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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Swallowfield Plc | LSE:SWL | London | Ordinary Share | GB0008667304 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 195.00 | 190.00 | 200.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSWL
RNS Number : 9891X
Swallowfield PLC
28 February 2017
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 7 January 2017
GBPm unless otherwise stated 2017 2016 ------------------------------- --------- --------- Reported results (1) ------------------------------- --------- --------- Revenue GBP39.7m GBP27.5m ------------------------------- --------- --------- Revenue (constant currency) GBP37.9m - (2) ------------------------------- --------- --------- Adjusted operating profit GBP2.54m GBP0.64m (1) ------------------------------- --------- --------- Adjusted basic earnings per share (1) 11.3p 4.1p ------------------------------- --------- --------- Statutory results ------------------------------- --------- --------- Revenue GBP39.7m GBP27.5m ------------------------------- --------- --------- Operating profit GBP2.20m GBP1.19m ------------------------------- --------- --------- Basic earnings per share 9.7p 8.5p ------------------------------- --------- --------- Total dividend per share 1.7p 0.8p ------------------------------- --------- --------- Net debt GBP5.5m GBP4.9m ------------------------------- --------- ---------
(1) Adjusted operating profit and adjusted earnings per share are calculated before exceptional items.
(2) Revenue translated at 2016 exchange rates.
Financial highlights
-- Strong revenue growth of +44% (+12% excluding The Brand Architekts acquisition) to GBP39.7m (2016: GBP27.5m), sterling weakness benefits the top-line with revenue growth on a constant currency basis of +38% and +7% respectively.
-- Owned brands now representing 25% of revenues. -- Adjusted operating profit increased by 297% year on year to GBP2.54m (2016: GBP0.64m). -- Adjusted EPS increased by 176% year on year to 11.3 pence (2016: 4.1 pence).
-- Net Debt of GBP5.5m (2016: GBP4.9m), inclusive of GBP2.0m additional term-loan funding to support acquisition.
-- Interim dividend increased by 113% to 1.7 pence (2016: 0.8 pence).
Operational highlights
-- The Brand Architekts acquisition now successfully integrated with continuing strong growth momentum driven by several successful new product launches and excellent sell through of Christmas gifting ranges.
-- Original Swallowfield brands also showing strong growth and extending retail distribution.
-- Manufacturing business performing robustly underpinned by successful launches for global brand owners.
-- Strong financial performance allowing investment in brand support and organisational capability whilst still delivering significantly improved profitability.
-- Cost optimisation projects progressing as planned.
Brendan Hynes, Non-executive Chairman, commented:
"The first half year has seen further, significant progress made in repositioning Swallowfield plc as a stronger, more profitable business with greater control over its own destiny. The completion of the transformational acquisition of The Brand Architekts, combined with the strong performance of our Manufacturing business, means Swallowfield is well positioned for the future."
Chris How, Chief Executive, commented:
"It has been a very successful first half. We are delighted with the way that the Swallowfield and Brand Architekts teams have worked together to further accelerate growth. The exciting potential of combining our resources identified at the time of acquisition is now being realised. We are also very pleased that our capability within the manufacturing business to satisfy the innovation, service and quality requirements of our customer base is being rewarded with good growth and a steady stream of new business wins and contract renewals."
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For further information please contact:
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Swallowfield plc
----------------------- -------------------------- --------------
01823 662
Chris How Chief Executive Officer 241
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01823 662
Mark Warren Group Finance Director 241
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0207 496
Alex Price N+1 Singer 3000
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Josh Royston / Hilary
Buchanan Alma PR 07780 901979
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Business review
Revenue showed growth of 44% at GBP39.7m (2016: GBP27.5m) and, 12% excluding the acquisition of The Brand Architekts which completed on 27 June 2016. The weakness of Sterling has increased sales revenue by GBP1.8m, with GBP1.1m of this coming from US dollar denominated sales and GBP0.7m from the Euro, so revenue growth on a constant currency basis would have been 38%, and 7% excluding the acquisition.
Direct contribution margins - defined as net sales less materials, direct labour, and other direct costs - increased to 31.7% (prior year 31.3%). The favourable currency impact on revenue has been offset by an adverse currency impact on costs of goods, reflecting the Group's natural hedge profile, plus inflationary pressures on GBP purchases. This maintained position reflects the success of our Product Category Prioritisation, the introduction of a number of innovative new products in our manufacturing business and the contribution of our portfolio of Swallowfield owned brands.
