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Swallowfield PLC (BAR)

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Thursday 28 February, 2008

Swallowfield PLC

Interim Results

Swallowfield PLC
28 February 2008

                                Swallowfield plc

          Creating and Delivering Solutions for our Customers' Success

             Interim Results for the 28 weeks ended 12 January 2008

  Swallowfield plc is pleased to announce its interim results for the 28 weeks
         ended 12 January 2008 and the resumption of interim dividends.

Highlights

•         Net Debt, down 64% at £1.49m (2007: £4.10m);
•         Higher gross margins on revenue of £23.53m;
•         Operating profit before exceptional items better than expected at
          £0.83m (2007: £0.86m);
•         Earnings per share before exceptional items 4.3p (2007: 3.8p);
•         Interim dividend resumed at 1.4p per share.
•         First half trading better than anticipated and better than analyst
          forecasts;
•         First production run from the new Czech operation in December 2007 -
          ahead of target;
•         Sale and leaseback of Lowmoor completed in spite of difficult
          commercial property market.

Outlook

•         Full year trading remains in line with market expectations;
•         Further broadening of manufacturing base to serve a higher quality and
          growing customer portfolio.


Shena Winning, Non-executive Chairman, commented:

'The last six months have delivered further significant progress with profits
ahead of original expectations and net debt down to its lowest level since 1988.
These achievements have been made possible by the energy, commitment and
expertise of our management team and all of our employees.  We operate in a
highly competitive environment and expect the commercial pressures of the last
few years to continue. Despite a weaker economic outlook for 2008, the
increasing operational and financial strength of the company puts us in a strong
position for the future.'



Enquiries:


Swallowfield plc
Ian Mackinnon,                       Chief Executive Officer                       01823 662 241
Peter Houston,                       Group Finance Director                        01823 662 241

Mike Coe / Marc Davies,              Blue Oar Securities Plc                       0117 933 0020
Alan Bulmer,                         Performance Communications                    0117 907 6514
Chris Lawrance,                      JBP Public Relations                          0117 907 3400



Creating and Delivering Solutions for our Customers' Success

Swallowfield plc is a market leader in the development, formulation and supply
of cosmetics, toiletries and related household products to the own label and
branded sectors.  We pride ourselves on being a customer orientated, innovative,
flexible and responsive company and combine high quality, competitive products
with strong customer service - developing close partnerships with our customers
and an in depth knowledge of their requirements.



Chairman's Statement

Key Achievements

The results for the 28 weeks to 12 January 2008 are better than analyst
forecasts which were issued in September 2007. The overall net margin mix has
improved compared to last year, operational efficiencies remain high and we
continue to manage costs and assets tightly.

Headline earnings per share were 14.1p benefitting from a post tax profit of
£1.31m on the sale and leaseback of our Lowmoor warehouse. The results are also
stated after deducting £0.29m of exceptional costs relating to the ongoing
restructuring of the cosmetics operation and the transfer of filling and
finishing capabilities to the Czech Republic.

Operating profit before exceptional items was £0.83m; a better than expected
performance (2007: £0.86m). After allowing for interest paid, profit before tax
and exceptional items was £0.66m (2007: £0.63m).

Net debt was £1.49m, a reduction of £2.61m from the same period last year and
the lowest level since December 1988.

Business Review

The business has experienced a continuation of the blurring of boundaries
between Toiletries and Cosmetics as a result of new product and technology
developments.  In due course, this will lead to a reassessment of the Group's
segmental analysis.

Toiletries Division

Revenue in the toiletries division, as anticipated, decreased from £18.78m to
£17.02m and operating profit declined by £0.44m to £0.94m as a result of
contract timings and new customer product launches. Cost control and efficiency
improvements remain good in response to the pressures on margins from increasing
raw materials and component costs which are hard to pass on to customers.

Cosmetics Division

Revenue in the cosmetics division, as anticipated, decreased from £6.94m to
£6.51m whilst operating profit increased substantially from £0.20m to £0.71m.
The restructuring activities of last year have reduced overhead costs, and
labour efficiencies have improved due, in part, to the automated equipment
installed over the last 9 months. At the same time, the division had a one-off
benefit from the completion of a contract earlier than anticipated.

