Interim Results
Swallowfield PLC
21 February 2002
Swallowfield plc
Announcement of interim results for the period to 31 December 2001
Chairman's statement
Following the announcement on 20 December 2001 that the Company's year-end has
been changed to 30 June, I am pleased to present this second set of interim
accounts for the 12 month period to 31 December 2001. The reasons for changing
the year-end and its impact on reporting and general meetings are discussed in
this announcement.
During the past year, we have continued to push ahead with our five year growth
strategy, despite the unhelpful market and economic background. We have focused
on reducing gearing levels, better use of our product development skills and
increased innovation across the Company in order to provide a platform for
future growth.
Headlines
During the 12 months to 31 December 2001, excluding a fundamental restructuring
credit of £74,000 in the prior year, profit before tax increased 12.2% to £2.55m
and earnings per share increased 8.7% to 16.3p on an 8.5% growth in sales.
Strong cash management enabled us to reinvest £1.9m in plant and equipment and
laboratory facilities during the year and, at the same time, reduce both net
debt and gearing levels below those reported last year. Our net debt level at
31 December 2001 of £2.4m and gearing level of 20% provide scope to raise
additional finance to fund new investment projects and selective acquisitions.
The Cosmetics business registered its first significant annual profit since
1997. In the 12 months to 31 December 2001 operating profit was £0.4m and
turnover increased 4.4% to £12.5m. Whilst there are still strong challenges
ahead with this business, we are very pleased with the progress so far.
The margin pressure noted in my last chairman's statement has continued to
affect the Aerosols business. During the last 12 months turnover increased
10.3%, but operating profit decreased by 8.7%. However, improvements in
purchasing, coupled with manufacturing efficiencies and capital investment, are
now coming through and our innovative product development skills are winning
business at the higher value end of the marketplace.
Trading update
As predicted, the business has become more seasonal in nature. Our continued
focus on the development of quality gift and product ranges, which are generally
shipped during the Autumn, contributed to a significant profitability
improvement in the second half of the calendar year. In the final 28 weeks of
the year, operating profit increased 42% on an 11.3% increase in turnover,
compared with the previous year.
Margin pressure on high volume commodity products remains, driven by the
weakness of the Euro and other competitive pressures. Our response to this
pressure is to focus on development of new and differentiated products, whilst
reducing component costs and improving manufacturing efficiencies.
During the last 12 months, we have experienced increased interest in our
crackling technology, which is used in crackling body sprays and crackling
colognes. A number of new products were launched during the period and enquiry
levels for such product developments remain buoyant.
We completed the development of plastic cased cosmetic pencil formulations
during the fourth quarter of the calendar year and we received our first orders
in December. At the same time as developing plastic cased pencils, we have also
developed new softer formulae extruded leads for wooden pencils.
Accounting policy changes
The new accounting standard on deferred tax, FRS19, has been adopted within
these interim accounts. In essence, this new standard requires us to provide for
deferred tax in full, whereas the previous standard, SSAP15, required partial
provision. The impact of this change is to reduce equity shareholders' funds by
£556,000 at 31 December 2000. There is no impact on reported profit, earnings
per share or cash in either the 12 months to 31 December 2001 or the 12 months
to 31 December 2000. Profit after tax and earnings per share have been restated
in earlier years as shown in the five year summary.
Looking forward
As expected, we are experiencing a comparatively slow start to the new calendar
year and current order books are below last year's levels. However, a number of
new initiatives will begin to be reflected in shipments in the second quarter of
the calendar year, and our Autumn/Winter gift programme should exceed last
year's volumes. We anticipate that our recent experience of a weaker first half
compared with the second half of the calendar year will continue.
Both the Aerosol and Cosmetic markets are broadly flat and are likely to be
influenced by the current economic downturn in Europe and North America. In
order to progress our growth objectives, we aim to broaden our penetration of
current markets and develop new market categories using our core strengths of
innovation and technical/manufacturing expertise.
Our key operational objectives are to reduce production costs, increase
throughput, enhance our good manufacturing practices and develop flexibility and
innovation. We aim to maintain our long-term capital investment plans to support
these objectives.