The overall re-shaping of the business towards stronger growth and margins has enabled us to deliver a three-fold increase in adjusted operating profit at a time when we have also increased investment in organisational capability and brand support.
The net effect is that the Group made an adjusted operating profit of GBP2.54m (2016: GBP0.64m). Adjusted profit before tax increased to GBP2.38m (2016: GBP0.51m).
The exceptional item of GBP0.34m in the current period relates to "one off" costs incurred in the acquisition of The Brand Architekts Ltd. In 2016 there was an exceptional credit of GBP0.55m relating to the closure to future accrual of the defined benefit pension scheme.
The overall effective rate of Group taxation for the period was 19.6% (2016: 10.0%) of pre-tax profits. The prior year benefitted from brought-forward UK tax losses which were fully utilised in the last financial year. The current year tax charge reflects standard UK and the Czech Republic rates of taxation.
This results in adjusted earnings per share of 11.3p (2016: 4.1p).
Progress vs strategy
'Creating for Tomorrow, Delivering for Today'
Since 2014, we have been successfully executing on the four strategic pillars of 'Creating for Tomorrow' represented by:
-- Product category focus -- Core business innovation -- Swallowfield owned brands -- Cost base optimisation
The acquisition of The Brand Architekts in June 2016 has accelerated the owned brands pillar and brought critical mass to our owned brands portfolio, representing 25% of Group revenues in the period. We have also introduced two reportable business segments, manufacturing and brands, so have therefore evolved the strategic pillars of 'Creating for Tomorrow' to reflect this change.
Within our manufacturing business, which remains focused on the development, formulation and production of quality products for many of the world's leading personal care and beauty brands the three pillars have evolved to:
-- Innovation, quality and service to global brand owners -- Drive category focus -- Cost base optimisation
Within our owned brands business, the three pillars will become:
-- New product development (NPD) -- Leverage Swallowfield resources -- International Expansion
The following is a review of progress against these evolved strategic pillars in the period:
Owned brands
The integration, and indeed performance, of The Brand Architekts has been very positive. The team at Teddington is settled and well-focused on continuing the excellent growth story that attracted us prior to the acquisition, and the ability to bring relevant new products to retailer shelves at pace remains hugely impressive. Pre-acquisition growth momentum is continuing and even further improving with all key brands in growth. The sell through of Christmas gift ranges was particularly strong. The founders are also working extremely well in their consultancy capacity.
Original Swallowfield owned brands (Real Shaving Company, Bagsy, MR., Tru) are also performing well, showing a combined revenue growth of c.50%, albeit from a modest base. We have relocated the management of these brands to our Teddington office ahead of schedule and they are benefitting from being managed in such a brand and retailer focused environment.
New product development (NPD)
Fast paced NPD that quickly identifies and responds to market trends is a core element of The Brand Architekts business model. We are pleased that this responsiveness continues as part of the Swallowfield Group and that retailer appetite remains as high as ever. 35 new products were launched in the reporting period across 9 different brands. Particular successes include the indulgent Senspa Thai Rituals and Argan+ Moroccan Spice ranges and the more performance driven Dr. Ceuticals Foot Rescue SOS cream and Good Things Pore-fectly Clear range. Impressively a new brand, Hill & Noble hand-care, was created, designed, produced and shipped within 12 weeks to realise an opportunity in a leading national retailer.
Progress also continues on the original Swallowfield brands. The Bagsy Savannah Miller collection was launched in November. The Real Shaving Company new gift range was launched and sold well over the Christmas period which contributed to a very positive year on year sales growth. MR., our premium male hair loss brand, has doubled its rate of sale on a year on year basis and looks set to continue its strong growth trend on the back of some innovative digital marketing activity. In the value sector, our small portfolio of brands such as Tru, are also showing significant year on year growth (from modest beginnings) and we have extended retail distribution.
Leverage Swallowfield resources
At the time of acquisition of The Brand Architekts, we identified a number of opportunities to either drive revenue growth or create savings by leveraging the existing resources and capabilities of the parent business. We are pleased to have started to realise many of these opportunities in the first six months of operating together.
