24th Feb 2005 07:00
Swallowfield PLC24 February 2005 Swallowfield plc Interim results for the 28 weeks ended 8 January 2005 Chairman's Statement Results I am pleased to report, that for the first six months of the financial year,turnover increased by 5% from £23.4m to £24.7m and profit before tax increasedby 68% to £0.6m. This is a good result when measured against the set ofunfavourable background conditions to which we are subject, and that I describedin my last report. The personal care market has remained weak and customerimposed price pressure has continued. In addition, we have witnessed a limitedresurgence of raw material price inflation driven by higher costs ofpetrochemical derivatives and base metals such as aluminium and tinplate. Ourstrategy to address these factors has been effective to date. Savings from last year's restructuring programme are broadly on track, and wehave been able to re-invest approximately half of these savings to begin tobuild our operation in the Peoples' Republic of China. This new operation isgrowing steadily - we have had our first finished product manufactured by localsub-contractors and have placed purchase orders for newly tooled components. Turnover in the Cosmetics business increased by 6% from £6.3m to £6.7m and,encouragingly, this division made an operating profit of £0.1m following anoperating loss of £0.3m over the same period last year. This turnaround has beenachieved through a combination of improved sales performance from recentlylaunched product ranges and overhead savings made during the last two years. Turnover in the Aerosols division increased 5% from £17.2m to £18.0m, andoperating profit decreased by 10% to £0.8m - the increased pricing pressure ontoiletry gift packs has been particularly noticeable during the last 6 months.We are taking positive steps to value engineer new products and increase thesourcing of components from the Far East. Cash and Net Debt The Group has generated operating cash flow of £5.1m since the last year-end asa result of which net debt has been reduced by £3.6m to £5.2m. Much of thisimprovement comes from the completion of a single customer contract withextended payment terms described in my last report, together with other seasonalfactors. Gearing stands at 42% compared with 73% at the end of the lastfinancial year and 44% at the interim stage last year. During the last six months we have prudently increased our expenditure on fixedassets totalling £0.9m, with particular emphasis being placed on goodmanufacturing practice. We have recently completed the installation of a newmicrobiological testing facility and a new water treatment plant. Strategy Update We continue to refine our strategy in the light of new information and changeswithin our market place. We are also exploring potential acquisitions that couldeither provide extensions to our product capabilities and/or create synergisticbenefits with our current operations. At the same time, we are examining opportunities to organically grow ourbusiness. Following efforts made over the last several months, we have veryrecently been awarded a significant outsourcing contract by a well-known brand.Under this contract, Swallowfield will manufacture the majority of thiscustomer's aerosol requirement for an initial term of three years. We are clearthat overall service levels, including new product development, are paramount tothe success of this new business and believe similar opportunities exist withother potential customers. In the strategy update presented last year, we stated that we have set ourselvesa long-term target to achieve a return on shareholders equity of 12% by 30 June2006, and 15% by 30 June 2009. Excluding exceptional costs, return on equity forthe 12 months to 8 January 2005 was 10%. Outlook The economic background is not expected to improve over the coming 6 months.Indeed, following the recently published December 2004 retail sales figures, ourexpectation and planning is that consumer spending could yet deterioratefurther. This background and continuing price pressures are likely to make thesecond half of the financial year slightly tougher than originally anticipated.However, raw material and production savings from our Chinese operation, andsales from the new business referred to above, will start to come throughtowards the end of the fourth quarter and should have a positive impact goingforward. The key to our future success remains our ability to innovate and createproducts that consumers wish to buy, at the same time we will not let-up on ourrelentless pursuit of improving our cost base and increasing operatingefficiencies. Dividend The Board has maintained the dividend policy explained in the last annual reportand accounts. This policy recognises the need, in the short term, for us torebuild the level of dividend cover and increase the strength of the Group'sbalance sheet. In the medium term, our aim of pursuing a progressive dividendpolicy remains. Accordingly, the Board has declared an interim dividend of 2.8pper share, which is unchanged from that declared at the same time last year. Thedividend will be paid on the 26 May 2005 to shareholders on the register on 13May 2005, and the shares will go ex-dividend