We are active in seeking opportunities, in line with our strategy, to expand and
enhance our business through partnership, or acquisition, although pricing
expectations in many cases are, in our opinion, still too high.
Whilst generally our overhead cost base remains stable, we regrettably expect a
significant increase in our insurance premiums from 25 February 2002. This
increase is caused by the hardening in the insurance market and is despite an
acknowledged continuous improvement in our risk management procedures.
In summary, the senior management is motivated to move the business forward and
we believe that the Company is well placed to continue to progress the five year
strategic plan.
Dividend
The Board is declaring a second interim dividend, based on the results for the
12 month period to 31 December 2001, of 2.8p against 2.5p in the previous year.
This brings the total dividends declared in the last 12 months to 4.5p, a 13%
increase on the previous year. This second interim dividend will be paid on 29
May 2002 to shareholders on the register on 17 May 2002.
J S Espey
Chairman
Group balance sheet
as at 31 December 2001
As at As at
31 Dec 2001 31 Dec 2000
£'000 £'000
Notes (unaudited) (restated)
Tangible fixed assets 10,715 10,194
Stocks 6,046 5,899
Debtors 6,532 6,176
Cash at bank and in hand 4,209 2,419
16,787 14,494
Creditors: amounts falling due within one year (9,531) (9,127)
Net current assets 7,256 5,367
Creditors: amounts falling due after more than (5,535) (4,452)
one year
Provisions for liabilities and charges 2b (716) (716)
11,720 10,393
Share capital 563 563
Share premium 3,796 3,796
Revaluation reserve 155 173
Profit & loss account 7,206 5,861
Equity shareholders' funds 2a 11,720 10,393
Reconciliation of movement in shareholders' funds
28 weeks 28 weeks 52 weeks 52 weeks
ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec 2000
2001 2000 2001
£'000 £'000 £'000 £'000
Notes (unaudited) (unaudited) (unaudited) (restated)
Profit attributable 1,581 1,141 1,839 1,823
to shareholders
Dividends (316) (281) (507) (450)
1,265 860 1,332 1,373
Unrealised exchange 2 (20) (5) -
gain
Net addition to 1,267 840 1,327 1,373
shareholders' funds
Equity 2a 10,453 9,553 10,393 9,020
shareholders' funds
brought forward
Equity 2a 11,720 10,393 11,720 10,393
shareholders' funds
at 31 December
Group profit and loss account
for the 28 weeks to 31 December 2001
28 weeks 28 weeks
ended ended
31 Dec 2001 31 Dec 2000
£'000 £'000
Notes (unaudited) (unaudited)
Turnover 3a 24,888 22,371
Operating profit 3a 2,368 1,670
Fundamental restructuring credit - 20
Profit on ordinary activities before interest and 2,368 1,690
taxation
Interest payable (176) (209)
Profit on ordinary activities before taxation 2,192 1,481
Tax on profit on ordinary activities (611) (340)
Profit attributable to shareholders 1,581 1,141
Dividends 4 (316) (281)
Retained profit 1,265 860
Dividend per ordinary share 4 2.8p 2.5p
Earnings per ordinary share
- Basic 5a 14.0p 10.1p
- Basic excluding fundamental 5b 14.0p 9.4p
restructuring credit
- Diluted 5c 14.0p 10.1p
Group statement of total recognised gains and losses
for the 28 weeks to 31 December 2001
28 weeks 28 weeks
ended ended
31 Dec 2001 31 Dec 2000
£'000 £'000
(unaudited) (unaudited)
Profit for the period 1,581 1,141
Translation gain/(loss) on overseas investment 2 (20)
Total recognised gains and (losses) relating to the period 1,583 1,121
Group profit and loss account
for the 52 weeks to 31 December 2001
52 weeks 52 weeks
ended ended
31 Dec 2001 31 Dec 2000
£'000 £'000
