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Swallowfield PLC (BAR)

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Thursday 24 February, 2005

Swallowfield PLC

Interim Results

Swallowfield PLC
24 February 2005

                                Swallowfield plc
             Interim results for the 28 weeks ended 8 January 2005

Chairman's Statement


I am pleased to report, that for the first six months of the financial year,
turnover increased by 5% from £23.4m to £24.7m and profit before tax increased
by 68% to £0.6m. This is a good result when measured against the set of
unfavourable background conditions to which we are subject, and that I described
in my last report. The personal care market has remained weak and customer
imposed price pressure has continued. In addition, we have witnessed a limited
resurgence of raw material price inflation driven by higher costs of
petrochemical derivatives and base metals such as aluminium and tinplate. Our
strategy to address these factors has been effective to date.

Savings from last year's restructuring programme are broadly on track, and we
have been able to re-invest approximately half of these savings to begin to
build our operation in the Peoples' Republic of China. This new operation is
growing steadily - we have had our first finished product manufactured by local
sub-contractors and have placed purchase orders for newly tooled components.

Turnover in the Cosmetics business increased by 6% from £6.3m to £6.7m and,
encouragingly, this division made an operating profit of £0.1m following an
operating loss of £0.3m over the same period last year. This turnaround has been
achieved through a combination of improved sales performance from recently
launched product ranges and overhead savings made during the last two years.

Turnover in the Aerosols division increased 5% from £17.2m to £18.0m, and
operating profit decreased by 10% to £0.8m - the increased pricing pressure on
toiletry gift packs has been particularly noticeable during the last 6 months.
We are taking positive steps to value engineer new products and increase the
sourcing of components from the Far East.

Cash and Net Debt

The Group has generated operating cash flow of £5.1m since the last year-end as
a result of which net debt has been reduced by £3.6m to £5.2m. Much of this
improvement comes from the completion of a single customer contract with
extended payment terms described in my last report, together with other seasonal
factors. Gearing stands at 42% compared with 73% at the end of the last
financial year and 44% at the interim stage last year.

During the last six months we have prudently increased our expenditure on fixed
assets totalling £0.9m, with particular emphasis being placed on good
manufacturing practice. We have recently completed the installation of a new
microbiological testing facility and a new water treatment plant.

Strategy Update

We continue to refine our strategy in the light of new information and changes
within our market place. We are also exploring potential acquisitions that could
either provide extensions to our product capabilities and/or create synergistic
benefits with our current operations.

At the same time, we are examining opportunities to organically grow our
business. Following efforts made over the last several months, we have very
recently been awarded a significant outsourcing contract by a well-known brand.
Under this contract, Swallowfield will manufacture the majority of this
customer's aerosol requirement for an initial term of three years. We are clear
that overall service levels, including new product development, are paramount to
the success of this new business and believe similar opportunities exist with
other potential customers.

In the strategy update presented last year, we stated that we have set ourselves
a long-term target to achieve a return on shareholders equity of 12% by 30 June
2006, and 15% by 30 June 2009. Excluding exceptional costs, return on equity for
the 12 months to 8 January 2005 was 10%.


The economic background is not expected to improve over the coming 6 months.
Indeed, following the recently published December 2004 retail sales figures, our
expectation and planning is that consumer spending could yet deteriorate
further. This background and continuing price pressures are likely to make the
second half of the financial year slightly tougher than originally anticipated.
However, raw material and production savings from our Chinese operation, and
sales from the new business referred to above, will start to come through
towards the end of the fourth quarter and should have a positive impact going

The key to our future success remains our ability to innovate and create
products that consumers wish to buy, at the same time we will not let-up on our
relentless pursuit of improving our cost base and increasing operating


The Board has maintained the dividend policy explained in the last annual report
and accounts. This policy recognises the need, in the short term, for us to
rebuild the level of dividend cover and increase the strength of the Group's
balance sheet. In the medium term, our aim of pursuing a progressive dividend
policy remains. Accordingly, the Board has declared an interim dividend of 2.8p
per share, which is unchanged from that declared at the same time last year. The
dividend will be paid on the 26 May 2005 to shareholders on the register on 13
May 2005, and the shares will go ex-dividend on 11 May 2005.

J S Espey, Chairman
24 February 2005

Group Profit and Loss Account
for the 28 weeks ended 8 January 2005
                                                                  28 weeks               28 weeks             12 months
                                                                     ended                  ended                 ended
                                                                8 Jan 2005            10 Jan 2004          30 June 2004
                                                               (unaudited)            (unaudited)
                                                Notes                £'000                  £'000                 £'000

Turnover                                          1                 24,677                 23,433                48,763

Operating profit                                  1                    860                    588                 1,584
Interest payable                                                     (240)                  (218)                 (419)

Profit on ordinary activities before taxation                          620                    370                 1,165
Tax on profit on ordinary activities                                 (189)                  (107)                 (349)

Profit attributable to shareholders                                    431                    263                   816
Dividends                                                            (316)                  (316)                 (541)

Retained profit/(loss)                                                 115                   (53)                   275

Dividend per ordinary share                       3                   2.8p                   2.8p                  4.8p

Earnings per ordinary share
- Basic                                           4                   3.8p                   2.3p                  7.2p
- Diluted                                         4                   3.8p                   2.3p                  7.2p

Group Balance Sheet
as at 8 January 2005
                                                                    As at                  As at                  As at
                                                               8 Jan 2005            10 Jan 2004           30 June 2004
                                                              (unaudited)            (unaudited)
                                                                    £'000                  £'000                  £'000

