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Swallowfield PLC (BAR)

  Print          Annual reports

Tuesday 01 March, 2016

Swallowfield PLC

Half Yearly Report

RNS Number : 5781Q
Swallowfield PLC
01 March 2016
 

Swallowfield plc

("Swallowfield" or the "Group")

Interim results

 

Swallowfield, a market leader in the development, formulation, and supply of personal care and beauty products, whose customers include many of the world's leading brands, announces its interim results for the 28 weeks ended 9 January 2016

 

 £m unless otherwise stated

2016

2015




 Reported results ¹



 Revenue

£27.5m

£26.0m  

 Revenue (constant currency) ²

£27.6m

£26.0m

 Operating profit ¹

£0.64m

£0.16m

 Adjusted basic earnings per share ¹

4.1p

0.4p




 Statutory results



 Revenue

£27.5m

£26.0m

 Operating profit

£1.19m

£0.16m

 Basic earnings per share

8.5p

0.4p

 Total Dividend per share

0.8p

-

 Net debt

£4.9m

£3.1m

 

¹ Adjusted operating profit and adjusted earnings per share are calculated before exceptional items.

² Revenue translated at 2015 exchange rates.

 

Financial highlights

·      Revenue growth of 5.9%, with 'drive' and 'build' product categories growing by 9.0%.

·      Strong increase in contribution margin (31.3% vs 27.7% prior year), enabling good net profit growth whilst investing in brand support and organisational capability.

·      Profitability increased significantly with an adjusted operating profit of £0.64m (2015: £0.16m).

·      Net Debt of £4.9m (2015: £3.1m), a reduction from the 30 June 2015 position of £5.4m, after £0.9m of capital expenditure.

·      Interim dividend re-instated at 0.8 pence (2015: Nil).

·      Defined benefit pension scheme closed to future accrual, generating a one-off, exceptional gain of £0.55m.

 

Operational highlights

·      Good contribution from core business with new contracts and further business innovation.

·      Secured future supply agreements for innovative haircare products which will positively impact business in fiscal 2017.

·      Four Swallowfield owned brands now launched, in market and building steadily with new collaborations entered into.

·      Cost optimisation projects progressing as planned.

 

Brendan Hynes, Non-executive Chairman, commented:

"The first half year profitability is significantly ahead of last year and in line with our expectations as we continue to show measurable progress with our 'building a better Swallowfield' strategy.

 

This gives us confidence that we can continue to grow our business and build shareholder value in both the medium and long term."

 

Chris How, Chief Executive, commented:

"We are pleased to have delivered sales growth, margin growth and a significant improvement in profitability. This has been driven by growth in both the core business and Swallowfield owned brands. It is particularly pleasing that we have been able to deliver this improved profitability whilst at the same time absorbing investments in brand support and organisational capability that will deliver future business growth."

 

 

For further information please contact:


Swallowfield plc



Chris How

 Chief Executive Officer

 01823 662 241

Mark Warren

 Group Finance Director

 01823 662 241

Nic Hellyer/Jen Boorer/Alex Price

 N+1 Singer

 0207 496 3000

Josh Royston / Hilary Buchanan

 Alma PR

 07780 901979

 

Business review

 

Revenue showed growth of 5.9% at £27.5m (2015: £26.0m). The weakness of the Euro has reduced sales revenue by £0.3m, but this impact has been offset by a broadly equal level of increase on US Dollar denominated sales, so revenue growth on a constant currency basis would have been 6.1%.  

 

Direct contribution margins - defined as net sales less materials, direct labour, and other direct costs - increased by 360 basis points to 31.3% (prior year 27.7%). This reflects the success of our Product Category Prioritisation, the introduction of a number of innovative new products in our core business and the growing contribution of our portfolio of Swallowfield owned brands.

 

We are pleased to report that our core contract manufacturing business delivered growth in both sales and contribution margin. Within Swallowfield owned brands we successfully integrated the Real Shaving Company brand (acquired in May 2015) and executed the launches of our Bagsy and MR. brands into Debenhams and Boots respectively.