Notes (unaudited) (audited)
Turnover 3b 42,942 39,576
Operating profit 3b 2,875 2,701
Fundamental restructuring credit - 74
Profit on ordinary activities before interest and 2,875 2,775
taxation
Interest payable (321) (425)
Profit on ordinary activities before taxation 2,554 2,350
Tax on profit on ordinary activities (715) (527)
Profit attributable to shareholders 1,839 1,823
Dividends 4 (507) (450)
Retained profit 1,332 1,373
Dividend per ordinary share 4 4.5p 4.0p
Earnings per ordinary share
- Basic 5a 16.3p 16.2p
- Basic excluding fundamental restructuring 5b 16.3p 15.0p
credit
- Diluted 5c 16.3p 16.2p
Group statement of total recognised gains and losses
for the 52 weeks to 31 December 2001
52 weeks 52 weeks
ended ended
31 Dec 2001 31 Dec 2000
£'000 £'000
(unaudited) (audited)
Profit for the period 1,839 1,823
Translation (loss) on overseas investment (5) -
Total recognised gains and (losses) relating to the year 1,834 1,823
Group statement of cash flows
for the 28 weeks to 31 December 2001
28 weeks 28 weeks
ended ended
31 Dec 2001 31 Dec 2000
£'000 £'000
Notes (unaudited) (unaudited)
Net cash inflow from operating activities 6 4,409 3,849
Returns on investments and servicing of finance (176) (209)
Corporation tax paid (425) (306)
Capital expenditure:
Purchase of tangible fixed assets (602) (539)
Sale of tangible fixed assets 45 38
Equity dividends paid (192) (394)
Net cash inflow before financing 3,059 2,439
Financing:
(Decrease) in long and short-term loans (494) (535)
Capital element of finance lease rentals (207) (177)
Increase in cash 2,358 1,727
Reconciliation of net cash flow to movement in net debt
for the 28 weeks to 31 December 2001
28 weeks 28 weeks
ended ended
31 Dec 2001 31 Dec 2000
£'000 £'000
Notes (unaudited) (unaudited)
Increase in cash 2,358 1,727
Cash outflow from changes in debt and lease 701 712
financing
Change in net debt resulting from cash flows 3,059 2,439
New finance leases (637) -
Movement in net debt in the period 2,422 2,439
Net debt at 16/17 June (4,777) (5,825)
Net debt at 31 December 7 (2,355) (3,386)
Group statement of cash flows
for the 52 weeks to 31 December 2001
52 weeks 52 weeks
ended ended
31 Dec 2001 31 Dec 2000
£'000 £'000
Notes (unaudited) (audited)
Net cash inflow from operating activities 6 4,309 3,242
Returns on investments and servicing of finance (321) (425)
Corporation tax paid (600) (678)
Capital expenditure:
Purchase of tangible fixed assets (1,292) (868)
Sale of tangible fixed assets 45 1,007
Equity dividends paid (473) (394)
Net cash inflow before financing 1,668 1,884
Financing:
Increase/(decrease) in long and short-term loans 485 (230)
Capital element of finance lease rentals (363) (338)
Increase in cash 1,790 1,316
Reconciliation of net cash flow to movement in net debt
for the 52 weeks to 31 December 2001
52 weeks 52 weeks
ended ended
31 Dec 2001 31 Dec 2000
£'000 £'000
Notes (unaudited) (audited)
Increase in cash 1,790 1,316
Cash (inflow)/outflow from changes in debt and (122) 568
lease financing
Change in net debt resulting from cash flows 1,668 1,884
New finance leases (637) (44)
Movement in net debt in the year 1,031 1,840
Net debt at 1 January (3,386) (5,226)
Net debt at 31 December 7 (2,355) (3,386)
Notes to the accounts
1. Second interim report
The financial information contained in this interim statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information for the full preceding year is based on the
statutory accounts for the financial year ended 31 December 2000. Those
accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
