19th Sep 2005 12:16
Swallowfield PLC19 September 2005 SWALLOWFIELD PLC ANNOUNCEMENT OF PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2005 CHAIRMAN'S STATEMENT The last financial year was a difficult one for the Company, but it also provedto be a time of positive change. Immediately below is a commentary on ourcurrent results but I describe later how we have laid a number of buildingblocks for the future and how our long-term plans are now much clearer. Results During the year to 30 June 2005, profit after tax decreased from £0.8m to £0.1mand earnings per share declined from 7.2p to 0.7p. The Aerosols business suffered during the second half of the year, due to theweak retail environment post Christmas 2004 and a gap in the order book, beforethe start of the new manufacturing agreement with PZ Cussons. As a consequence,operating profit in the Aerosols business decreased from £2.0m to £0.3m andturnover fell by 13% from £36.5m to £31.8m. The Cosmetics business has continued to improve following the efforts we havemade over the last few years. Although it too suffered from the general weakretail environment, it posted a full year profit for the first time in more than5 years. Operating profit in the Cosmetics business was £0.2m against abreak-even situation a year ago. As stated in our recent trading updates, sales during the second half of theyear were weaker than expected, exacerbated by a short term gap in our orderbooks caused by customer cancellations and contract timings. Notwithstandingthese short term issues, we maintained our operational capability to enable usto respond to new business contracted from June, resulting in additional costs. The restructuring plan announced last year was completed on time and to budgetand the expected savings of £0.4m were achieved. Our new operation in the Peoples' Republic of China is working well and we havea team of seven in place with plans to increase staffing levels as our businessdevelops. The net cost of this operation for the year was approximately £0.3m,although the operation was self-financing towards the end of the year. At the year-end, net debt stood at £8.4m, a reduction of 4.3% from the previousyear-end level of £8.8m. Expenditure on capital equipment was increased duringthe year to £1.2m and working capital improved due to the completion of a largecontract shipped in the second half of last year. International Accounting Standards The Group will adopt International Accounting Standards for the year ending 30June 2006. The impact of this is further described in the financial review andthe notes on pages 47 and 48 of the Annual Report and Accounts. In summary, weexpect a reduction of approximately £1.4m to shareholders' equity as a result ofcapitalisation of the IAS19 pension deficit, offset, in part, by an increase inthe value of land at Wellington and a number of other smaller changes. We alsoexpect that the impact of IAS 19 will reduce the level of profit after tax byaround £0.1m, although as explained below, this should not change the currentcash funding requirements of the defined benefit pension scheme. Pension Funds The Group's main defined benefit plan - the Aerosols International Limiteddefined benefit scheme - underwent its triennial actuarial valuation as at 5April 2005. I am pleased to report that the results of this valuation indicatethat the scheme is 99.4% funded on a continuing basis and that the futureCompany contribution rate requires no increase during the next three years. Thisis testament to the cost containment and asset allocation strategies put inplace over the last 3 years. We have reassessed the position under FRS 17 basedon this latest triennial valuation and, accordingly, have reduced the overallpension liability to £1.9m compared with £2.5m reported last year. Looking Forward The retail environment remains tough with customers still demanding pricereductions that are becoming extremely difficult to achieve. We do notanticipate any improvement in the retail background during the next 12 monthsand have taken this into account in our current thinking. We are also seeinglarge cost increases in certain areas, notably this year in the supply of gas,electricity and steel. On the positive side, a number of strategic moves planned over the last 18months are now coming to fruition. The 3-year manufacturing contract with PZCussons, announced earlier in the year, is up and running and should provide uswith a sound production platform going forward. The procurement office in Chinais developing well and will be a net contributor to the result for the year to30 June 2006. At the same time, we have a number of good enquiries andpossibilities from our existing customer base, which leave us more optimisticfor next year. Overall therefore, we expect an improved performance over thenext year. Our strategic review is close to finalisation and the new strategy has takeninto account our view that, over the next few years, our traditional marketswill remain highly competitive. In summary, we will complement our existing keytechnical strengths