 

The overall re-shaping of the business towards stronger growth and margins has enabled us to increase profitability at a time when we have also increased investment in organisational capability and brand support.

 

The net effect is that the Group made an adjusted operating profit of £0.64m (2015: £0.16m). Adjusted profit before tax increased to £0.51m (2015: £0.06m).

 

The overall effective rate of Group taxation for the period was 10% of pre-tax profits. This represents the current tax payable in the Czech Republic and also the expectation that, in the UK, the taxable profit in the current year is anticipated to exceed the £1.1m of brought forward tax losses which will be fully utilised as a consequence. This results in an adjusted earnings per share of 4.1p (2015: 0.4p).

 

The Group's strategic investment of a 19% shareholding in Shanghai Colour Cosmetics Technology Company Limited (SCCTC) was re-valued upwards by £0.09m during the period, to fair value based on SCCTC's 31 December 2015 net assets.  The initial cost of this investment was £0.14m and this is now valued at £0.48m. This improved valuation is in addition to the dividend income received since acquisition.

 

Net debt and cash flow

 

Net debt decreased from a year-end position of £5.4m to £4.9m (2015: £3.1m, prior year reflected a one-off receipt timing benefit). We have continued our focus on working capital with good results achieved.

 

Financing costs of £0.12m (2015: £0.11m) comprised interest expense of £0.07m (2015: £0.06m) plus a pension scheme finance charge of £0.05m (2015: charge £0.05m).

 

Capital expenditure was £0.9m which was £0.3m above depreciation. We expect capital expenditure to be higher than depreciation in this financial year as we have made a number of investments to improve line efficiencies and support incremental new customer contracts.

 

Dividends

 

The Board is pleased to announce that it has approved an interim dividend of 0.8 pence per share (2015: Nil). This dividend will be paid on 27 May 2016 to shareholders on the register on 6 May 2016. The Shares will go ex-dividend on 5 May 2016.

 

This reinstatement of the interim dividend reflects the Board's confidence and progress on our strategy which is designed to build shareholder value in the medium and long term.

 

However, as previously advised, it is the Directors' intention to have a dividend policy that aligns future dividend payments to the underlying earnings and cash flow of the business, taking in to account the gearing and the operational requirements of the business.

 

Defined benefit pension scheme

 

During the reporting period the Group closed the existing defined benefit scheme to future accrual.

 

The defined benefit pension scheme underwent its last triennial valuation as of 5 April 2014. The deficit on a statutory funding basis was £1.3m and the Group entered into a revised deficit recovery plan and schedule of contributions in July 2015. The deficit reduction payment will be £108k per annum (previously £111.5k per annum) for ten years.

 

Subsequent to finalising the valuation the Group entered in to a formal consultation with the members to close the scheme to future accrual with effect from 31 December 2015, and this negotiation was concluded in the period. As a consequence, in the period ended 9 January 2016, we have recognised a credit of £0.77m (2015: £nil) relating to a curtailment gain, which represents a reduction in liabilities on closure to future accrual and is accounted for as a past service credit under IAS 19. One-off costs of £0.22m were incurred during this process which have been netted against this gain. We have therefore excluded the net amount of £0.55m from adjusted Group operating profit, as this is a one-off gain and is unrelated to the underlying performance of the Group.

 

For accounting purposes at 9 January 2016, the Group recognised under IAS19 'employee benefits', a deficit of £3.55m (30 June 2015: £2.66m). The Accounting Standards require the discount rate to be based on yields on high quality (usually AA-rated) corporate bonds of appropriate currency, taking into account the term of the relevant pension scheme's liabilities. Corporate bond indices are used as a proxy to determine the discount rate. At the reporting date, the yields on bonds of all types were lower than they were at 30 June 2015. This has resulted in lower discount rates being adopted for accounting purposes compared to last year, offset by a reduction in expectations of long term inflation, this coupled with the volatile market conditions at the accounting date impacting fair value asset valuations, has translated into an increased liability under IAS19.