The first Swallowfield produced products (Body Sprays and Fragrance for Dirty Works) are now on shelf. Several others will follow in the second half. Much work has been completed to build improved web sites and e-commerce capability for key acquired brands such as Dirty Works, Kind Natured and Quick Fix, we have also consolidated PR agencies across the brand portfolio to create better quality coverage at a lower cost. Margin improvement programmes with pre-existing suppliers to Brand Architekts are in process and are expected to bring benefits in H2 and beyond. We are leveraging 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 quite significant annual savings in freight and duty on shipments from China by combining our expertise and our buying power.
International Expansion
Growth in international revenues has been strong, led in particular by export sales to the USA and Turkey. Across the full portfolio of our brands, international sales now account for 23% of total and we are investing to grow this further still. We have put in place dedicated resource to grow this area and are pleased to have opened new distributors in the period in Austria, Netherlands, and Chile. In February and March respectively, we are participating at major trade fairs in Monaco and Bologna, with an expectation of building further new business.
Manufacturing
Innovation
Our manufacturing business relies on our ability to bring innovative new products to our customer base. In the period, we introduced 92 Swallowfield developed new products and expect a similar amount to be launched in the second half. This level of innovation activity compares favourably to prior year. Volumes on our innovative Plastic aerosol products continued to grow in the period and we are pleased to be working on two projects which may see the technology introduced by other customers in the future.
Drive category focus
In the reporting period, we have seen particularly strong growth in Personal Care Aerosols, Cosmetic Pencils, and Premium Liquids. In each case, recently won contracts to support new product launches have been a major contributor, underlining our position as a reliable partner for major global brand owners. The success of our partnership with a major European cosmetics company has supported a project which is now in progress to increase wood pencil capacity and cost efficiency to meet growing demand. Further improvements in capacity and cost competitiveness are being planned with particular focus on Personal Care aerosols.
Cost base optimisation
Energy saving improvements continue at the Wellington site and line efficiency programmes continue to contribute to margin improvement across all sites. The investment in pencil automation in Bideford decreases cost per unit and increases capacity. The flexibility of our site footprint has enabled us to accommodate the needs of a major customer who needed to transfer sourcing from a dollar denominated supply chain out of China to a euro-denominated supply chain.
Work is ongoing to assess in-house production of selected Brand Architekts products and is expected to bring financial benefits in FY18.
Net debt and cash flow
Net debt increased from a year-end position of GBP4.3m to GBP5.5m (2016: GBP4.9m). This includes an additional GBP2m five-year term loan facility taken out to support the acquisition of The Brand Architekts Ltd. The components of working capital reflect the impact of the four major product launches in our manufacturing business across the June year-end and into this first half, plus the statement of financial position now includes The Brand Architekts working capital components. The increase in tax paid reflects the payment of The Brand Architekts prior-year corporation tax, and the re-introduction of quarterly instalments across the enlarged Group.
Financing costs of GBP0.16m (2016: GBP0.12m) comprised interest expense of GBP0.09m (2016: GBP0.07m) plus a pension scheme notional finance charge of GBP0.07m (2016: charge GBP0.05m).
Capital expenditure was GBP0.5m which was GBP0.2m below depreciation. We expect capital expenditure to be broadly in line with 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 impact the second-half.
Defined benefit pension scheme
The defined benefit pension scheme underwent its last triennial valuation as of 5 April 2014. The deficit on a statutory funding basis was GBP1.3m and the Group entered into a revised deficit recovery plan and schedule of contributions in July 2015. The deficit reduction payment will be GBP108k per annum (previously GBP111.5k per annum) for ten years. The scheme was subsequently closed to future accrual with effect from 31 December 2015.
For accounting purposes at 7 January 2017, the Group recognised under IAS19 'employee benefits', a deficit of GBP8.75m (25 June 2016: GBP4.50m). 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 lower than they were at 25 June 2016. This has resulted in lower discount rates being adopted for accounting purposes compared to last year, which has been coupled with an increase in expectations of long term inflation, with the combination materially increasing the fair value of the scheme liabilities, with the strong investment return performance only partially mitigating. This has translated into an increased liability under the IAS19 methodology.
Dividends
The Board is pleased to announce that it has approved an interim dividend of 1.7 pence per share (2016: 0.8 pence). This dividend will be paid on 26 May 2017 to shareholders on the register on 5 May 2017. The Shares will go ex-dividend on 4 May 2017.