with improved procurement and offshore sourcing and a widergeographic reach to customers outside of the UK. At the same time, we will seekpotential acquisitions that could either create synergistic benefits with ourexisting operations and/or provide new product or technical capabilities. Dividend In the recent past, we have maintained dividend payments even during years whendividend cover fell below what we consider to be a sensible long-term averagelevel. Although the proposed dividend for this year will be uncovered, theplanned improvements and contract described above give the Board confidence inproposing that the final dividend be maintained at the same level as last year.This would bring the total dividend payment for the year to 4.8p per share,unchanged on the previous year. If approved at the Annual General Meeting, afinal dividend of 2.0p per share will be paid on 11 November 2005 toshareholders on the register at 28 October 2005 and the shares will goex-dividend on 26 October 2005. J S EspeyChairman19 September 2005 GROUP PROFIT AND LOSS ACCOUNTFor the year ended 30 June 2005 2005 2004 Notes £'000 £'000 Turnover 1 43,539 48,763Cost of sales (37,227) (40,722) Gross profit 6,312 8,041Net operating expenses 2b (5,808) (6,457) Operating profit 2a 504 1,584Interest receivable 7 -Interest payable (458) (419) Profit on ordinary activities before taxation 53 1,165Tax on profit on ordinary activities 23 (349) Profit attributable to shareholders 76 816Dividends (541) (541) Transferred (from)/to reserves (465) 275 Earnings per share - basic 3 0.7p 7.2p - diluted 3 0.7p 7.2p GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 30 June 2005 2005 2004 £'000 £'000 Profit for the financial year 76 816 There are no gains or losses other than the profit for the financial year, ineither the year ended 30 June 2005 or the year ended 30 June 2004. GROUP AND COMPANY BALANCE SHEETSAs at 30 June 2005 Group Company 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Fixed assetsTangible assets 12,138 12,382 12,138 12,382Investments - - 2,494 2,494 Current assetsStocks 9,312 7,982 9,312 7,982Debtors 8,896 14,219 8,896 15,155Cash at bank and in hand 25 94 25 7 18,233 22,295 18,233 23,144 Creditors: amounts falling due within (11,398) (14,998) (13,890) (18,502)one yearNet current assets 6,835 7,297 4,343 4,642 Total assets less current liabilities 18,973 19,679 18,975 19,518 Creditors: amounts falling due after (6,379) (6,668) (6,379) (6,668)more than one yearProvisions for liabilities and (995) (947) (995) (947)charges 11,599 12,064 11,601 11,903Capital and reservesCalled up share capital 563 563 563 563Share premium 3,796 3,796 3,796 3,796Revaluation reserve 110 124 - -Capital reserve - - 467 467Profit and loss account 7,130 7,581 6,775 7,077Equity shareholders' funds 11,599 12,064 11,601 11,903 GROUP STATEMENT OF CASH FLOWSFor the year ended 30 June 2005 2005 2004 £'000 £'000 Net cash inflow from operating activities 2,799 1,897 Returns on investments and servicing of financeInterest received 7 -Interest paid (405) (364)Interest element of finance lease rentals (53) (55) (451) (419)Corporation tax paid (232) (190) Capital expenditurePurchase of tangible fixed assets (1,204) (696)Sale of tangible fixed assets 4 2 (1,200) (694)Equity dividends paid (541) (541)Net cash inflow before financing 375 53 FinancingRepayment of loans (3) (32)Capital element of finance lease rentals (345) (351) (348) (383)Increase/(decrease) in cash 27 (330) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 2005 2004 £'000 £'000 Increase/(decrease) in cash 27 (330)Cash outflow from changes in debt and lease financing 348 383 Change in net debt resulting from cash flows 375 53Net debt at 1 July (8,781) (8,834)Net debt at 30 June (8,406) (8,781) NOTES: 1. Turnover and Segmental Analysis 2005 2004 Turnover Profit Net Turnover Profit Net before tax assets before tax assetsClass of business £'000 £'000 £'000 £'000 £'000 £'000 Aerosol products 31,788 319 13,586 36,520 1,986 14,820Cosmetic products 11,751 185 7,565 12,243 (6) 6,398 43,539 21,151 48,763 21,218 Operating profit before 504 1,980exceptional costs Exceptional costs - (396)Net interest payable (451) (419) Profit before tax 53 1,165 Unallocated net liabilities (9,552) (9,154) Group net assets 11,599 12,064 Geographic segmentBy destination: UK 35,394 34,049 Other Europe 7,379 12,545 North America 278 1,393 Far East 296 407 Other 192 369 43,539 48,763 All turnover is derived from operations established in the UK. Unallocated net liabilities comprise bank loans, overdrafts, finance leases,taxation and proposed dividend. 