 

Progress vs strategy

 

'Creating for Tomorrow, Delivering for Today'

 

Our business strategy is developed on two complimentary platforms. The first 'Creating for Tomorrow' identifies the strategic pillars that we believe will help us create a stronger business in the mid and long term. The second 'Delivering for Today' identifies some key operational focus areas that we need to drive in order to deliver our more immediate (i.e. current fiscal) performance.

 

The 4 strategic pillars of 'Creating for Tomorrow' are:

 

Product category focus

The business is focusing on a select number of 'drive' and 'build' product categories where Swallowfield has an existing and sustainable competitive advantage. Investment of both human and financial resources is prioritised to drive higher growth and profitability in each of these categories at the expense of our 'service' product categories which we are seeking to de-prioritise/exit.

 

Our 'drive' categories include personal care aerosols, hot pour products (for lips, face, hair and underarm) and roll-ons. Our 'build' categories include cosmetic pencils, fragrance, gifting and premium liquids.

 

In the reporting period our drive and build categories combined delivered 9% sales growth versus prior year. Percentage contribution margin growth was particularly strong in our drive categories which underpinned the 360 basis point improvement in the reported number.

 

 

 

 

Core business innovation

 

Our core customers are brand owners who require a constant stream of product innovation to remain competitive and we have built a reputation as a valuable partner to them in this process.

 

During the reporting period we were pleased to introduce a number of new products across a range of key customers and also secure agreements for future supply of several innovative haircare products to major premium brand owners which will positively impact business performance in fiscal 2017.

 

We have also seen growth in volumes of the innovative 'world first' plastic aerosol foaming shower gel which was successfully introduced last year.

 

Furthermore, we delivered our first order under a partnership arrangement entered into with a leading US aerosol manufacturer. This arrangement enables the production of Swallowfield formulations in the USA adapted to US regulatory requirements in a cost effective way to allow our European based customers to launch their products into North America. Swallowfield receive a commission and satisfy an increasingly common customer need.

 

Swallowfield owned brands

 

As well as our core work we are also utilising our product development, manufacturing, and distribution expertise to create innovative ranges of products which are being taken to market under our own brand names. These are positioned to avoid any direct conflict with our existing valued customer base. Through highly targeted campaigns and the use of cost-effective customer engagement channels such as social media, we believe we can build strong brand awareness to support product sales with moderate and sustainable investment levels.

 

The Real Shaving Company brand (acquired in May 2015) has been fully integrated into the business and sales and margins are contributing positively. A new aerosol product was added to the range and launched in October in the UK and will be introduced in Canada in the Spring. The addition of the aerosol is a great example of how Swallowfield can add value to brands through applying its existing product expertise and intellectual property. A new sampling campaign will be executed in the second half and we have entered into an exciting sponsorship package with Somerset County Cricket Club, which will run through the 2016 season.

 

Our premium beauty brand, 'Bagsy', was successfully rolled out in October to 36 Debenhams stores on full display units. Sales have been building steadily and we have a number of interesting in-store promotions planned through the Spring and Summer which will be backed up by digital advertising and PR. Further distribution extensions are being worked on, both in the UK and internationally, and we are excited to announce that we have entered into an exclusive agreement with the well-known fashion designer Savannah Miller. We will be co-developing a number of new products to be launched later in the year under the 'Savannah Miller for Bagsy' name.

 

Our premium and innovative new male haircare brand 'MR.' was launched into 350 Boots stores in October and sales have also been building steadily. Again, a range of in-store promotions and digital advertising / promotion through the Spring and Summer are expected to build further consumer awareness and sales.

 

Our value brand Tru continues to generate sales in existing outlets and we are seeking to further extend its retail distribution.