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.
Outlook
We have delivered another significant improvement in performance in the first half year helped by the acquisition of The Brand Architekts and four major new product launches in our Manufacturing business.
We expect the strong momentum in our branded business to continue, supported by a steady stream of new products, that signal not only continuing innovation flow, but also continued strong support for our brands across our retail customers.
In our Manufacturing business, the outlook is solid with a steady flow of new contract wins and launches. This needs to be balanced against the expected normalisation of volumes in the second half of this year and the first half of next year, having had the benefit of four major launches during calendar 2016, which will be hard to repeat and which have created strong comparators.
In line with the Industry, both business segments are being challenged by increasing material and packaging costs resulting from the fall in sterling and global inflationary pressures. Whilst this does bring some uncertainty in the months ahead, we remain confident that our strong overall trading momentum will compensate in the current year.
We therefore expect to see further sales and profitability growth for the full year, as planned.
Having successfully integrated Brand Architekts, we continue to be alert to further acquisition opportunities should they offer the potential to build incremental shareholder value.
Group Statement of Comprehensive Income
28 weeks 28 weeks 12 months
ended ended ended
7 Jan 2017 9 Jan 2016 25 June
2016
(unaudited) (unaudited) (audited)
Continuing operations Notes GBP'000 GBP'000 GBP'000
Revenue 2 39,708 27,507 54,455
Cost of sales (32,264) (23,538) (46,393)
------------------------------- ------ ------------ ------------ ----------
Gross profit 7,444 3,969 8,062
Commercial and administrative
costs (4,905) (3,333) (6,269)
------------------------------- ------ ------------ ------------ ----------
Operating profit
before exceptional
items 2,539 636 1,793
Exceptional items 3 (343) 554 645
------------------------------- ------ ------------ ------------ ----------
Operating profit 2,196 1,190 2,438
Finance income 1 - 55
Finance costs 4 (163) (123) (219)
Profit before taxation 2,034 1,067 2,274
Taxation (398) (107) (273)
------------------------------- ------ ------------ ------------ ----------
Profit after taxation 1,636 960 2,001
Other comprehensive
(loss) / income for
the period:
Re-measurement of
defined benefit liability (3,469) (1,290) (2,160)
Items that will be
reclassified subsequently
to profit or loss
Exchange differences
on translating foreign
operations 79 70 162
Gain on available
for sale financial
assets 256 93 170
Other comprehensive
(loss) for the period (3,134) (1,127) (1,828)
------------------------------- ------ ------------ ------------ ----------
Total comprehensive
(loss) / income for
the period (1,498) (167) 173
=============================== ====== ============ ============ ==========
Profit attributable
to:
------------------------------- ------ ------------ ------------ ----------
Equity shareholders 1,636 960 2,001
------------------------------- ------ ------------ ------------ ----------
Total comprehensive
(loss) / income attributable
to:
------------------------------- ------ ------------ ------------ ----------
Equity shareholders (1,498) (167) 173
------------------------------- ------ ------------ ------------ ----------
Earnings per share
- basic 5 9.7p 8.5p 17.7p
- diluted 5 9.5p 8.3p 17.4p
Dividend
Paid in period (GBP'000) 388 226 317
Paid in period (pence
per share) 2.3p 2.0p 2.8p
Proposed (GBP'000) 6 287 90 388
Proposed (pence per
share) 1.7p 0.8p 2.3p
Group Statement of Changes in Equity
Share Share Available Exchange Net Retained Total
Capital Premium for Reserve defined Earnings Equity
Sale benefit
Financial liability
Assets
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- --------- ----------- --------- ----------- ---------- --------
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 2015 566 3,830 246 (452) (37) 8,771 12,924
--------------------- ---- ------ ---- ------ -------- ------ --------
Dividends - - - - - (226) (226)
Share based
payments - - - - - 8 8
Transactions
with owners - - - - - (218) (218)
--------------------- ---- ------ ---- ------ -------- ------ --------
Profit for
the period - - - - - 960 960
Other comprehensive
income:
Re-measurement
of defined
benefit liability - - - - (1,290) - (1,290)
Exchange difference
on translating
foreign operations - - - 70 - - 70
Gain on available
