plan and schedule of contributions in July 2018. The deficit
reduction payment will be GBP318k per annum (previously GBP108k per
annum) for seven years and GBP210k for a further three years.
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 marginally higher than they were
at 24 June 2017. This has resulted in higher discount rates being
adopted for accounting purposes compared to last year. The
combination of these two factors have materially decreased the fair
value of the scheme liabilities, combined with the anticipated
investment return performance, has translated into a decreased
liability under the IAS19 methodology. For accounting purposes at
30 June 2018, the Group recognised under IAS19 'employee benefits',
a deficit of GBP4.5m (2017: GBP6.1m).
Dividends
The Board is pleased to announce that it will be proposing a
final dividend of 4.2 pence. Together with the interim dividend
already paid of 2.0 pence this represents a total dividend for the
year of 6.2 pence, an improvement of 19% over the prior year (2017:
5.2p). If approved, the final dividend will be paid on 7 December
2018 to shareholders on the register on 16 November 2018. The
shares will be marked as ex-dividend on 15 November 2018.
Prior Period Adjustment
The Group have chosen to recognise, as part of the Research
& Development intangible asset, the intangible asset that is
created in the development of new products. Historically
expenditure of this nature was recognised as an expense within the
Statement of Comprehensive Income as incurred. As expenditure of
this nature should have been capitalised historically a material
prior period error was considered to be present. As a result, a
prior period adjustment has been processed in accordance with IAS
8: 'Accounting policies, changes in accounting estimates and
errors'.
A restatement of GBP0.3m has been made to increase the opening
Intangible Fixed Asset balance. An equal and opposite adjustment
has been posted to brought forward reserves. The comparatives
disclosed throughout this report are the restated amounts.
The intangible fixed asset in 2016 should have been GBP395,000.
The adjustment to the 2016 Statement of comprehensive income and
opening reserves has been made using the 2017 calculated intangible
fixed asset adjustment of GBP345,000 as the movement that would
have been recognised in 2017 of GBP50,000 is not considered to be
material. As a result, there is no restatement to the 2017
Statement of Comprehensive Income.
Group Statement of Comprehensive Income
For the 53 weeks ending 30 June 2018 and 52 weeks ending 24 June
2017
2018 2017
Notes GBP'000 GBP'000
Revenue 5 73,945 74,314
Cost of sales (60,253) (60,404)
--------------------------------------------------------------------- ------ --------- ---------
Gross profit 13,692 13,910
Commercial and administrative costs (8,716) (10,235)
--------------------------------------------------------------------- ------ --------- ---------
Operating profit before exceptional items 4,976 3,675
Exceptional items 6 (279) (343)
--------------------------------------------------------------------- ------ --------- ---------
Operating profit 4,697 3,332
--------------------------------------------------------------------- ------ --------- ---------
Finance income 191 97
Finance costs (364) (314)
--------------------------------------------------------------------- ------ --------- ---------
Profit before taxation 7 4,524 3,115
Taxation 8 (891) (543)
--------------------------------------------------------------------- ------ --------- ---------
Profit for the year 3,633 2,572
===================================================================== ====== ========= =========
Other comprehensive income/(loss):
Items that will not be reclassified subsequently to profit or loss:
Re-measurement of defined benefit liability 1,403 (1,697)
Items that will be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations 30 148
Gain on available for sale financial assets 156 675
Other comprehensive income / (loss) for the year 1,589 (874)
--------------------------------------------------------------------- ------ --------- ---------
Total comprehensive income for the year 5,222 1,698
===================================================================== ====== ========= =========
Profit attributable to:
--------------------------------------------------------------------- ------ --------- ---------