 

Cost base optimisation

We aim to improve our asset utilisation across our locations, which will reduce the cost base and improve productivity. We have identified a project to implement a coordinated upgrade of our energy and waste infrastructure at our main Wellington site, which aims to generate savings of approximately £0.15m per annum. This work is now underway, with the installation of a new compressor and boiler complete and waste treatment trial in progress. This is all expected to be completed during the current financial year.

 

 

 

 

Acquisition strategy

 

The Company continues to explore further acquisition opportunities where we could leverage our product expertise, intellectual property and distribution relationships to create value for all stakeholders.

 

Outlook

 

Despite challenging retail conditions and the increasing macro-economic uncertainty we have delivered a significant increase in profitability in the period. We expect to see continued growth in both sales and profitability for the full year, as planned.

 

The progress being delivered against our 'building a better Swallowfield' strategy gives us confidence that we will continue to strengthen and grow our business and build further shareholder value in the medium and longer term.

Group Statement of Comprehensive Income

 








28 weeks ended

28 weeks ended

12 months ended



9 Jan 2016

10 Jan 2015

30 June 2015



(unaudited)

(unaudited)

(audited)

Continuing operations

Notes

£'000

£'000

£'000






Revenue

2

27,507

25,975

49,447

Cost of sales


(23,538)

(23,321)

(43,609)

Gross profit


3,969

2,654

5,838

Commercial and administrative costs


(3,333)

(2,490)

(4,842)

Operating profit before exceptional items


636

164

996

Exceptional items

3

554

-

-

Operating profit / (loss)

Finance income

 

4

1,190

-

164

-

996

18

(200)

Finance costs

4

(123)

(108)

Profit / (loss) before taxation


1,067

56

814

Taxation


(107)

(7)

(68)

Profit after taxation

 


960

49

746

Other comprehensive (loss) / income for the period:





Re-measurement of defined benefit liability


(1,290)

(2,142)

(316)

Items that will be reclassified subsequently to profit or loss





Exchange differences on translating foreign operations


70

(54)

(137)

Gain / (loss) on available for sale financial assets


93

63

68

Other comprehensive (loss) / income for the period


(1,127)

(2,133)

(385)

Total comprehensive (loss) / income for the period


 

(167)

 

(2,084)

 

361











Profit / (loss) attributable to:





Equity shareholders


960

49

746






Total comprehensive (loss) / income attributable to:





Equity shareholders


(167)

(2,084)

361











Earnings per share





- basic

- diluted

5

5

8.5p

8.3p

0.4p

-

6.6p

6.5p






Dividend





Paid in period (£'000)

Paid in period (pence per share)


226

2.0p

-

-

-

-

Proposed (£'000)

Proposed (pence per share)

6

90

0.8p

-

-

226

2.0p

 

 

 

 



 

Group Statement of Changes in Equity

 

 

Share Capital

Share Premium

Exchange Reserve

Retained Earnings

Available

for Sale Financial Assets

Net defined benefit liability

/(asset)

Total Equity

Group

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance as at 30 June 2015

566

3,830

(452)

8,771

246

(37)

12,924

Dividends

-

-

-

(226)

-

-

(226)

Share based payments

-

-

-

8

-

-

8

Transactions with owners

-

-

-

(218)

-

-

(218)

Profit/(loss) for the year

-

-

-

960

-

-

960

Other comprehensive income:








Re-measurement of defined benefit liability/(asset)

-

-

-

-

-

(1,290)

(1,290)

Exchange difference on translating foreign operations

-

-

70

-

-

-

70

Gain on available for sale financial assets

-

-

-

-

93

-

93

Total comprehensive income for the year

-

-

70

960

93

(1,290)

(167)

Balance as at 9 January 2016

566

3,830

(382)

9,513

339

(1,327)

12,539

 

 

 

Share Capital

Share Premium

Exchange Reserve

Retained Earnings

Available

for Sale Financial Assets

Net defined benefit liability

/(asset)

Total Equity

Group

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance as at 30 June 2014

566

3,830

(315)