on 11 May 2005. J S Espey, Chairman24 February 2005 Group Profit and Loss Accountfor the 28 weeks ended 8 January 2005 28 weeks 28 weeks 12 months ended ended ended 8 Jan 2005 10 Jan 2004 30 June 2004 (unaudited) (unaudited) Notes £'000 £'000 £'000 Turnover 1 24,677 23,433 48,763 Operating profit 1 860 588 1,584Interest payable (240) (218) (419) Profit on ordinary activities before taxation 620 370 1,165Tax on profit on ordinary activities (189) (107) (349) Profit attributable to shareholders 431 263 816Dividends (316) (316) (541) Retained profit/(loss) 115 (53) 275 Dividend per ordinary share 3 2.8p 2.8p 4.8p Earnings per ordinary share- Basic 4 3.8p 2.3p 7.2p- Diluted 4 3.8p 2.3p 7.2p Group Balance Sheetas at 8 January 2005 As at As at As at 8 Jan 2005 10 Jan 2004 30 June 2004 (unaudited) (unaudited) £'000 £'000 £'000 Tangible fixed assets 12,501 12,682 12,382 Stocks 7,705 7,570 7,982Debtors 7,130 5,632 14,219Cash at bank and in hand 69 483 94 14,904 13,685 22,295 Creditors: amounts falling due within one year (9,765) (8,474) (14,998)Net current assets 5,139 5,211 7,297 Creditors: amounts falling due after more than one (4,514) (5,313) (6,668)yearProvisions for liabilities and charges (947) (844) (947) 12,179 11,736 12,064 Share capital 563 563 563Share premium 3,796 3,796 3,796Reserves 7,820 7,377 7,705 Equity shareholders' funds 12,179 11,736 12,064 Group Statement of Cash Flowsfor the 28 weeks ended 8 January 2005 28 weeks 28 weeks 12 months ended ended ended 8 Jan 2005 10 Jan 2004 30 June 2004 (unaudited) (unaudited) £'000 £'000 £'000 Net cash inflow from operating activities (note I) 5,101 4,512 1,897 Returns on investments and servicing of finance (240) (218) (419) Corporation tax paid (162) (92) (190) Capital expenditure:Purchase of tangible fixed assets (860) (368) (696)Sale of tangible fixed assets 5 40 2 Equity dividends paid (225) (225) (541)Net cash inflow before financing 3,619 3,649 53 Financing:(Decrease) in long and short-term loans (2,003) (1,532) (32)Capital element of finance lease rentals (181) (200) (351) (2,184) (1,732) (383) Increase/(decrease) in cash 1,435 1,917 (330) Notes to the Statement of Cash Flows 28 weeks 28 weeks 12 months ended ended ended 8 Jan 2005 10 Jan 2004 30 June 2004 (unaudited) (unaudited) £'000 £'000 £'000I. Reconciliation of operating profit to net cashinflow from operating activitiesOperating profit 860 588 1,584Depreciation 741 822 1,488(Profit) on disposal of fixed assets (5) (2) (2)Decrease/(increase) in stocks 277 46 (366)Decrease/(increase) in debtors 7,089 3,638 (4,952)(Decrease)/increase in creditors (3,861) (580) 4,145 Net cash inflow from operating activities 5,101 4,512 1,897 II. Analysis of net debtNet cash at bank and in hand 69 483 94Overdraft (398) - (1,858)Short-term loans - (3) (3)Long-term loans (4,000) (4,500) (6,000)Finance leases (833) (1,165) (1,014) (5,162) (5,185) (8,781) III. Reconciliation of net cash flow to movement in net debtNet debt at start of the period (8,781) (8,834) (8,834)Increase/(decrease) in cash 1,435 1,917 (330)Decrease in borrowings and finance leases 2,184 1,732 383 Net debt at end of the period (5,162) (5,185) (8,781) Notes to the Financial Information 1. Turnover and segmental analysis 28 weeks ended 28 weeks ended 12 months ended 8 Jan 2005 10 Jan 2004 30 June 2004 Class of business Operating Operating Operating Profit Profit Profit Turnover Turnover Turnover £'000 £'000 £'000 £'000 £'000 £'000 (unaudited) (unaudited) (unaudited) (unaudited) Aerosol products 18,018 762 17,158 845 36,520 1,986Cosmetic products 6,659 98 6,275 (257) 12,243 (6) 24,677 860 23,433 588 48,763 1,980 Operating profit before exceptional costsExceptional costs - - - - - (396)Operating profit 24,677 860 23,433 588 48,763 1,584 2. The results for the twenty-eight weeks ended 8 January 2005 and the summarybalance sheet on that date are unaudited. The results for the 12 month periodended 30 June 2004 do not constitute full accounts within the meaning of section240 of the Companies Act 1985. Full accounts for that period together with anunqualified audit report thereon have been filed with the Registrar ofCompanies. 3. The dividend comprises an ordinary dividend of 2.8p (2004: 2.8p) perordinary share payable on 26 May 2005 to shareholders on the register on 13 May2005. 4. The calculation of basic earnings per share is based on 11,256,416 (2004:11,256,416) ordinary shares of 5.0p each, being the weighted average number ofordinary shares in issue during the period, and the profit on ordinaryactivities after taxation of £431,000 (2004: £263,000). The diluted earnings per share is based on the profit for the period of £431,000(2004: £263,000) and on the weighted average number of shares in issue for theperiod, adjusted for shares held under unexercised options. The adjusted numberof shares for the period was 11,268,118 (2004: 11,266,316) ordinary shares whichinclude 11,702 (2004: 9,900) dilutive potential ordinary shares from executiveshare options. 5. The Interim Report will be sent to shareholders and is available to membersof the public at the Company's Registered Office at Swallowfield House, StationRoad, Wellington, Somerset, TA21 8NL. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Brand Architek.