Tangible fixed assets                                              12,501                 12,682                 12,382

Stocks                                                              7,705                  7,570                  7,982
Debtors                                                             7,130                  5,632                 14,219
Cash at bank and in hand                                               69                    483                     94
                                                                   14,904                 13,685                 22,295

Creditors: amounts falling due within one year                    (9,765)                (8,474)               (14,998)
Net current assets                                                  5,139                  5,211                  7,297

Creditors: amounts falling due after more than one                (4,514)                (5,313)                (6,668)
Provisions for liabilities and charges                              (947)                  (844)                  (947)
                                                                   12,179                 11,736                 12,064

Share capital                                                         563                    563                    563
Share premium                                                       3,796                  3,796                  3,796
Reserves                                                            7,820                  7,377                  7,705

Equity shareholders' funds                                         12,179                 11,736                 12,064

Group Statement of Cash Flows
for the 28 weeks ended 8 January 2005
                                                                28 weeks               28 weeks              12 months
                                                                   ended                  ended                  ended
                                                              8 Jan 2005            10 Jan 2004           30 June 2004
                                                             (unaudited)            (unaudited)
                                                                   £'000                  £'000                  £'000

Net cash inflow from operating activities (note I)                 5,101                  4,512                  1,897

Returns on investments and servicing of finance                    (240)                  (218)                  (419)

Corporation tax paid                                               (162)                   (92)                  (190)

Capital expenditure:
Purchase of tangible fixed assets                                  (860)                  (368)                  (696)
Sale of tangible fixed assets                                          5                     40                      2

Equity dividends paid                                              (225)                  (225)                  (541)
Net cash inflow before financing                                   3,619                  3,649                     53

(Decrease) in long and short-term loans                          (2,003)                (1,532)                   (32)
Capital element of finance lease rentals                           (181)                  (200)                  (351)
                                                                 (2,184)                (1,732)                  (383)

Increase/(decrease) in cash                                        1,435                  1,917                  (330)

Notes to the Statement of Cash Flows

                                                               28 weeks                 28 weeks              12 months
                                                                  ended                    ended                  ended
                                                             8 Jan 2005              10 Jan 2004           30 June 2004
                                                            (unaudited)              (unaudited)
                                                                  £'000                    £'000                  £'000
I. Reconciliation of operating profit to net cash
inflow from operating activities
Operating profit                                                    860                      588                  1,584
Depreciation                                                        741                      822                  1,488
(Profit) on disposal of fixed assets                                (5)                      (2)                    (2)
Decrease/(increase) in stocks                                       277                       46                  (366)
Decrease/(increase) in debtors                                    7,089                    3,638                (4,952)
(Decrease)/increase in creditors                                (3,861)                    (580)                  4,145

Net cash inflow from operating activities                         5,101                    4,512                  1,897

II. Analysis of net debt
Net cash at bank and in hand                                         69                      483                     94
Overdraft                                                         (398)                        -                (1,858)
Short-term loans                                                      -                      (3)                    (3)
Long-term loans                                                 (4,000)                  (4,500)                (6,000)
Finance leases                                                    (833)                  (1,165)                (1,014)
                                                                (5,162)                  (5,185)                (8,781)

III. Reconciliation of net cash flow to movement in net debt
Net debt at start of the period                                 (8,781)                  (8,834)                (8,834)
Increase/(decrease) in cash                                       1,435                    1,917                  (330)
Decrease in borrowings and finance leases                         2,184                    1,732                    383

Net debt at end of the period                                   (5,162)                  (5,185)                (8,781)

Notes to the Financial Information

1. Turnover and segmental analysis

                                   28 weeks ended                   28 weeks ended                  12 months ended
                                     8 Jan 2005                       10 Jan 2004                    30 June 2004

Class of business                             Operating                       Operating                       Operating
                                                 Profit                          Profit                          Profit
                               Turnover                        Turnover                        Turnover
                                  £'000           £'000           £'000           £'000           £'000           £'000
                            (unaudited)     (unaudited)     (unaudited)     (unaudited)

Aerosol products                 18,018             762          17,158             845          36,520           1,986
Cosmetic products                 6,659              98           6,275           (257)          12,243             (6)
                                 24,677             860          23,433             588          48,763           1,980

Operating profit before 
exceptional costs
Exceptional costs                     -               -               -               -               -           (396)
Operating profit                 24,677             860          23,433             588          48,763           1,584

2.   The results for the twenty-eight weeks ended 8 January 2005 and the summary
balance sheet on that date are unaudited. The results for the 12 month period
ended 30 June 2004 do not constitute full accounts within the meaning of section
240 of the Companies Act 1985. Full accounts for that period together with an
unqualified audit report thereon have been filed with the Registrar of

3.   The dividend comprises an ordinary dividend of 2.8p (2004: 2.8p) per
ordinary share payable on 26 May 2005 to shareholders on the register on 13 May

4.   The calculation of basic earnings per share is based on 11,256,416 (2004:
11,256,416) ordinary shares of 5.0p each, being the weighted average number of
ordinary shares in issue during the period, and the profit on ordinary
activities after taxation of £431,000 (2004: £263,000).

The diluted earnings per share is based on the profit for the period of £431,000
(2004: £263,000) and on the weighted average number of shares in issue for the
period, adjusted for shares held under unexercised options. The adjusted number
of shares for the period was 11,268,118 (2004: 11,266,316) ordinary shares which
include 11,702 (2004: 9,900) dilutive potential ordinary shares from executive
share options.

5.   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.

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