Equity shareholders 3,542 2,554
--------------------------------------------------------------------- ------ --------- ---------
Non-controlling interests 91 18
Total comprehensive income attributable to:
--------------------------------------------------------------------- ------ --------- ---------
Equity shareholders 5,131 1,680
--------------------------------------------------------------------- ------ --------- ---------
Non-controlling interests 91 18
Earnings per share
- basic 9 20.9p 15.2p
- diluted 9 20.3p 14.7p
Dividends
Paid in year (GBP'000) 933 675
Paid in year (pence per share) 5.5p 4.0p
Proposed (GBP'000) 720 590
Proposed (pence per share) 4.2p 3.5p
Group Statement of Financial Position
For the 53 weeks ending 30 June 2018, and 52 weeks ending 24
June 2017 and 25 June 2016
2018 2017 2016
Notes GBP'000 GBP'000 GBP'000
ASSETS Restated Restated
Non-current assets
Property, plant and equipment 11,438 11,076 10,852
Intangible assets 12,707 9,490 1,512
Deferred tax assets 803 1,088 1,064
Investments 1,391 1,235 560
---------------------------------------------- ------ -------- --------- ---------
Total non-current assets 26,339 22,889 13,988
Current assets
Inventories 13,825 11,430 9,043
Trade and other receivables 19,283 16,345 15,358
Cash and cash equivalents 10 934 4,057 798
Current tax receivable 109 88 104
---------------------------------------------- ------ -------- --------- ---------
Total current assets 34,151 31,920 25,303
---------------------------------------------- ------ -------- --------- ---------
Total assets 60,490 54,809 39,291
---------------------------------------------- ------ -------- --------- ---------
LIABILITIES
Current liabilities
Trade and other payables 23,709 23,524 20,540
Interest-bearing loans and borrowings 1,127 534 141
Current tax payable 503 243 122
---------------------------------------------- ------ -------- --------- ---------
Total current liabilities 25,339 24,301 20,803
---------------------------------------------- ------ -------- --------- ---------
Non-current liabilities
Interest-bearing loans and borrowings 3,230 1,559 442
Post-retirement benefit obligations 4,489 6,132 4,495
Deferred tax liabilities 410 407 414
Total non-current liabilities 8,129 8,098 5,351
---------------------------------------------- ------ -------- --------- ---------
Total liabilities 33,468 32,399 26,154
---------------------------------------------- ------ -------- --------- ---------
Net assets 27,022 22,410 13,137
---------------------------------------------- ------ -------- --------- ---------
EQUITY
Share capital 857 844 566
Share premium 11,987 11,744 3,830
Revaluation of investment reserve 1,247 1,091 416
Exchange reserve (112) (142) (290)
Pension re-measurement reserve (2,491) (3,894) (2,197)
Retained earnings 15,455 12,749 10,812
---------------------------------------------- ------ -------- --------- ---------
Equity attributable to holders of the parent 26,943 22,392 13,137
---------------------------------------------- ------ -------- --------- ---------
Non-controlling interest 79 18 -
---------------------------------------------- ------ -------- --------- ---------
Total equity 27,022 22,410 13,137
---------------------------------------------- ------ -------- --------- ---------
Group Statement of Changes in Equity
For the 53 weeks ending 30 June 2018 and 52 weeks ending 24 June
2017
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 as
restated 844 11,744 1,091 (142) (3,894) 12,749 18 22,410
Dividends - - - - - (933) (30) (963)
Issue of new
shares 13 243 - - - - - 256
Non-controlling
interest - - - - - - 91 91
Share based
payments - - - - - 97 - 97
Transactions
with owners 13 243 - - - (836) 61 (519)
----------------- -------- -------- ------------ --------- --------------- --------- ---------------- --------
Profit for the
year - - - - - 3,542 - 3,542
Other
comprehensive
income:
Re-measurement
of defined
benefit
liability - - - - 1,403 - - 1,403
Exchange
difference on
translating
foreign
operations - - - 30 - - - 30
Gain on
available for
sale financial
assets - - 156 - - - - 156
Total
comprehensive
income for the
year - - 156 30 1,403 3,542 - 5,131
----------------- -------- -------- ------------ --------- --------------- --------- ---------------- --------
Balance as at
June 2018 857 11,987 1,247 (112) (2,491) 15,455 79 27,022