8,022

178

279

12,560

Dividends

-

-

-

-

-

-

-

Share based payments

-

-

-

-

-

-

-

Transactions with owners

-

-

-

-

-

-

-

Profit/(loss) for the year

-

-

-

49

-

-

49

Other comprehensive income:








Re-measurement of defined benefit liability/(asset)

-

-

-

-

-

(2,142)

(2,142)

Exchange difference on translating foreign operations

-

-

(54)

-

-

-

(54)

Gain on available for sale financial assets

-

-

-

-

63

-

63

Total comprehensive income for the year

-

-

(54)

49

63

(2,142)

(2,084)

Balance as at 10 January 2015

566

3,830

(369)

8,071

241

(1,863)

10,476

 

 

 

 

Share Capital

Share Premium

Exchange Reserve

Retained Earnings

Available

for Sale Financial Assets

Net defined benefit liability

/(asset)

Total Equity

Group

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance as at 30 June 2014

566

3,830

(315)

8,022

178

279

12,560

Dividends

-

-

-

-

-

-

-

Share based payments

-

-

-

3

-

-

3

Transactions with owners

-

-

-

3

-

-

3

Profit/(loss) for the year

-

-

-

746

-

-

746

Other comprehensive income:








Re-measurement of defined benefit liability/(asset)

-

-

-

-

-

(316)

(316)

Exchange difference on translating foreign operations

-

-

(137)

-

-

-

(137)

Gain on available for sale financial assets

-

-

-

-

68

-

68

Total comprehensive income for the year

-

-

(137)

746

68

(316)

361

Balance as at 30 June 2015

566

3,830

(452)

8,771

246

(37)

12,924

 

 

 

Group Statement of Financial Position

 



As at

As at

As at



9 Jan 2016

10 Jan 2015

30 June 2015



(unaudited)

(unaudited)

(audited)


Notes

£'000

£'000

£'000

ASSETS





Non-current assets





Property, plant and equipment


11,087

10,676

10,743

Intangible assets


1,153

145

1,200

Deferred tax assets


600

887

378

Investments


483

384

390

Total non-current assets


13,323

12,092

12,711

Current assets





Inventories


7,521

6,403

6,493

Trade and other receivables


10,521

8,890

10,839

Cash and cash equivalents


928

512

148

Current tax receivable


66

1

-

Total current assets


19,036

15,806

17,480

Total assets


32,359

27,898

30,191






LIABILITIES





Current liabilities





Trade and other payables


15,560

12,338

13,823

Interest-bearing loans and borrowings


139

-

137

Current tax payable


14

21

9

Total current liabilities


15,713

12,359

13,969

Non-current liabilities





Interest-bearing loans and borrowings


501

-

583

Post-retirement benefit obligations

8

3,550

5,002

2,662

Deferred tax liabilities


56

61

53

Total non-current liabilities


4,107

5,063

3,298

Total liabilities


19,820

17,422

17,267

Net assets


12,539

10,476

12,924






EQUITY





Share capital


566

566

566

Share premium


3,830

3,830

3,830

Other components of equity


339

241

246

Exchange reserve


(382)

(369)

(452)

Re-measurement of defined benefit liability


(1,327)

(1,863)

(37)

Retained earnings


9,513

8,071

8,771

Total equity


12,539

10,476

12,924

 

 

 



 

Group Cash Flow Statement

 


28 weeks ended

28 weeks ended

12 months ended


9 Jan 2016

10 Jan 2015

30 June 2015


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000

Cash flow from operating activities




Profit / (loss) before taxation

1,067

56

814

Depreciation

615

503

1,101

Amortisation

32

26

48

Defined benefit pension scheme curtailment gain

 

(554)

-

-

-

-

Finance income

-

-

(18)

Finance cost

123

108

200

(Increase) / decrease in inventories

(1,028)

662

572

Decrease in trade and other receivables

30

3,315

2,108

Increase / (decrease) in trade and other payables

1,459

(2,099)

(2,249)

Contributions to defined benefit plan

(209)

   (200)

(399)

