Final Results
Swallowfield PLC
05 September 2002
Swallowfield plc
Preliminary announcement of final results for the 18 months ended 30 June 2002
Chairman's Statementwallowfield formulates, manufactures and packages fine,
tories and cosmetics across the whole specets for own label and brand name
I am pleased to present the Company's first report and accounts since changing
the year-end to 30 June. For statutory purposes these have been drawn up for the
18 months to 30 June 2002, and the comparative figures for the previous period
are those for the 12 months to 31 December 2000. These results therefore include
the typically weak January to June trading period for both 2001 and 2002.
However, to enable proper comparisons to be made, the last five years' results
have been restated to years ending 30 June, using previously reported interim
accounts. This restatement is shown in Note 1, and comparisons made in this
review are with reference to these restated results.
Results
During the year to 30 June 2002 profit after tax increased by 20.6% compared
with the prior year to £1.7m. Over the same period, and on the same basis,
earnings per share increased to 15.0p from 12.4p.
The cosmetics division reported an operating loss in the year to 30 June 2002 of
£0.1m, on sales of £11.5m. This is lower than the loss of £0.2m reported in the
previous year. The business became much more seasonal in nature and made a loss
of £0.7m in the last six months of the year. Lower sales, a worse product mix
and price pressures contributed to this loss. We still believe this business
contributes to the Group's capabilities and customer base, but continue to look
for ways to improve its core profitability.
The aerosols division made an operating profit of £2.7m during the year to 30
June 2002, an increase of 12.9% over the previous year on a 10.1% increase in
turnover. We continue to leverage our core strengths in this business to broaden
our product capabilities.
As anticipated, the Group's business has become more seasonal, justifying our
decision to change the year-end which will also provide greater clarity to the
results. As a consequence the new June year-end will typically result in higher
debt levels than a December year-end.
Gearing stood at 42% at the end of June compared to 46% at the same time last
year. Net debt levels have increased from the low levels reported at December
2001 mainly due to the seasonality impact noted above and the increased working
capital necessary to meet our growing business volumes.
The results for the last four months have been adversely affected by rising
insurance costs. Despite the insurance industry acknowledging our superior and
improving risk management, our insurance costs have increased £0.25m a year from
March 2002.
Strategic Update
We have continued to progress the strategy developed two years ago, and during
the past year, have briefed all employees on its rationale and intent.
During the last 18 months, we have invested £3.1m in plant and equipment and
laboratory facilities. This investment, facilitated by good cash management, has
been focused on increasing capacity, improving manufacturing efficiencies and
enhancement of our product capabilities. Our strategy for the business requires
organic growth and we have now started construction of a factory extension at
our site in Wellington. This extension will provide much needed room for
expansion, for both production and office accommodation and allow us to continue
to significantly improve our new product development facilities on this site.
We continue to look for opportunities to enhance our business through
acquisition or partnership, although as yet we have seen no suitable targets
which match our perception of value for money.
Changes to Accounting Standards
A number of new accounting standards have been implemented during the year, and
these are more fully described in the financial review section of the report and
accounts. We have adopted the transitional rules for implementing the
controversial new pensions accounting standard FRS17. The defined benefit
pension scheme operated on behalf of our Wellington site had an apparent
liability of £1.1m net of deferred tax at 30 June 2002 on an FRS17 basis, due
mainly to asset values on that date and use of a discount rate which does not
reflect an equity premium. However, the scheme underwent a triennial valuation
as at 6 April 2002. The results of this valuation indicate that the fund has a
slight surplus on an ongoing funding basis and importantly, was 119.6% funded on
the Government's minimum funding rate basis.
Looking Forward
Our positive outlook for the next six months remains. Whilst this is dependent
on seasonal sales, orders for the Autumn/Winter gift season exceed last year's
levels. At the end of June, the unit volume order book in the Aerosols business
was significantly higher than last year. Despite a weak sales performance in the
first six months of this calendar year, production in the cosmetics business has
picked up strongly and we remain hopeful that this will be reflected in sales in
the final quarter of this calendar year. The size of the current order books has
put us at full operating capacity in the short-term. This inevitably puts a
strain on the existing infrastructure and management is striving to ensure that
any effect on customer service levels is minimised.
Dividends
Your Board is proposing a final dividend of 2.0p against 1.7p declared at the
same time last year. This brings the total for the last 12 months to 4.8p
against 4.2p in the previous 12 month period and continues the progressive
dividend policy that we have followed over the last two years, whilst
recognising that our strategy requires reinvestment in the business to achieve
organic growth. The dividend will be paid on 30 October 2002 to shareholders on
the register on 11 October 2002.