for sale financial
assets - - 93 - - - 93
Total comprehensive
income for
the year - - 93 70 (1,290) 960 (167)
--------------------- ---- ------ ---- ------ -------- ------ --------
Balance as
at 9 January
2016 566 3,830 339 (382) (1,327) 9,513 12,539
--------------------- ---- ------ ---- ------ -------- ------ --------
Balance as
at June 2015 566 3,830 246 (452) (37) 8,771 12,924
--------------------- ---- ------ ---- ------ -------- ------- --------
Dividends - - - - - (317) (317)
Share based
payments - - - - - 12 12
Transactions
with owners - - - - - (305) (305)
--------------------- ---- ------ ---- ------ -------- ------- --------
Profit for
the year - - - - - 2,001 2,001
Other comprehensive
income:
Re-measurement
of defined
benefit liability - - - - (2,160) - (2,160)
Exchange difference
on translating
foreign operations - - - 162 - - 162
Gain on available
for sale financial
assets - - 170 - - - 170
Total comprehensive
income for
the year - - 170 162 (2,160) 2,001 173
--------------------- ---- ------ ---- ------ -------- ------- --------
Balance as
at June 2016 566 3,830 416 (290) (2,197) 10,467 12,792
--------------------- ---- ------ ---- ------ -------- ------- --------
Group Statement of Financial Position
As at As at As at
7 Jan 2017 9 Jan 2016 25 June
2016
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant
and equipment 10,754 11,087 10,852
Intangible assets 9,231 1,153 1,167
Deferred tax assets 1,472 600 710
Investments 816 483 560
--------------------------- ------ ------------ ------------ ----------
Total non-current
assets 22,273 13,323 13,289
--------------------------- ------ ------------ ------------ ----------
Current assets
Inventories 12,096 7,521 9,043
Trade and other
receivables 15,892 10,521 15,358
Cash and cash equivalents 825 928 798
Current tax receivable 166 66 104
--------------------------- ------ ------------ ------------ ----------
Total current assets 28,979 19,036 25,303
--------------------------- ------ ------------ ------------ ----------
Total assets 51,252 32,359 38,592
--------------------------- ------ ------------ ------------ ----------
LIABILITIES
Current liabilities
Trade and other
payables 18,728 15,560 20,540
Deferred consideration 8 1,850 - -
Interest-bearing
loans and borrowings 529 139 141
Current tax payable 426 14 122
--------------------------- ------ ------------ ------------ ----------
Total current liabilities 21,533 15,713 20,803
--------------------------- ------ ------------ ------------ ----------
Non-current liabilities
Interest-bearing
loans and borrowings 1,783 501 442
Post-retirement
benefit obligations 9 8,745 3,550 4,495
Deferred tax liabilities 65 56 60
Total non-current
liabilities 10,593 4,107 4,997
--------------------------- ------ ------------ ------------ ----------
Total liabilities 32,126 19,820 25,800
--------------------------- ------ ------------ ------------ ----------
Net assets 19,126 12,539 12,792
--------------------------- ------ ------------ ------------ ----------
EQUITY
Share capital 844 566 566
Share premium 11,744 3,830 3,830
Revaluation of investment
reserve 672 339 416
Exchange reserve (211) (382) (290)
Re-measurement of
defined benefit
liability (5,666) (1,327) (2,197)
Retained earnings 11,743 9,513 10,467
--------------------------- ------ ------------ ------------ ----------
Total equity 19,126 12,539 12,792
--------------------------- ------ ------------ ------------ ----------
Group Cash Flow Statement
28 weeks 28 weeks 12 months
ended ended ended
7 Jan 2017 9 Jan 2016 25 June
2016
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Cash flow from operating
activities
Profit before taxation 2,034 1,067 2,274
Depreciation 661 615 1,152
Amortisation 123 32 67
Loss on disposal of
property, plant and
equipment - - 41
Defined benefit pension
scheme curtailment gain - (774) (870)
Finance income (1) - (55)
Finance cost 163 123 219
(Increase) in inventories (637) (1,028) (2,550)
Decrease / (increase)
in trade and other receivables 1,974 30 (4,956)
(Decrease) / increase
in trade and other payables (2,572) 1,679 7,374
Contributions to defined
benefit plan (54) (209) (321)
Current service cost
of defined benefit plan - 206 305
--------------------------------- ------ ------------ ------------ ----------
Cash generated from
operations 1,691 1,741 2,680
--------------------------------- ------ ------------ ------------ ----------
Finance expense paid (89) (71) (134)
Taxation (paid) (724) (55) (10)
--------------------------------- ------ ------------ ------------ ----------
Net cash flow from operating
activities 878 1,615 2,536
--------------------------------- ------ ------------ ------------ ----------