2. Deferred taxation
The Group has adopted Financial Reporting Standard 19 'Deferred Taxation' within
these interim accounts and accordingly has provided for Deferred Taxation in
full. As a result of this change in accounting policy, prior period comparatives
have been restated as follows:
As at As at As at
16 June 31 Dec 17 June
2001 2000 2000
£'000 £'000 £'000
a) equity shareholders' funds
As previously reported 11,009 10,949 10,109
Adoption of FRS 19 (556) (556) (556)
As restated 10,453 10,393 9,553
b) provisions for liabilities and charges
As previously reported 160 160 310
Adoption of FRS19 556 556 556
As restated 716 716 866
3. Turnover and segmental analysis
2001 2000
Turnover Operating Turnover Operating
Profit Profit
£'000 £'000 £'000 £'000
(a) for the 28 weeks ended
31 December 2001
Aerosol products 17,394 1,742 15,791 1,680
Cosmetic products 7,494 626 6,580 (10)
24,888 2,368 22,371 1,670
(b) for the 52 weeks ended
31 December 2001
Aerosol products 30,483 2,462 27,637 2,698
Cosmetic products 12,459 413 11,939 3
42,942 2,875 39,576 2,701
4. Dividends
28 weeks 28 weeks ended 52 weeks 52 weeks
ended 31 Dec ended ended
31 Dec 2000 31 Dec 31 Dec
2001 2001 2000
£'000 £'000 £'000 £'000
Interim paid 1.7p (2000:1.5p) per share - - 191 169
Second Interim/Final proposed 2.8p 316 281 316 281
(2000: 2.5p) per share
316 281 507 450
5. Earnings per share
28 weeks 28 weeks 52 weeks 52 weeks
ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec
2001 2000 2001 2000
£'000 £'000 £'000 £'000
a) Basic
Profit on ordinary 1,581 1,141 1,839 1,823
activities after taxation
Basic weighted average 11,256,416 11,256,416 11,256,416 11,256,416
number of shares
Earnings per share 14.0p 10.1p 16.3p 16.2p
b) Basic excluding fundamental restructuring credit
Profit on ordinary 1,581 1,141 1,839 1,823
activities after taxation
Less:
Fundamental restructuring - (20) - (74)
credit
Tax credit on fundamental - (60) - (60)
restructuring
1,581 1,061 1,839 1,689
Basic weighted average
number of shares 11,256,416 11,256,416 11,256,416 11,256,416
Earnings per share 14.0p 9.4p 16.3p 15.0p
c) Diluted
Profit on ordinary 1,581 1,141 1,839 1,823
activities after taxation
Basic weighted average 11,256,416 11,256,416 11,256,416 11,256,416
number of shares
Dilutive potential ordinary
shares:
Executive share options 22,584 24,058 26,554 29,586
Total dilutive shares 11,279,000 11,280,474 11,282,970 11,286,002
Earnings per share 14.0p 10.1p 16.3p 16.2p
6. Reconciliation of operating profit to net cash inflow from operating
activities
28 weeks 28 weeks 52 weeks 52 weeks
ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec
2001 2000 2001 2000
£'000 £'000 £'000 £'000
Operating profit 2,368 1,670 2,875 2,701
Depreciation 722 844 1,379 1,530
(Profit) on disposal of (16) (21) (16) (21)
fixed assets
Decrease/(increase) in 1,091 322 (143) (846)
stocks
(Increase)/decrease in (138) 366 (332) 125
debtors
Increase/(decrease) in 382 686 546 (92)
creditors
Fundamental restructuring - (18) - (155)
costs
Net cash inflow from 4,409 3,849 4,309 3,242
operating activities
7. Analysis of net debt
As at As at
31 Dec 31 Dec
2001 2000
£'000 £'000
Net cash at bank and in hand 4,209 2,419
Short-term loans (695) (994)
Long-term loans (4,885) (4,101)
Finance leases (984) (710)
(2,355) (3,386)
Five year summary
The financial information set out below is based on the audited accounts of the
Group for the four financial years ended 31 December 2000, together with the
unaudited accounts of the Group for the 12 months ended 31 December 2001.