----------------- -------- -------- ------------ --------- --------------- --------- ---------------- --------
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 2016 as
reported 566 3,830 416 (290) (2,197) 10,467 - 12,792
Prior Year
Adjustment - - - - - 345 - 345
As Revised 566 3,830 416 (290) (2,197) 10,812 - 13,137
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 as
restated 844 11,744 1,091 (142) (3,894) 12,749 18 22,410
----------------- -------- -------- ------------ --------- --------------- --------- ---------------- --------
Cash Flow Statement
For the 53 weeks ending 30 June 2018 and 52 weeks ending 24 June
2017
Group Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Profit before taxation 4,524 3,115 699 1,621
Depreciation 1,283 1,249 1,058 990
Amortisation 583 239 418 74
Finance income (191) (97) (822) (1,100)
Finance cost 364 314 363 313
(Increase)/Decrease in inventories (2,395) (2,387) (1,279) 456
(Increase)/Decrease in trade and other receivables (2,648) (995) 71 2,555
Increase/(Decrease) in trade and other payables 944 2,074 2,563 (4,534)
(Decrease)/Increase in share-based payments provision (1,666) 1,755 (1,666) 1,755
Contributions to defined benefit plans (108) (108) (108) (108)
Cash generated from operations 690 5,159 1,297 2,022
------------------------------------------------------- -------- --------- -------- --------
Finance expense paid (209) (165) (208) (164)
Taxation paid (762) (1,142) (247) (94)
------------------------------------------------------- -------- --------- -------- --------
Net cash flow from operating activities (281) 3,852 842 1,764
------------------------------------------------------- -------- --------- -------- --------
Cash flow from investing activities
Dividend income received 191 97 822 1,097
Purchase of property, plant and equipment (1,631) (1,367) (1,486) (1,207)
Purchase of intangible assets (3,850) (8) (3,850) (8)
Purchase of subsidiary (1,850) (9,401) (1,850) (9,401)
Net cash flow from investing activities (7,140) (10,679) (6,364) (9,519)
------------------------------------------------------- -------- --------- -------- --------
Cash flow from financing activities
Proceeds on invoice discounting facility 2,741 1,059 1,701 982
Proceeds from new loan 3,000 2,000 3,000 2,000
Issue of new share capital 256 8,192 256 8,192
Repayment of loans (736) (490) (736) (490)
Finance income received - - - 3
Dividends paid (963) (675) (933) (675)
------------------------------------------------------- -------- --------- -------- --------
Net cash flow from financing activities 4,298 10,086 3,288 10,012
------------------------------------------------------- -------- --------- -------- --------
Net (decrease)/increase in cash and cash equivalents (3,123) 3,259 (2,234) 2,257
Cash and cash equivalents at beginning of year 4,057 798 2,971 714
------------------------------------------------------- -------- --------- -------- --------
Cash and cash equivalents at end of year 934 4,057 737 2,971
------------------------------------------------------- -------- --------- -------- --------
1. Statutory Accounts
The financial information does not constitute statutory accounts
as defined in section 435 of the Companies Act 2006, but has been
extracted from the statutory accounts for the year ended June 2018
on which an unqualified audit report has been issued and which will
be delivered to the Registrar following their adoption at the
Annual General Meeting.
The statutory accounts for the financial year ended June 2017
have been delivered to the Registrar of Companies with an
unqualified audit report and did not contain a statement under
section 498 of the Companies Act 2006.
Copies of the 2018 Annual Report and Accounts will be posted to
shareholders with the notice of the Annual General Meeting. Further
copies may be obtained by contacting the Company Secretary at
Swallowfield plc, Swallowfield House, Station Road, Wellington,
Somerset, TA21 8NL. An electronic copy will be available on the
Group's web site (www.swallowfield.com).
2. Basis of preparation
The Group has prepared its consolidated financial statements in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union and also in accordance with IFRS
issued by the International Accounting Standards Board. These
financial statements have been prepared under the historical cost
convention, modified to include the revaluation of certain
non-current assets and financial instruments.