Current service cost of defined benefit plan

206

230

361

Cash generated from operations

1,741

2,601

2,538

Finance expense paid

(71)

(59)

(112)

Taxation received / (paid)

(55)

199

(80)

Net cash flow from operating activities

1,615

2,741

2,346

Cash flow from investing activities




Finance income received

-

-

18

Purchase of property, plant and equipment

(871)

(756)

(1,543)

Purchase of intangible assets

(4)

(57)

(1,134)

Sale of property, plant and equipment

-

-

-

Net cash flow from investing activities

(875)

(813)

(2,659)

Cash flow from financing activities




Proceeds from new loan

-

-

720

Proceeds / (repayment) of debt facility

346

(1,949)

(792)

Repayment of loans

(80)

-

-

Dividends paid

(226)

-

-

Net cash flow from financing activities

40

(1,949)

(72)

Net increase / (decrease) in cash and cash equivalents

780

(21)

(385)

Cash and cash equivalents at beginning of period

148

533

533

Cash and cash equivalents at end of period

928

512

148





Cash and cash equivalents consist of:




Cash

928

512

148

Cash and cash equivalents at end of period

928

512

148

 



 

Notes to the Accounts

 

Note 1 Basis of preparation

The Group has prepared its interim results for the 28 week period ended 9 January 2016 in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) as adopted by the European Union and also in accordance with the recognition and measurement principles of IFRS issued by the International Accounting Standards Board.

 

The Directors have considered trading and cash flow forecasts prepared for the Group, and based on these, and the confirmed banking facilities, are satisfied that the Group will continue to be able to meet its liabilities as they fall due for at least one year from the date of approval of the Interim Report.  On this basis, they consider it appropriate to adopt the going concern basis in the preparation of these accounts.

 

As permitted, this interim report has been prepared in accordance with the AIM rules and not in accordance with IAS34 'Interim Financial Reporting'.

 

These interim financial statements do not constitute full statutory accounts within the meaning of section 434 of the Companies Act 2006 and are unaudited.  The unaudited interim financial statements were approved by the Board of Directors on 29 February 2016.

 

The consolidated financial statements are prepared under the historical cost convention as modified to include the revaluation of certain non-current assets.  The accounting policies used in the interim financial statements are consistent with IFRS and those which will be adopted in the preparation of the Group's Annual Report and Financial Statements for the year ended 30 June 2016. 

 

The statutory accounts for the year ended 30 June 2015, which were prepared under IFRS, have been filed with the Registrar of Companies.  These statutory accounts carried an unqualified Auditors Report and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006.

 

Note 2 Segmental analysis

 

The Group operates in one reportable segment as all sales, purchasing, production and operational decisions are taken based on the overall Group operating performance.  The results of this segment are as reported through the Group Statement of Comprehensive Income, Group Statement of Financial Position, Group Statement of Changes in Equity and Group Cash Flow Statement.

 

The distribution of the Group's external revenue by destination is shown below:

 

Geographical segments

28 weeks ended

28 weeks ended

12 months ended


9 Jan 2016

10 Jan 2015

30 June 2015

(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000

UK

18,510

15,904

30,308

Other European Union countries

7,593

9,152

16,700

Rest of the World

1,404

919

2,439


27,507

25,975

49,447

 

In the 28 weeks ended 9 January 2016, the Group had one customer that exceeded 10% of total revenues, this being 23.4%, this reflected the timing of new launches and strong re-orders falling in our first half, which is anticipated will normalise over the full year. In the 28 weeks ended 10 January 2015, the Group had two customers that exceeded 10% of total revenues, being 13.5% and 10.8% respectively.

 

Note 3 Exceptional items

 

Under exceptional Items we have recognised a credit of £0.77m (2015: £nil) relating to a curtailment gain, which represents a reduction in liabilities on closure of the DB scheme to future accrual. One-off costs of £0.22m were incurred during this closure process, which have been netted against this gain. We have therefore excluded the net amount of £0.55m from adjusted Group operating profit, as this is a one-off gain and is unrelated to the underlying performance of the Group.