Czech Republic

The new facility, which will fill and finish cosmetic and toiletry products, was
delivered to us on time by the building developer and landlord. Because of this
and the high quality of the final build, we were able to make our first
production run in December, almost a month ahead of schedule. There is a phased
project to transfer equipment from the UK and to install two new production
lines that have been purchased specifically for this operation. We expect all of
the equipment to be in place and operators to be fully trained by the end of
June 2008. The facility is of a high standard and is already generating
considerable interest from existing and potential new customers across a range
of product technologies. At 12 January 2008, £0.21m of capital investment has
been made in Tabor, with net costs since opening of £0.07m and £0.09m treated as
exceptional costs in these accounts.

China

Signing of the final contracts for the joint manufacturing venture in China,
which is dependent on registering various matters with the local government, has
not yet been completed.  We expect this to happen within the next three months.

The sourcing office in Shanghai remains in place and continues to contribute
well to the overall business.

Financial Results

Net Debt

Further significant progress has been made over the last six months in reducing
net debt. At 12 January 2008 net debt stood at £1.49m and was at its lowest
level since December 1988. Further progress was made on inventory reduction by
the focus on non-stockholding accounts, and inventories reduced by £0.46m
compared to the same period last year. The sale and leaseback referred to below
contributed significantly to the reduction in borrowings.

Pension Scheme

At 12 January, the pension scheme deficit recorded in the balance sheet under
IAS19 was £2.66m, although the Company had an unrealised surplus of £1.54m as a
buffer against future volatility and other factors. This unrealised surplus has
reduced since 30 June 2007 due to the volatility of investment markets over the
last few months. The next Triennial valuation of the scheme is due as at 6 April
2008 and it is likely that we will need to increase the life expectancy
assumptions with a consequent rise in liabilities.

Properties

The sale and leaseback of our warehouse at Lowmoor was completed on 28 December
2007 for a cash consideration of £2.12m. These interim results include an
exceptional profit on the sale of £1.31m, including £0.05m of related tax timing
factors, equivalent to 11.65p per share.  At this time, the Directors do not
plan to enter into similar transactions with the remainder of the Group's
property portfolio, the book value of which is supported by its current value in
use to the business.

Strategy & Outlook

Swallowfield is rapidly evolving into a service company providing customers with
options which range from market analysis, formulation, design and packaging
development through to product manufacture, sourcing and logistics. Our core
strategy of customer intimacy is central to the delivery of these services and
continuous improvement in Quality, Cost, Service and Innovation, a prerequisite
for success. Our ongoing strategy is built around strengthening and building
upon the services we offer and broadening our product portfolio.

Our plans for the coming six months include the continued roll-out of our Czech
operation and the completion of the joint venture in China. Each of these
activities will enhance our service abilities and reduce our cost base in the
medium term. In order to improve our service levels to global customers, we are
carefully examining opportunities for new overseas sales offices. As a first
step, we plan to open a small bureau in France in the next six months. We are
mindful, however, of the need to avoid overstretching existing resources and
incurring unnecessary overheads.

The recent price increases in oil and other commodities has put pressure on
input costs and passing on these increases to customers remains difficult.
However, we continue to defend against input price increases and are using our
new sourcing capabilities in China and the Czech Republic in this regard.

In the second half of the financial year we expect to begin to deliver on our
long-term mission of profitable sales growth in the toiletries business. The
cosmetics division will be focused on operating at the 12% targeted return on
net assets as we continue to restructure the business and transfer production.

Overall we expect the second half of the year to show an improvement in trading
on the second half of last year.

Dividends

The Board laid out its strategy for the payment of dividends in the last Annual
Report. In essence this strategy is to pay dividends using a cautious dividend
cover of three times, with a progressive approach to future dividend cover over
time. Accordingly, the Board will pay an interim dividend of 1.4p per share on
30 May 2008 to shareholders on the register at 9 May 2008. The shares will go
ex-dividend on 7 May 2008.