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 signing of these accounts. On this basis,
they consider it appropriate to adopt the going concern basis in
the preparation of these accounts.
The consolidated financial statements are presented in sterling
and all values are rounded to the nearest thousand (GBP'000) except
where otherwise indicated.
3. Basis of consolidation
The Group financial statements consolidate the financial
statements of the Company and its subsidiary undertakings. The
results and net assets of undertakings acquired or disposed of
during a financial year are included in the Group Statement of
Comprehensive Income and Group Statement of Financial Position from
the effective date of acquisition or to the effective date of
disposal. Subsidiary undertakings have been consolidated using the
purchase method of accounting. In accordance with the exemptions
given by section 408 of the Companies Act 2006, the Company has not
presented its own Statement of Comprehensive Income.
4. Accounting Policies
The principal accounting policies which apply in preparing the
financial statements for the year ended 30 June 2018 are consistent
with those disclosed in the Group's audited accounts for the year
ended 24 June 2017.
5. 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), the
portfolio of Brands included in The Brand Architekts acquisition
(in 2016) and the Fish brand acquired during this financial
year.
-- Manufacturing - the contracted 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), share-based payment 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 Directors, which is considered to be the Chief
Operating Decision Maker (CODM) for the purposes of IFRS 8.
Comparative full year numbers have been presented on the same
basis.
a) Principal measures of profit and loss - Income Statement
segmental information for 53 weeks ending 30 June 2018 and 52 weeks
ending 24 June 2017:
53 weeks ended 30 Eliminations and 2017
June 2018 Brands Manufacturing Central Costs Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------------------ ----------------------- -------------------- ------------------------ ---------------------
UK revenue 17,116 34,168 - 51,284 44,732
International
revenue 3,968 18,693 - 22,661 29,582
--------------------- ------------------------ ----------------------- -------------------- ------------------------ ---------------------
Revenue - External 21,084 52,861 - 73,945 74,314
Revenue - Internal - 1,940 (1,940) - -
--------------------- ------------------------ ----------------------- -------------------- ------------------------ ---------------------
Total revenue 21,084 54,801 (1,940) 73,945 74,314
--------------------- ------------------------ ----------------------- -------------------- ------------------------ ---------------------
Underlying profit
from operations 4,806 2,615 (1,951) 5,470 5,617
--------------------- ------------------------ ----------------------- -------------------- ------------------------ ---------------------
Charge for
share-based
payments - - (297) (297) (1,755)
Amortisation of
acquisition-related
intangibles - - (197) (197) (187)
Exceptional costs - - (279) (279) (343)
Net borrowing costs - - (173) (173) (217)
--------------------- ------------------------ ----------------------- -------------------- ------------------------ ---------------------
Profit before
taxation 4,806 2,615 (2,897) 4,524 3,115
--------------------- ------------------------ ----------------------- -------------------- ------------------------ ---------------------
Tax charge (891) (891) (543)
--------------------- ------------------------ ----------------------- -------------------- ------------------------ ---------------------
Profit for the
period 4,806 2,615 (3,788) 3,633 2,572
--------------------- ------------------------ ----------------------- -------------------- ------------------------ ---------------------
52 weeks ended 24 Eliminations and 2016
June 2017 Brands Manufacturing Central Costs Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------------------ ----------------------- -------------------- ------------------------ --------
UK revenue 13,630 31,102 - 44,732 31,868
International
revenue 4,276 25,306 - 29,582 22,587
--------------------- ------------------------ ----------------------- -------------------- ------------------------ --------
Revenue - External 17,906 56,408 - 74,314 54,455
Revenue - Internal - 1,572 (1,572) - -
--------------------- ------------------------ ----------------------- -------------------- ------------------------ --------
Total revenue 17,906 57,980 (1,572) 74,314 54.455
--------------------- ------------------------ ----------------------- -------------------- ------------------------ --------
Underlying profit
from operations 2,910 4,822 (2,115) 5,617 2,015
--------------------- ------------------------ ----------------------- -------------------- ------------------------ --------
Charge for
share-based
payments - - (1,755) (1,755) (222)
Amortisation of
acquisition-related
intangibles - - (187) (187) -
Exceptional costs - - (343) (343) 645
Net borrowing costs - - (217) (217) (164)
--------------------- ------------------------ ----------------------- -------------------- ------------------------ --------
Profit before
taxation 2,910 4,822 (4,617) 3,115 2,274
--------------------- ------------------------ ----------------------- -------------------- ------------------------ --------
Tax charge (543) (543) (273)
--------------------- ------------------------ ----------------------- -------------------- ------------------------ --------
Profit for the
period 2,910 4,822 (5,160) 2,572 2,001
--------------------- ------------------------ ----------------------- -------------------- ------------------------ --------
The segmental Income Statement disclosures are measured in
accordance with the Group's accounting policies as set out in note
4.