Chairman
J S Espey
Group Profit and Loss Account
for the 18 months ended 30 June 2002
18 months 12 months
ended ended
30 June 31 Dec
2002 2000
£'000 £'000
Turnover 62,458 39,576
Cost of sales (50,155) (30,780)
Gross profit 12,303 8,796
Net operating expenses (9,168) (6,095)
Operating profit 3,135 2,701
Fundamental restructuring credit - 74
Profit on ordinary activities before interest and taxation 3,135 2,775
Interest receivable 148 48
Interest payable (589) (473)
Profit on ordinary activities before taxation 2,694 2,350
Tax on profit on ordinary activities (749) (527)
Profit attributable to shareholders 1,945 1,823
Dividends (732) (450)
Transferred to reserves 1,213 1,373
Earnings per share
- basic 17.3p 16.2p
- basic excluding fundamental
restructuring credit 17.3p 15.0p
- diluted 17.2p 16.2p
Group Statement of Total Recognised Gains and Losses
for the 18 months ended 30 June 2002
18 months 12 months
ended ended
30 June 31 Dec
2002 2000
£'000 £'000
Profit for the financial period 1,945 1,823
Translation gain on overseas investment 6 -
Total recognised gains and (losses) relating to the year 1,951 1,823
Prior year adjustment (556) -
Total recognised gains and (losses) since the last annual report 1,395 1,823
Group and Company Balance Sheets
as at 30 June 2002
Group Company
30 June 31 Dec 30 June 31 Dec
2002 2000 2002 2000
£'000 £'000 £'000 £'000
(restated) (restated)
Fixed assets
Tangible assets 11,142 10,194 - -
Investments - - 6,072 6,072
Current assets
Stocks 8,626 5,899 - -
Debtors 8,488 6,176 7,790 7,539
Cash at bank and in hand 1,306 2,419 18 46
18,420 14,494 7,808 7,585
Creditors: amounts falling due within one year (11,993) (9,127) (3,880) (4,249)
Net current assets 6,427 5,367 3,928 3,336
Total assets less current liabilities 17,569 15,561 10,000 9,408
Creditors: amounts falling due after more than one year (5,187) (4,452) (4,500) (3,925)
Provisions for liabilities and charges (770) (716) - (12)
11,612 10,393 5,500 5,471
Capital and reserves
Called up share capital 563 563 563 563
Share premium 3,796 3,796 3,796 3,796
Revaluation reserve 152 173 - -
Capital reserve - - 467 467
Profit and loss account 7,101 5,861 674 645
Equity shareholders' funds 11,612 10,393 5,500 5,471
Group Statement of Cash Flows
for the 18 months ended 30 June 2002
18 months 12 months
ended ended
30 June 31 Dec
2002 2000
£'000 £'000
Net cash inflow from operating activities 3,670 3,242
Returns on investments and servicing of finance
Interest received 148 48
Interest paid (512) (402)
Interest element of finance lease rentals (77) (71)
(441) (425)
Corporation tax paid (823) (678)
Capital expenditure
Purchase of tangible fixed assets (2,463) (868)
Sale of tangible fixed assets 77 1,007
(2,386) 139
Equity dividends paid (788) (394)
Net cash (outflow)/inflow before financing (768) 1,884
Financing
New loans 6,000 5,665
Repayment of loans (5,863) (5,895)
Capital element of finance lease rentals (482) (338)
(345) (568)
(Decrease)/increase in cash (1,113) 1,316
Reconciliation of Net Cash Flow to Movement in Net Debt
18 months 12 months
ended ended
30 June 31 Dec
2002 2000
£'000 £'000
(Decrease)/increase in cash (1,113) 1,316
Cash outflow from changes in debt and lease financing 345 568
Change in net debt resulting from cash flows (768) 1,884
New finance leases (723) (44)
Movement in net debt in the year (1,491) 1,840
Net debt at 1 January (3,386) (5,226)
Net debt at 30 June/31 December (4,877) (3,386)
Notes
1 Restated five year summary
The following unaudited and restated five year summary has been produced to
allow improved comparisons to be made between the current results and those of
prior years.
