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Swallowfield PLC (BAR)

  Print          Annual reports

Thursday 21 February, 2002

Swallowfield PLC

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
            The company news service from the London Stock Exchange
                                                                                                        

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