2. Operating Profit 2005 2004 £'000 £'000(a) This is stated after charging:Depreciation of tangible fixed assets:Leased assets 273 274Purchased assets 1,147 1,214Research and development 686 756Operating leases:Hire of plant and machinery 57 60Rent of buildings 87 112Auditors' remuneration:Audit services 51 71Non-audit services 98 55Exceptional costs: predominantly redundancy costs and fees to - 396professional advisors (b) Net operating expenses are analysed as follows:Distribution costs 2,282 2,309Administrative expenses 3,526 4,148 5,808 6,457 3. Earnings per Share 2005 2004(a) BasicProfit on ordinary activities after taxation £76,000 £816,000Weighted average number of ordinary shares in issue during the 11,256,416 11,256,416yearEarnings per share 0.7p 7.2p (b) DilutedProfit on ordinary activities after taxation £76,000 £816,000Basic weighted average number of ordinary shares in issue during 11,256,416 11,256,416the yearDilutive potential ordinary shares:executive share options 14,970 9,285 11,271,386 11,265,701Diluted earnings per share 0.7p 7.2p 4. Notes to Statement of Cash Flows (a) Reconciliation of operating profit to net cash inflow from operatingactivities: Group 2005 2004 £'000 £'000Operating profit 504 1,584Depreciation 1,420 1,488Loss/(profit) on disposal of fixed assets 24 (2)(Increase) in stocks (1,330) (366)Decrease/(increase) in debtors 5,397 (4,952)(Decrease)/increase in creditors (3,216) 4,145Net cash inflow from operating activities 2,799 1,897 (b) Analysis of net debt Group Non-cash 30 June 1 July 2004 Cashflow changes 2005 £'000 £'000 £'000 £'000 Cash at bank and in hand 94 (69) - 25Bank overdraft (1,858) 96 - (1,762)Cash (1,764) 27 - (1,737)Loans (6,003) 3 - (6,000)Finance leases (1,014) 345 - (669)Total (8,781) 375 - (8,406) 5. Five Year Summary The following five year summary has been produced to allow improved comparisonsto be made between the current results and those of prior years. audited audited unaudited unaudited unaudited Financial Financial Financial Financial Financial Year Year Year Year Year 2005 2004 2003 2002 2001 Notes £'000 £'000 £'000 £'000 £'000First day of financial year (a) 1 July 2004 1 July 2003 1 July 2002 17 June 2001 18 June 2000Last day of financial year (a) 30 June 2005 30 June 2004 30 June 2003 30 June 2002 16 June 2001Number of weeks in financial year (b) 52 52 52 54 52 Profit and Loss Account Turnover 43,539 48,763 54,663 44,404 40,425Adjustment to 52 week basis (b) - - - (1,088) -Adjusted turnover 43,539 48,763 54,663 43,316 40,425Operating profit 504 1,584 1,419 2,628 2,197Net interest (451) (419) (444) (296) (354)Profit before taxation 53 1,165 975 2,332 1,843Taxation 23 (349) (257) (645) (444)Profit attributable to 76 816 718 1,687 1,399shareholdersDividends (541) (541) (541) (541) (472)Retained earnings (465) 275 177 1,146 927 Balance Sheet Fixed assets 12,138 12,382 13,174 11,142 10,228Net current assets 6,835 7,297 5,872 6,427 6,610Total assets less current 18,973 19,679 19,046 17,569 16,838liabilitiesLong-term creditors:Loans and lease finance (6,379) (6,668) (6,413) (5,187) (5,669)Deferred tax (995) (947) (844) (770) (716)Equity 11,599 12,064 11,789 11,612 10,453Net debt 8,406 8,781 8,834 4,877 4,777 Segmental AnalysisAerosol products:Turnover 31,788 36,520 40,835 31,783 28,880Operating profit 319 1,986 2,223 2,710 2,400Cosmetic products:Turnover 11,751 12,243 13,828 11,533 11,545Operating profit 185 (6) (804) (82) (223) Statistics Weighted average number of shares 11,256,416 11,256,416 11,256,416 11,256,416 11,256,416in issueUndiluted earnings per share 0.7p 7.2p 6.4p 15.0p 12.4pGearing 72% 73% 75% 42% 46%Dividends per share 4.8p 4.8p 4.8p 4.8p 4.2p Notes: (a) For 2001 and 2002 the five year summary is based onpreviously reported interim and full year reports as adjusted for theretrospective implementation of FRS19, Deferred Tax. The results for each ofthese financial years comprised the interim results for the first half of thecalendar year in which the financial year ended, together with the second halfof the previous calendar year. The balance sheet and net debt numbers are thosereported at the last day of the financial year. (b) Except for turnover, where the relevant adjustment has been shown above, nomaterial changes would be required to the profit and loss account to adjust thefinancial year 2002 numbers to a 52 week basis. 6. Statutory Accounts The financial information does not constitute statutory accounts as defined insection 240 of the Companies Act 1985, but has been extracted from the statutoryaccounts for the year ended 30 June 2005, on which an unqualified audit reporthas been issued and which will be delivered to the Registrar following theiradoption at the Annual General Meeting. The statutory accounts for the financial year ended 30 June 2004 have beendelivered to the Registrar of Companies with an unqualified audit reportthereon. The restated five year summary in Note 5 above which has been produced to allowcomparisons to be made between the current results and those of prior years, isunaudited. 7. Copies of the 2005 Annual Report and Accounts will be posted toshareholders on the 23 September 2005. Further copies may be obtained bycontacting the Company Secretary at Swallowfield plc, Swallowfield House,Station Road, Wellington, Somerset, TA21 8NL. 8. Annual General Meeting The Annual General Meeting will be held on Monday 24 October 2005 at the CastleHotel, Taunton, Somerset at 12.00 noon. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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