Cash flow from investing
activities
Finance income received 1 - 55
Purchase of property,
plant and equipment (432) (871) (1,181)
Purchase of intangibles - (4) (34)
Purchase of subsidiary 8 (9,378) - -
Net cash flow from investing
activities (9,809) (875) (1,160)
--------------------------------- ------ ------------ ------------ ----------
Cash flow from financing
activities
Proceeds from new loan 2,000 - -
(Repayment) / proceeds
of invoice discounting
facility (575) 346 (272)
Repayment of loans (271) (80) (137)
--------------------------------- ------ ------------ ------------ ----------
Net cash proceeds /
(repayment) of borrowings 1,154 266 (409)
Issue of new share capital 8,192 - -
Dividends paid (388) (226) (317)
--------------------------------- ------ ------------ ------------ ----------
Net cash flow from financing
activities 8,958 40 (726)
--------------------------------- ------ ------------ ------------ ----------
Net increase in cash
and cash equivalents 27 780 650
Cash and cash equivalents
at beginning of period 798 148 148
--------------------------------- ------ ------------ ------------ ----------
Cash and cash equivalents
at end of period 825 928 798
--------------------------------- ------ ------------ ------------ ----------
Notes to the Accounts
Note 1 Basis of preparation
The Group has prepared its interim results for the 28 week period ended 7 January 2017 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 27 February 2017.
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 2017.
The statutory accounts for the year ended June 2016, 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, acquired at the start of this financial year. This latter acquisition brings critical mass to our owned brands and has therefore changed the segmental analysis for this year.
-- 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, 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 Executive Directors, which is considered to be the CODM for the purposes of IFRS 8.
No comparative figures are shown as it is only since the acquisition of The Brand Architekts that this segmentation has been adopted. Prior to this brand performance was not considered to be sufficiently material to be separately reported.
a) Principal measures of profit and loss - Income Statement segmental information:
28 weeks ended 7 Brands Manufacturing Eliminations Total
January 2017 and Central
Costs
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------------------- -------------- ------------------ --------------------
UK revenue 7,543 17,283 - 24,826
International revenue 2,289 12,593 - 14,882
----------------------- --------------------- -------------- ------------------ --------------------
Revenue - External 9,832 29,876 - 39,708
Revenue - Internal - 605 (605) -
----------------------- --------------------- -------------- ------------------ --------------------
Total revenue 9,832 30,481 (605) 39,708
----------------------- --------------------- -------------- ------------------ --------------------
Profit/(loss) from
operations 1,845 2,104 (1,410) 2,539
Exceptional costs - - (343) (343)
Net borrowing costs - - (162) (162)
----------------------- --------------------- -------------- ------------------ --------------------
Profit/(loss) before
taxation 1,845 2,104 (1,915) 2,034
----------------------- --------------------- -------------- ------------------ --------------------
Tax charge (398) (398)
----------------------- --------------------- -------------- ------------------ --------------------
Profit/(loss) for
the period 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 7 January Brands Manufacturing Eliminations Total
2017 and Central
Costs
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------------- --------------------- ------------- -----------
Depreciation 18 643 - 661
Amortisation 83 40 - 123
LTIP charges - - 434 434
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
7 Jan 2017 9 Jan 2016 25 June
2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------ ------------ ----------
UK 24,826 18,510 31,868
Other European Union
countries 11,619 7,593 20,577
Rest of the World 3,263 1,404 2,010
------------ ------------ ----------
39,708 27,507 54,455
------------ ------------ ----------
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. In the 28 weeks ended 9 January 2016, the Group had one customer that exceeded 10% of total revenues, this being 23.4%.
Note 3 Exceptional items
Under exceptional Items we have recognised costs associated with The Brand Architekts acquisition which completed on 27 June 2016.
