Trading Update

Silverwood Brands PLC

01 May 2024

 

1 May 2024

Silverwood Brands Plc

("Silverwood" or the "Company"; together with its subsidiaries, the "Group)

Trading Update

Silverwood Brands plc (Aquis: SLWD), a holding company established to invest primarily in branded consumer businesses, is pleased to announce a trading update for the year ended 31 December 2023 and for the quarter ended 31 March 2024. The Company expects to publish its audited results for the year ended 31 December2023  by the end of June 2024.

2023 - Business Review

For this update we want to provide an overview of the year. This is made with the obvious caveat that we do not yet have the final audited figures available.

The year saw the first full year of trading for our existing brand portfolio of Balmonds, Nailberry and Sonotas (comprising SteamCream and Cigarro).

We would note that our underlying brands performed in line with our expectations - that is, we do not expect a simple tidy linear pattern when growing these smaller brands. On a month to month basis, even a year to year basis, we expect a bumpy ride. However, over the longer term we expect a picture of profitable growth.

Our teams remain committed to the task of delivering that growth and we continue to be impressed by their efforts.

Balmonds

As mentioned in our report for the previous financial year, "Balmonds enjoyed some well-placed press coverage during the year which gave a pleasant boost to sales. This may prove difficult to replicate…."

Annoyingly we were unable to replicate the boost we enjoyed in 2022 and sales fell by approximately 20% on a year on year basis. We would note that 2023 still achieved a substantial uplift against 2021, which is in line with the bumpy growth patterns we expect and represents strong growth over the two year period.

The reduced sales amount and investments made in product development and to launch the brand in new markets is likely to result in a loss for the year at Balmonds.

Nailberry

Nailberry continues to attract new customers and open new sales channels. This has resulted in sales growth over the prior year.

We congratulate the Nailberry team on this performance.

Sonotas

Sonotas operates the SteamCream, Cigarro and Nailberry brands in Japan.  SteamCream worked on its channel mix of wholesale, events and direct to consumer digital sales during this period, moving away from owned retail.  Sales have begun to improve, and operating margins grew modestly.  Cigarro's rapid growth slowed in 2023 with China supply chain issues affecting packaging sourcing; problems have since been resolved.  Nailberry launched in Q4 2023, focused on pop-up events in premium locations such as Isetan department stores.

Lush

As noted in previous announcements about this transaction, we were very disappointed with the reaction of the Lush management team to our position, and we have taken the pragmatic approach of withdrawing from the acquisition due to the aggressive stance adopted by Lush. Our previous announcements covered the details of this.

We have now effected an unwinding of the transaction via a capital reduction which was approved by the court on 16 April 2024 and completed on 30 April 2024.

The attempted transaction consumed a huge amount of management time and focus, along with associated costs. Much of this fee cost was reimbursed by Andrew Gerrie and Alison Hawksley. We now wish them good luck in their endeavours to achieve a sale of their Lush shares.

Financing

We are fortunate to have Castlenau Group Limited ("Castelnau")  as a shareholder, and one that shares our long term view on building businesses.

Following the year end, Castlenau agreed to convert the majority of its loan position into ordinary shares in the Company. This was completed on 29 January 2024 at a price of 54p per share.

At the same time, the Company completed a £1.0 million subscription from Andrew Gerrie,  also at 54p per share, and Silver Americum Limited, a company in which Mr Gerrie and his wife each hold separate 20% interests, agreed to provide an unsecured convertible loan of £0.5 million to the Company.

Group

Group numbers are expected to show a consolidated pre-tax loss for the 2023 financial year.

Q1 2024 - Trading Update

Trading in our brands since our December year end has been as expected.

Balmonds

The long term focus of growing the business has continued at Balmonds.

Whilst a rebranding project has proved disruptive, we believe it will help build sales in the long term. The new look and packaging have been well received by those customers who have seen it and also by buyers from retail chains we are targeting. Now we need to convert that response to sales.

Additional work has gone in to supporting a medical device license application for Balmonds' Skin Salvation balm. If granted, this will allow for more effective marketing around the benefits of this product.

Nailberry

We continue to attract new customers to Nailberry, and the brand is performing in line with our expectations.

Sonotas

Sonotas' sales continue to reflect the exit from its retail business, with the closure of 5 stores, in April 2023.  However, other SteamCream channels grew significantly in this period, particularly in online and digital channels, wholesale sales and events sales.  Sonotas' profitability for the quarter was, however, impacted by the transaction costs associated with the purchase of the Japanese cosmetic OEM manufacturer Cosme Science and its subsidiary Dr. Baeltz, which we completed on 29 March 2024. The details of this were noted in our announcement on 2 April 2024.

Cosme Science provides us with a wonderful production base to support our Asian ambitions. The business started in 1984 and now provides formulation, production and distribution capabilities from a modern warehouse/production base of 6,700 sq. metres in Tokyo.

The business has an IP catalogue of over 2,000 product formulae and employs over 100 full time equivalent staff including 6 research and development professionals.

We also acquired a small skincare brand, Dr Baeltz, as part of the Cosme Science purchase.

Group

As previously noted, our cost base here remains very lean, and we continue to focus on limiting expenditure wherever possible. However, we will increasingly need to address some key functions which are currently not paid for.

Moreover, whilst we have greatly reduced our interest expense and hope to reduce our legal expenses even further, we do expect management remuneration to increase from a current position of nil, to rates which are more reflective of market norms.

Future Prospects

Silverwood is not immune to  the headwinds battering global markets, but we believe that our commitment  and experience will enable us to prosper over the longer term. We are resolutely focused on enabling our existing brands to deliver their full potential, whilst continuously reviewing complimentary brand opportunities when we find them.

Overall, therefore, your Directors view the future with confidence.

Shareholder online meeting

We are planning to hold a shareholder webinar following the announcement of our 2023 full year results with a focus on Q&A with the management team. Further details will be announced in due course.

--Ends--

Silverwood Brands Plc Andrew Gerrie Paul Hodgins	[e-mail]
Peterhouse Capital Limited (Aquis Corporate Adviser) Mark Anwyl Narisha Ragoonanthun Brefo Gyasi	[phone]

About Silverwood Brands PLC

Silverwood Brands PLC is a leader in the health and beauty industry, committed to developing and marketing high-quality products that meet the diverse needs of consumers worldwide. Through strategic acquisitions and organic growth, Silverwood Brands continues to enhance its portfolio and global reach, ensuring a strong position in the competitive health and beauty market.

Market Abuse Regulation (MAR) Disclosure

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation EU 596/2014 as it forms part of retained EU law (as defined in the European Union (Withdrawal) Act 2018).

 

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