 



 

 

Note 4 Finance income and costs

28 weeks ended

28 weeks ended

12 months ended


9 Jan 2016

10 Jan 2015

30 June 2015


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000

Finance Income

Other income

 

-

 

-

 

18


-

-

18





Finance costs




Bank loans and overdrafts

71

59

112

Net pension scheme costs

52

49

88


123

108

200

 

 

Note 5 Earnings per share

28 weeks ended

28 weeks ended

12 months ended


9 Jan 2016

10 Jan 2015

30 June 2015


(unaudited)

(unaudited)

(audited)





Basic and diluted




Profit for the period (£'000)

960

49

746

Basic weighted average number of




ordinary shares in issue during the period

11,306,416

11,306,416

11,306,416

Diluted number of shares

11,531,535

11,531,535

11,531,535

Basic earnings per share

8.5p

0.4p

6.6p

Diluted earnings per share

8.3p

0.4p

6.5p

 

Basic earnings per share has been calculated by dividing the profit for each financial period by the weighted average number of ordinary shares in issue in the period.  There is a difference at 30 June 2015 and 9 January 2016 between the basic net earnings per share and the diluted net earnings per share due to the 225,119 share options awarded.

 

Adjusted earnings per share                                                               

Profit for the period (£'000)

960

49

746

Add back: Exceptional items

(554)

-

-

Notional tax charge on exceptional items

56

-

-

Adjusted profit before exceptional items

462

49

746

Basic weighted average number of




ordinary shares in issue during the period

11,306,416

11,306,416

11,306,416

Diluted number of shares

11,531,535

11,531,535

11,531,535

Adjusted basic earnings per share

4.1p

0.4p

6.6p

Adjusted diluted earnings per share

4.0p

0.4p

6.5p

 

Adjusted earnings per share has been calculated by dividing the adjusted profit (after allowing for the notional tax charge on exceptional items) by the weighted average number of shares in issue in the period. There is a difference at 30 June 2015 and 9 January 2016 between the adjusted basic net earnings per share and the adjusted diluted net earnings per share due to the 225,119 share options awarded.

 

Note 6 Dividends

 

The Directors have declared an interim dividend payment of 0.8p per share (2015: Interim: nil; Final: 2.0p).

 



 

 

Note 7 Reconciliation of cash and cash equivalents to movement in net debt

 


28 weeks ended

28 weeks ended

12 months ended


9 Jan 2016

10 Jan 2015

30 June 2015


(unaudited)

(unaudited)

(audited)


£000's

£000's

£000's





Increase / (decrease) in cash and cash equivalents in the period

780

(21)

(385)

Net cash outflow / (inflow) from decrease / (increase) in borrowings

 

(266)

 

1,949

 

72

Change in net debt resulting from cash flows

514

1,928

(313)

Net debt at the beginning of the period

(5,390)

(5,077)

(5,077)

Net debt at the end of the period

(4,876)

(3,149)

(5,390)

 

 
Note 8 Accounting Policies

 

The accounting policies used in the interim financial statements are consistent with IFRS and those which will be adopted in the preparation of the Group's Annual Report and Financial Statements for the year ended 30 June 2016.

 

IAS 19 'Employee Benefits'

 

Expected future cash flows to and from the Scheme:

 

The Scheme is subject to the scheme funding requirements outlined in UK legislation. The last scheme funding valuation of the Scheme was as at 5 April 2014 and revealed a funding deficit of £1,298k.  The liabilities of the Scheme are based on the current value of expected benefit payment cash flows to members of the Scheme over the next 60 to 80 years. The average duration of the liabilities is approximately 20 years.

 

In accordance with the schedule of contributions dated 3 July 2015 the Company is expected to pay contributions to the Scheme to make good any shortfalls in funding and has agreed to pay £108k per annum for 10 years from 18 July 2015 to eliminate the deficit. The magnitude of such payments will be reviewed following the next scheme funding valuation as at April 2017. Prior to July 2015 the Company was paying £111.5k per annum.