Inter segment revenue earned by Manufacturing from sales to
Brands is determined on commercial trading terms as if Brands were
a third-party customer.
All defined benefit pension costs and share-based payment
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
underlying profit and loss reported to the CODM and are included
within (a) above:
53 weeks ended 30 June 2018 Eliminations and Central
Brands Manufacturing Costs Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------------- ---------------------- ---------------------------- -----------------
Depreciation 13 1,270 - 1,283
Amortisation - 386 197 583
52 weeks ended 24 June 2017 Eliminations and Central
Brands Manufacturing Costs Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------------- ---------------------- ---------------------------- -----------------
Depreciation 22 1,191 - 1,213
Amortisation - as previously
reported - 52 - 52
Amortisation - correction of
omission - 1 187 188
Amortisation - 53 187 240
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 53 weeks ended 52 weeks ended
30 June 2018 29 June 2017
GBP'000 GBP'000
--------------- ---------------
UK 51,284 44,732
Other European Union countries 16,891 23,012
Rest of the World 5,770 6,570
--------------- ---------------
73,945 74,314
--------------- ---------------
In the 53 weeks ended 30 June 2018, the Group had two customers
that exceeded 10% of total revenues, being 13% and 12%
respectively. In the 52 weeks ended 29 June 2017, the Group had two
customers that exceeded 10% of total revenues, this being 13% and
12% respectively.
6. Exceptional Items
Under exceptional Items we have recognised the costs of writing
off the investment in Sterling Shave Club and also the additional
costs of having certain posts duplicated to ensure a smooth
transition in key management roles. The prior year exceptional item
are the costs associated with the acquisition of The Brand
Architekts.
7. Profit before taxation
2018 2017
GBP'000 GBP'000
(a) This is stated after charging/ (crediting)
Depreciation of property, plant and equipment of purchased assets 1,283 1,249
Amortisation of intangible assets 583 240
Research and development 972 1,049
Foreign exchange (gains) / losses (9) 104
Operating leases:
Hire of plant and machinery 80 58
Rent of buildings 679 646
(b) Auditors' remuneration
Audit services:
Audit of the Company financial statements 42 42
Audit of subsidiary undertakings 20 23
Audit related assurance services:
Interim review 9 9
Taxation compliance services:
Corporation tax compliance 21 20
Other non-audit services:
iXBRL tagging - 2
Merger and acquisition advice - 5
Acquisition advice 19 55
(c) Earnings before interest, taxation, depreciation and amortisation ('EBITDA')
Operating profit before exceptional items 4,976 3,675
Depreciation of property, plant and equipment 1,283 1,249
Amortisation of intangible assets 386 52
Amortisation of acquisition-related intangibles 197 187
Loss on disposal of property, plant, and equipment - 104
-------- --------
EBITDA before exceptional operating items 6,842 5,163
Exceptional operating items (279) (343)
-------- --------
EBITDA after exceptional operating items 6,563 4,820
-------- --------
8. Taxation
2018 2017
(a) Analysis of tax charge in the year GBP'000 GBP'000
UK corporation tax:
- on profit for the year 901 718
- adjustment in respect of previous years - (69)
-foreign tax (11) 10
Total current tax charge 890 659
-------- --------
Deferred tax:
-current year (credit) (60) (37)
-prior year charge / (credit) 61 (102)
-effect of tax rate change on opening balance - 23
-------- --------