S J Winning
Chairman
28 February 2008



Group Income Statement


                                                        28 weeks ended      28 weeks ended      12 months ended
                                                           12 Jan 2008         13 Jan 2007         30 June 2007
                                                           (unaudited)         (unaudited)            (audited)
Continuing operations                      Notes                 £'000               £'000                £'000

Revenue                                        2                23,529              25,720               44,715
Cost of sales                                                 (20,105)            (22,021)             (38,411)
Gross profit                                                     3,424               3,699                6,304
Commercial and administrative costs                            (2,594)             (2,844)              (4,986)
Operating profit before exceptional                                830                 855                1,318
items
Exceptional items                              2                 1,024               (244)                (244)
Operating profit                                                 1,854                 611                1,074
Finance income                                                      12                  21                   24
Finance costs                                                    (179)               (251)                (411)
Profit before taxation                                           1,687                 381                  687
Taxation                                                          (95)               (126)                (248)
Profit for the period                                            1,592                 255                  439

Attributable to:
Equity shareholders                                              1,592                 255                  439

Earnings per share
- basic and diluted                            3                 14.1p                2.3p                 3.9p

Dividend
Paid in period (£000's)                                            146                   -                    -
Paid in period (pence per share)                                   1.3                   -                    -
Proposed (£000's)                                                  158                   -                    -
Proposed (pence per share)                                         1.4                   -                    -


Group Statement of Recognised Income and Expense

                                                      28 weeks ended       28 weeks ended      12 months ended
                                                         12 Jan 2008          13 Jan 2007         30 June 2007
                                                         (unaudited)          (unaudited)            (audited)
                                                               £'000                £'000                £'000
Profit for the period                                          1,592                  255                  439
Total recognised income and expense for the                    1,592                  255                  439
period


Group Balance Sheet
                                                                      As at             As at             As at
                                                                12 Jan 2008       13 Jan 2007      30 June 2007
                                                                (unaudited)       (unaudited)         (audited)
                                                 Notes                £'000             £'000             £'000
ASSETS
Non-current assets
Property, plant and equipment                                        10,940            10,928            11,032
Intangible assets                                                        75                62                77
Total non-current assets                                             11,015            10,990            11,109
Current assets
Inventories                                                           5,830             6,288             6,062
Trade and other receivables                                           7,940             8,181             7,711
Derivative financial instruments                                          -                13                 6
Cash and cash equivalents                                               584               561               185
                                                                     14,354            15,043            13,964
Non-current assets held for sale                     5                    -               854               854
Total current assets                                                 14,354            15,897            14,818
Total assets                                                         25,369            26,887            25,927

LIABILITIES
Current liabilities
Trade and other payables                                              8,604             9,197             7,508
Interest-bearing loans and borrowings                                   469               159             1,153
Current tax payable                                                      38                 -                 -
Total current liabilities                                             9,111             9,356             8,661
Non-current liabilities
Interest-bearing loans and borrowings                                 1,600             4,514             3,920
Post-retirement benefit obligations                                   2,663             2,694             2,717
Deferred tax liabilities                                                396               354               476
Total non-current liabilities                                         4,659             7,562             7,113
Total liabilities                                                    13,770            16,918            15,774
Net assets                                                           11,599             9,969            10,153

EQUITY
Share capital                                                           563               563               563
Share premium                                                         3,796             3,796             3,796
Other reserve                                                             -                89                 -
Retained earnings                                                     7,240             5,521             5,794
Total equity                                                         11,599             9,969            10,153


Group Cash Flow Statement

                                                       28 weeks ended      28 weeks ended      12 months ended
                                                          12 Jan 2008         13 Jan 2007         30 June 2007
                                                          (unaudited)         (unaudited)            (audited)
                                                                £'000               £'000                £'000
Cash flows from operating activities
Profit before taxation                                          1,687                 381                  687
Depreciation                                                      627                 717                1,205
Amortisation                                                       22                  17                   36
Profit on disposal of non-current asset held for              (1,313)                   -                    -
sale
Loss on disposal of equipment                                       2                   -                   25
Impairment of property, plant and equipment                         6                   -                   42
Finance income                                                   (12)                (21)                 (24)
Finance cost                                                      179                 251                  411
Decrease in inventories                                           232               1,059                1,285
(Increase)/decrease in trade and other                          (229)               1,337                1,807
receivables
Increase/(decrease) in trade and other payables                 1,094               (354)              (2,055)
(Decrease)/increase in retirement benefit                        (54)                  19                   55
obligations
Cash generated from operations                                  2,241               3,406                3,474
Finance expense paid                                            (171)               (257)                (428)
Taxation paid                                                    (90)                   -                    -
Net cash flow from operating activities                         1,980               3,149                3,046
Cash flow from investing activities
Finance income received                                            12                   4                   24
Purchase of property, plant and equipment                       (543)               (175)                (834)
Purchase of intangible assets                                    (20)                (13)                 (47)
Sale of property, plant and equipment                           2,120                  51                   51
Net cash flow from investing activities                         1,569               (133)                (806)
Cash flow from financing activities
Capital element of finance lease liabilities                     (79)               (198)                (291)
Repayment of loans                                            (2,432)               (147)                (147)
Dividends paid                                                  (146)                   -                    -
Net cash flow from financing activities                       (2,657)               (345)                (438)
Net increase in cash and
cash equivalents                                                  892               2,671                1,802
Cash and cash equivalents at beginning of period                (308)             (2,110)              (2,110)
Cash and cash equivalents at end of period                        584                 561                (308)