The prior-year reflecting an exceptional curtailment gain, representing a reduction in liabilities on closure of the defined benefit pension scheme to future accrual, offset by one-off costs incurred during the process. This net amount was excluded from adjusted Group operating profit, as this was a one-off gain and is unrelated to the underlying performance of the Group.
Note 4 Finance costs 28 weeks 28 weeks 12 months
ended ended ended
7 Jan 2017 9 Jan 2016 25 June
2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------ ------------ ----------
Finance costs
Bank loans and overdrafts 89 71 134
Notional pension scheme
costs 74 52 85
------------ ------------ ----------
163 123 219
------------ ------------ ----------
Note 5 Earnings per share 28 weeks 28 weeks 12 months
ended ended ended
7 Jan 2017 9 Jan 2016 25 June
2016
(unaudited) (unaudited) (audited)
------------ ------------ -----------
Basic and diluted
Profit for the period
(GBP'000) 1,636 960 2,001
Basic weighted average
number of
ordinary shares in issue
during the period 16,865,401 11,306,416 11,306,416
Diluted number of shares 17,182,330 11,531,535 11,531,535
Basic earnings per share 9.7p 8.5p 17.7p
--------------------------- ------------ ------------ -----------
Diluted earnings per
share 9.5p 8.3p 17.4p
--------------------------- ------------ ------------ -----------
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 9 January 2016 and June 2016 between the basic net earnings per share and the diluted net earnings per share due to the 225,119 share options awarded. The difference at 7 January 2017 includes the LTIP share options awarded in July 2016, to give a total of 316,929 share options that could be issued.
Adjusted earnings per share
Profit for the period (GBP'000) 1,636 960 2,001 Add back: Exceptional items 343 (554) (650) Notional tax charge on exceptional items (69) 56 83 --------------------------- ------------------------- ----------- ----------- Adjusted profit before exceptional items 1,910 462 1,430 --------------------------- ------------------------- ----------- ----------- Basic weighted average number of ordinary shares in issue during the period 16,865,401 11,306,416 11,306,416 Diluted number of shares 17,182,330 11,531,535 11,531,535 --------------------------- ------------------------- ----------- ----------- Adjusted basic earnings per share 11.3p 4.1p 12.6p --------------------------- ------------------------- ----------- ----------- Adjusted diluted earnings per share 11.1p 4.0p 12.4p --------------------------- ------------------------- ----------- -----------
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 9 January 2016 and June 2016 between the basic net earnings per share and the diluted net earnings per share due to the 225,119 share options awarded. The difference at 7 January 2017 includes the LTIP share options awarded in July 2016, to give a total of 316,929 share options that could be issued.
Note 6 Dividends
The Directors have declared an interim dividend payment of 1.7p per share (2016: Interim: 0.8p; Final: 2.3p).
Note 7 Reconciliation of cash and cash equivalents to movement in net debt
28 weeks 28 weeks 12 months
ended ended ended
7 Jan 2017 9 Jan 2016 25 June
2016
(unaudited) (unaudited) (audited)
GBP000's GBP000's GBP000's
------------ ------------ ----------
Increase in cash and
cash equivalents in the
period 27 780 650
Net cash outflow / (inflow)
from decrease / (increase)
in borrowings (1,154) (266) 409
------------------------------ ------------ ------------ ----------
Change in net debt resulting
from cash flows (1,127) 514 1,059
Net debt at the beginning
of the period (4,331) (5,390) (5,390)
------------------------------ ------------ ------------ ----------
Net debt at the end of
the period (5,458) (4,876) (4,331)
------------------------------ ------------ ------------ ----------
Note 8 Accounting Policies
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 2017.