2001 2000 1999 1998 1997
£'000 £'000 £'000 £'000 £'000
(unaudited) (restated) (restated) (restated) (restated)
Profit & Loss Account
Turnover 42,942 39,576 36,573 46,643 49,743
Operating profit 2,875 2,701 1,776 1,113 4,076
Fundamental restructuring - 74 - (3,302) -
Interest (321) (425) (449) (566) (374)
Profit/(loss) before 2,554 2,350 1,327 (2,755) 3,702
taxation
Taxation (715) (527) (460) (381) (1,290)
Dividends (507) (450) (338) (248) (901)
Retained profit/(loss) 1,332 1,373 529 (3,384) 1,511
Earnings per 5p ordinary share
- basic 16.3p 16.2p 7.7p (27.9)p 21.5p
- basic excluding 16.3p 15.0p 7.7p (0.1)p 21.5p
fundamental restructuring
- diluted 16.3p 16.2p 7.7p (27.9)p 21.3p
Dividends per 5p ordinary 4.5p 4.0p 3.0p 2.2p 8.0p
share
Balance Sheet
Fixed assets 10,715 10,194 11,587 12,474 11,256
Net current assets/ 7,256 5,367 (471) 1,536 4,096
(liabilities)
Total assets less current 17,971 15,561 11,116 14,010 15,352
liabilities
Long-term creditors:
Loans and lease finance (5,535) (4,452) (1,123) (2,761) (3,103)
Provisions for liabilities (716) (716) (973) (2,762) (501)
and charges
Equity shareholders' funds 11,720 10,393 9,020 8,487 11,748
Net debt 2,355 3,386 5,226 4,626 4,637
Gearing (net debt , equity 20% 33% 58% 55% 39%
shareholders' funds)
Independent review report
To Swallowfield plc
Introduction
We have been instructed by the Company to review the financial information for
the 28 week and 52 week periods ended 31 December 2001 which comprises the Group
Profit and Loss Accounts, Group Balance Sheet, Group Statements of Cash Flows,
Group Statements of Total Recognised Gains and Losses, Reconciliation of
Movement in Shareholders' Funds and the related notes 1 to 7. We have read the
other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review of work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of Group management and applying analytical procedures to the financial
information and underlying financial data and, based thereon, assessing whether
the accounting policies and presentation have been consistently applied, unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom Auditing Standards and therefore provides a lower level of assurance
than an audit. Accordingly, we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the 28 week and 52
week periods ended 31 December 2001.
Ernst & Young LLP
Bristol
21 February 2002
Change of accounting date
We announced on 20 December 2001 that Swallowfield plc would change its year-end
accounting date from 31 December to 30 June with immediate effect. This extends
the current accounting reference period by six months to 30 June 2002.
The change is necessary to better align the financial reporting year with the
Company's trading cycle. As we have regularly reported, a greater proportion of
the Company's profits are made in the second half of the calendar year compared
with the first half, and over the last two years we have seen this imbalance
increase. The Directors expect this trend to continue. By moving the year-end
date from 31 December to 30 June we consider that we can improve shareholder
communications, as we would be in a better position to comment on profit
expectations.
Transitional arrangements
We anticipate that we will be able to publish the full report and accounts for
the 18 month period to 30 June 2002 early in September 2002. The final dividend
for the 18 month period will then be paid, subject to shareholder approval, at
the end of October 2002, as if it were an interim dividend for the period 31
December to 30 June.
In order to comply with the provisions of the Companies Act 1985 the Annual
General Meeting for 2002 will be held on 15 July 2002 to re-appoint Directors
and Auditors and undertake any special business. We will be sending shareholders
a notice convening the AGM and confirming the venue nearer to the time, but we
would anticipate that the AGM will commence at 10.00 am.
We will be holding an Extraordinary General Meeting on 10 October 2002 to
approve the annual report and accounts and declare any dividend. This EGM will
be held at noon at the Castle Hotel, Taunton and the Board will be presenting
full details of the Company's results at this meeting as would normally occur at
the AGM.
Full details of the EGM will be circulated with the report and accounts in early
September. However, should shareholders have any questions on the above
arrangements, either the Group Finance Director or the Company Secretary would
be pleased to answer them.
This information is provided by RNS
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