Notes Unaudited Unaudited Unaudited Unaudited Unaudited
Financial Financial Financial Financial Financial
Year Year Year Year Year
2002 2001 2000 1999 1998
£'000 £'000 £'000 £'000 £'000
First day of financial (a) 17 June 2001 18 June 2000 20 June 1999 21 June 1998 15 June 1997
year
Last day of the (a) 30 June 2002 16 June 2001 17 June 2000 19 June 1999 20 June 1998
financial year
Number of weeks in (b)
financial year 54 52 52 52 53
Profit and Loss Account
Turnover 44,404 40,425 37,600 39,731 52,797
Adjustment to 52 week (b)
basis (1,088)
Adjusted turnover 43,316 40,425 37,600 39,731 52,797
Operating profit 2,628 2,177 2,205 917 3,231
Fundamental - 20 54 (3,302) -
restructuring
Interest (296) (354) (454) (503) (462)
Profit/(loss) before 2,332 1,843 1,805 (2,888) 2,769
taxation
Taxation (645) (444) (501) (325) (864)
Profit attributable to
shareholders 1,687 1,399 1,304 (3,213) 1,905
Dividends (541) (472) (394) (113) (778)
Retained earnings 1,146 927 910 (3,326) 1,127
Balance Sheet
Fixed assets 11,142 10,228 10,516 11,972 12,278
Net current assets 6,427 6,610 5,146 (421) 3,855
Total assets less
current liabilities 17,569 16,838 15,662 11,551 16,133
Long-term creditors:
Loans and lease finance (5,187) (5,669) (5,243) (1,211) (3,726)
Deferred tax (770) (716) (720) (667) (623)
Provision for - - (146) (950) -
liabilities
Equity 11,612 10,453 9,553 8,723 11,784
Net debt 4,877 4,777 5,825 6,285 7,731
Segmental Analysis
Aerosol products:
Turnover 31,783 28,880 25,041 21,671 29,606
Operating profit 2,710 2,400 2,470 1,734 3,247
Cosmetic products:
Turnover 11,533 11,545 12,559 18,060 23,191
Operating profit (82) (223) (265) (817) (16)
Statistics
Weighted average number
of shares in issue 11,256,416 11,256,416 11,256,416 11,256,416 11,248,021
Undiluted earnings per
share 15.0p 12.4p 11.6p (28.5)p 16.9p
Earnings per share
excluding fundamental 15.0p 11.7p 11.1p (0.8)p 16.9p
restructuring
Gearing 42% 46% 61% 72% 66%
Dividends per share 4.8p 4.2p 3.5p 1.0p 6.9p
Notes to five year summary
(a) The restated five year summary is based on previously reported interim and
full year reports as adjusted for the restrospective implementation of FRS19,
Deferred Tax. The results for each financial year comprise the interim results
for the first half of the calendar year in which the financial year ends,
together with the second half of the previous calendar year. The balance sheet
and net debt numbers are those reported at the last day of the financial year.
(b) Except for turnover, where the relevant adjustment has been shown above, no
material changes would be required to the profit and loss account to adjust the
financial year 2002 numbers to a 52 week basis.
2 Turnover and Segmental Analysis
18 months ended 30 June 2002 12 months ended 31 December 2000
Turnover Profit before Net Turnover Profit before Net
Class of tax assets tax assets
business £'000 £'000 £'000 £'000 £'000 £'000
Aerosol products 45,615 3,430 11,004 27,637 2,698 9,203
Cosmetic 16,843 (295) 6,667 11,939 3 5,898
products
62,458 17,671 39,576 15,101
Operating 3,135 2,701
profit
Fundamental
restructuring - 74
Net interest
payable (441) (425)
Profit before 2,694 2,350
tax
Unallocated net
liabilities (6,059) (4,708)
Group net 11,612 10,393
assets
Geographic segment
By destination:
UK 47,546 32,258
Continental Europe 10,766 6,426
North America 1,223 252
Far East 2,336 583
Other 587 57
62,458 39,576
Unallocated net liabilities comprise bank loans, finance leases, taxation,
proposed dividend and certain other holding company assets.
3 Earnings per Share
18 months 12 months
ended ended
30 June 31 Dec
2002 2000
(a) Basic
Profit on ordinary activities after taxation £1,945,000 £1,823,000
Weighted average number of ordinary shares in issue during the year 11,256,416 11,256,416
Earnings per share 17.3p 16.2p
(b) Basic excluding fundamental restructuring credit
Profit on ordinary activities after taxation £1,945,000 £1,823,000
Less:
Fundamental restructuring credit - £(74,000)
Tax credit on fundamental restructuring expenditure - £(60,000)
£1,945,000 £1,689,000
Weighted average number of ordinary shares during the year 11,256,416 11,256,416
Earnings per share 17.3p 15.0p
(c) Diluted
Profit on ordinary activities after taxation £1,945,000 £1,823,000
Basic weighted average number of ordinary shares in issue during the year 11,256,416 11,256,416
Dilutive potential ordinary shares:
executive share options 26,838 29,586
11,283,254 11,286,002
Earnings per share 17.2p 16.2p
4 Statutory Accounts
The financial information does not constitute statutory accounts as defined in
section 240 of the Companies Act 1985, but has been extracted from the
statutory accounts for the 18 months ended 30 June 2002, on which an unqualified
audit report has been issued and which will be delivered to the Registrar
following their adoption at the Extraordinary General Meeting. The statutory
accounts for the financial year ended 31 December 2000 have been delivered to
the Registrar of Companies with an unqualified audit report thereon. The
restated five year summary in Note 1 above which has been produced to allow
comparisons to be made between the current results and those of prior years, is
unaudited.
5 Extraordinary General Meeting
The Extraordinary General Meeting will be held on Thursday 10 October 2002 at
the Castle Hotel, Taunton, Somerset at 12.00 noon
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