Acquisition of subsidiary: The Brand Architekts
On 27 June 2016, the Group acquired 100% of the issued share capital of The Brand Architekts Ltd. The total consideration for the acquisition along with the fair value of the identified assets and assumed liabilities is shown below:
Recognised amounts of identifiable assets acquired
and liabilities assumed
Book value Fair Value Provisional
adjustments Fair Value
7 January
2017
GBP000's GBP000's GBP000's
----------- ------------- ------------
Tangible assets
Fixed assets 30 - 30
Inventory 2,416 - 2,416
Trade and other receivables 3,332 - 3,332
Bank and cash balances 832 - 832
Trade and other payables (2,737) - (2,737)
Intangible assets - 6,737 6,737
----------------------------- ----------- ------------- ------------
Sub total 3,873 6,737 10,610
----------------------------- ----------- ------------- ------------
Goodwill - - 1,450
----------------------------- ----------- ------------- ------------
Total Fair Value recognised - 12,060
----------------------------- ----------- ------------- ------------
Net cash paid on acquisition
GBP000's
---------
Purchase of subsidiary (12,060)
Deferred consideration 1,850
Cash on acquisition 832
Net cash paid on acquisition (9,378)
-------------------------------- ---------
The acquisition consideration is subject to a deferred payment of GBP1.85m based on a margin performance target for the 12 months immediately following acquisition. Management believe that the margin target will be achieved and as such the fair value of the transaction assumes payment of this deferred consideration in full. The acquisition costs, including due diligence costs, that relate to the transaction have been expensed as operating costs in compliance with IFRS3 and shown as exceptional items.
The portfolio of brand names is considered to have an indefinite life and is tested for impairment annually. This is on the basis that there is no foreseeable limit on the period of time over which it is expected to contribute to cash flow. Customer relationships are amortised on a straight-line basis over ten years.
Goodwill of GBP1.45m has been recognised on acquisition and is attributable to future product launches and assembled workforce at point of acquisition.
Note 9 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 2014 and revealed a funding deficit of GBP1.3m. 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 10 years from 18 July 2015 to eliminate the deficit. The magnitude of such payments will be reviewed following the next scheme funding valuation as at April 2017. Prior to July 2015 the Company was paying GBP111.5k per annum.
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
7 January 9 January 25 June 2016
2017 2016 GBP000's
GBP000's GBP000's
----------- ----------------- --------------
Company pension
contributions - 155 213
Deficit recovery
payments 54 54 108
Scheme administrative
expenses 71 44 101
Pension Protection
Fund premium 240 211 211
----------------------- ----------- ----------------- --------------
Total 365 464 633
----------------------- ----------- ----------------- --------------
The amounts expensed in the Group Statement of Comprehensive Income were:
28 weeks 28 weeks 12 months
ended ended ended
7 January 9 January 25 June 2016
2017 2016 GBP000's
GBP000's GBP000's
----------- ----------------- --------------
In Operating profit:
Company pension
contributions - 206 305
Scheme administrative
expenses 71 41 86
Pension Protection
Fund premium 120 106 211
----------- ----------------- --------------
191 353 602
In Finance costs:
Unwinding of notional
discount factor 74 52 85
----------------------- ----------- ----------------- --------------
Total 265 405 687
----------------------- ----------- ----------------- --------------
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 7 January 2017 are:
7 January
2017
GBP000's
----------
Increase in pension and other
benefit obligations (4,250)
Decrease in deferred tax 761
Decrease in equity (3,489)
--------------------------------- ----------
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 2016. 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 an increased liability.
The key assumptions used were:
As at 7 January As at 9 January As at 25 June
2017 2016 2016
---------------- ---------------- --------------
Discount Rate 2.80% 3.85% 3.35%
Rate of inflation
(RPI) 3.45% 3.05% 2.90%
Rate of inflation
(CPI) 2.45% 2.05% 1.90%
The amounts recognised in the Group statement of financial position were:
As at 7 January As at 9 January As at 25 June
2017 2016 2016
GBP000's GBP000's GBP000's
---------------- ---------------- --------------
Present value of
funded obligations (30,891) (22,975) (24,694)
Fair value of scheme
assets 22,146 19,425 20,199
---------------------- ---------------- ---------------- --------------
(Deficit) (8,745) (3,550) (4,495)
---------------------- ---------------- ---------------- --------------
Note 10 Announcement of results
These results were announced to the London Stock Exchange on 28 February 2017. 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.
Independent review report to Swallowfield plc
Introduction
We have been engaged by the Group to review the condensed set of financial statements in the half-yearly financial report of Swallowfield plc for the twenty eight weeks ended 7 January 2017 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 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. Our review work has been undertaken so that we might state to the Group those matters we are required to state to it in an independent 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 International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this 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 condensed set of financial statements 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 Ireland) 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 condensed set of financial statements in the half-yearly financial report for the twenty eight weeks ended 7 January 2017 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
Southampton
27 February 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR OKODNFBKDBBB
(END) Dow Jones Newswires
February 28, 2017 02:00 ET (07:00 GMT)
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