Total deferred tax 1 (116)
-------- --------
Tax charge 891 543
-------- --------
(b) Factors affecting total tax charge for the year
The tax assessed on the profit before taxation for the year is
higher (2017: lower) than the standard rate of UK corporation tax
of 19.00% (2017: 19.75%). The differences are reconciled below:
2018 2017
GBP'000 GBP'000
Profit before taxation 4,524 3,115
-------- --------
Tax at the applicable rate of 19.00% (2017: 19.75%) 860 615
Effect of:
Adjustment in respect of previous years (60) (149)
Adjustment to deferred tax - 6
Differences between UK and foreign tax rates - 12
Permanent differences and other 91 79
R&D tax credit - (20)
Actual tax charge 891 543
-------- --------
9. Earnings per share
2018 2017
Basic and Diluted
Profit for the year (GBP'000) 3,542 2,554
Basic weighted average number of ordinary shares in issue during the year 16,934,762 16,834,773
Diluted number of shares 17,454,505 17,382,702
------------- -------------
Basic earnings per share 20.9p 15.2p
------------- -------------
Diluted earnings per share 20.3p 14.7p
------------- -------------
Basic earnings per share has been calculated by dividing the
profit for each financial year by the weighted average number of
ordinary shares in issue at 30 June 2018 and 24 June 2017
respectively. There is a difference at June 2018 between the basic
net earnings per share and the diluted net earnings per share of
0.6p due to the 535,000 share options awarded.
2018 2017
Adjusted earnings per share
Adjusted Profit for the year (GBP'000) 3,928 2,979
Basic weighted average number of ordinary shares in issue during the year 16,934,762 16,834,773
Diluted number of shares 17,454,505 17,382,702
------------- -------------
Basic earnings per share 23.2p 17.7p
------------- -------------
Diluted earnings per share 22.5p 17.1p
------------- -------------
Adjusted profit for the current year of GBP3.93m is shown after
adding back Exceptional Items of GBP0.28m and Amortisation of
Acquisition Related Intangibles of GBP0.20m, and then deducting a
notional tax charge of GBP0.09m. Adjusted earnings per share has
been calculated by dividing the adjusted profit of GBP3.93m by the
weighted average number of ordinary shares in issue at 30 June
2018. The 2017 comparative figures have also been adjusted to a
comparable basis.
10. Note to Cash Flow Statement
(a) Reconciliation of cash and cash equivalents to movement in net debt:
2018 2017
GBP'000 GBP'000
(Decrease) / Increase in cash and cash equivalents (3,123) 3,259
Net cash (inflow) from (increase) in borrowings (5,005) (2,569)
------------- -------------
Change in net debt (8,128) 690
Opening net debt (3,641) (4,331)
------------- -------------
Closing net debt (11,769) (3,641)
------------- -------------
(b) Analysis of net debt: Closing 2017 Cash Flow Non-Cash Movement Closing 2018
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in hand 4,057 (3,105) (18) 934
CID facility (5,605) (2,741) - (8,346)
Borrowings due within one year (534) (593) - (1,127)
Borrowings due after one year (1,559) (1,671) - (3,230)
------------- ---------- ------------------ -------------
(3,641) (8,110) (18) (11,769)
------------- ---------- ------------------ -------------
11. Annual General Meeting
The Annual General Meeting will be held on Thursday 15 November
2018 at the Company's Registered Office, at 12.00 noon.
12. Interim Report
This report will also be available from the Company's registered
office and on the Company's website www.swallowfield.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EASNLASNPEFF
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