 

In addition, the Company has agreed to meet the cost of administrative expenses and Pension Protection Fund insurance premiums for the Scheme.

 

Payments made by the Company to the Scheme and in respect of Scheme liabilities were:

 

 

28 weeks ended

9 January 2016

£000's

28 weeks ended

10 January 2015

£000's

12 months ended

30 June 2015

£000's

Company pension contributions

155

144

287

Deficit recovery payments

54

56

112

Scheme administrative expenses

44

56

121

Pension Protection Fund premium

211

98

98

Total

464

354

618

 

 

The amounts expensed in the Group Statement of Comprehensive Income were:

 

 

28 weeks ended

9 January 2016

£000's

28 weeks ended

10 January 2015

£000's

12 months ended

30 June 2015

£000's

In Operating profit:

 

 

 

Company pension contributions

206

230

361

Scheme administrative expenses

41

61

138

Pension Protection Fund premium

106

49

123

 

353

340

622

 

 

 

 

In Finance costs:

 

 

 

Unwinding of discount factor

52

49

88

Total

405

389

710

 

 

IAS 19 requires a separate valuation of the Scheme on a different basis to the funding valuation referred to above. The effects of the application of IAS19 on the statement of financial position at 9 January 2016 are:


 

 

 

 

 

 

9 January 2016


 

 

£000's

Increase in pension and other benefit obligations


 

(888)

Decrease in deferred tax


 

323

Decrease in equity

 

 

(565)

 

 

 

 

 

The Accounting Standards require the discount rate to be based on yields on high quality (usually AA-rated) corporate bonds of appropriate currency, taking into account the term of the relevant pension scheme's liabilities. Corporate bond indices are often used as a proxy to determine the discount rate. At the reporting date, the yields on bonds of all types were lower than they were at 30 June 2015. This has resulted in lower discount rates being adopted for accounting purposes compared to last year, offset by a reduction in expectations of long term inflation, this coupled with the volatile market conditions at the accounting date impacting fair value asset valuations, has translated into an increased liability.

 

The key assumptions used were:

 

 

 

As at 9 January 2016

As at 10 January 2015

As at 30 June 2015

Discount Rate

3.85%

3.45%

4.10%

Rate of inflation (RPI)

3.05%

2.95%

3.30%

Rate of inflation (CPI)

2.05%

2.00%

2.30%

 

The amounts recognised in the Group statement of financial position were: 

 

 

As at 9 January 2016

£000's

As at 10 January 2015

£000's

As at 30 June 2015

£000's

Present value of funded obligations

(22,975)

(24,775)

(22,970)

Fair value of scheme assets

19,425

19,773

20,308

(Deficit) / surplus

(3,550)

(5,002)

(2,662)

 

 

Note 9 Announcement of results

These results were announced to the London Stock Exchange on 1 March 2016.  The Interim Report will be sent to shareholders and is available to members of the public at the Company's Registered Office at Swallowfield House, Station Road, Wellington, Somerset, TA21 8NL.

 



Independent review report to Swallowfield plc

 

Introduction

We have been engaged by the Group to review the condensed set of financial statements in the half-yearly financial report of Swallowfield plc for the twenty eight weeks ended 9 January 2016 which comprises the Group statement of comprehensive income, the Group statement of changes in equity, the Group statement of financial position, the Group cash flow statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report which comprises the Chief Executive's Statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Group, in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. Our review work has been undertaken so that we might state to the Group those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group for our review work, for this report, or for the conclusion we have formed.

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the half-yearly financial report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

 

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the basis of preparation in Note 1.

 

Our responsibility is to express to the Group a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the twenty eight weeks ended 9 January 2016 is not prepared, in all material respects, in accordance with the basis of accounting described in Note 1.

 

 

 

 

 

Grant Thornton UK LLP

Statutory Auditor, Chartered Accountants

Southampton

29 February 2016

 


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