Cash and cash equivalents consist of:
Cash                                                              584                 561                  185
Overdraft                                                           -                   -                (493)
Cash and cash equivalents at end of period                        584                 561                (308)




Notes to the Accounts

Note 1 Basis of preparation

The Group's interim results for the 28 week period ended 12 January 2008 are
prepared in accordance with the Group's accounting policies which are based on
the recognition and measurement principles of International Financial Reporting
Standards (IFRS) as adopted by the EU and effective at 30 June 2008 or are
expected to be adopted and effective at 30 June 2008. 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 240(5) of the Companies Act 1985 and are
unaudited.  The unaudited interim financial statements were approved by the
Board of Directors on 28 February 2008.

The consolidated financial statements are prepared under the historical cost
convention as modified to include the revaluation of certain fixed assets and
financial instruments.  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 2008.  The statutory accounts for the year ended 30 June 2007,
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 either Section 237(2) or (3) of the Companies Act
1985.

Note 2 Segmental analysis

The Group operates in two segments which reflect the internal organisation and
management structure according to the nature of the products:

Toiletries       - Development, manufacture, marketing and sales of toiletry products
Cosmetics        - Development, manufacture, marketing and sales of cosmetic products

Details for these business reporting segments are shown below:

                                28 weeks ended             28 weeks ended       52 weeks ended 30 June 2007
                                 12 Jan 2008                 13 Jan 2007
                                 Revenue       Profit      Revenue       Profit       Revenue        Profit
                             (unaudited)  (unaudited)  (unaudited)  (unaudited)     (audited)     (audited)
                                   £'000        £'000        £'000        £'000         £'000         £'000

Toiletries                        17,019          943       18,783        1,381        33,497         2,362
Cosmetics                          6,510          707        6,937          198        11,218           299
Total                             23,529        1,650       25,720        1,579        44,715         2,661
Central costs                                   (820)                     (724)                     (1,343)
Operating profit before                           830                       855                       1,318
exceptional items
Exceptional items                               1,024                     (244)                       (244)
Operating profit                                1,854                       611                       1,074
Finance income                                     12                        21                          24
Finance costs                                   (179)                     (251)                       (411)
Profit before taxation                          1,687                       381                         687
Taxation                                         (95)                     (126)                       (248)
Profit for the period                           1,592                       255                         439


Exceptional items relate to the profit on disposal of property (£1.31m),
including £0.05m of related tax timing factors; costs associated with the
Bideford reorganisation £0.23m, and other non-recurring items £0.06m (2007:
non-operational costs in closing out a customer contract £0.24m.)

Note 3 Earnings per share
                                                      28 weeks ended      28 weeks ended      12 months ended
                                                         12 Jan 2008         13 Jan 2007         30 June 2007
                                                         (unaudited)         (unaudited)            (audited)

(a) Basic and diluted
Profit for the period (£'000)                                  1,592                 255                  439
Basic weighted average number of
ordinary shares in issue during the period                11,256,416          11,256,416           11,256,416
Dilutive potential ordinary shares:
executive share options                                        6,024                   -                    -
                                                          11,262,440          11,256,416           11,256,416
Basic earnings per share                                       14.1p                2.3p                 3.9p
Diluted earnings per share                                     14.1p                2.3p                 3.9p

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 no difference for any of the reported periods between the
basic net profit per share and the diluted net profit per share.

Adjusted earnings per share

(b) Basic and diluted
Profit for the period (£'000)                                  1,592                 255                 439
(Less)/add back: Exceptional items                           (1,024)                 244                 244
Notional tax charge on exceptional items                        (86)                (73)                (73)
Adjusted profit
before exceptional items                                         482                 426                 610
Basic weighted average number of
ordinary shares in issue during the period                11,256,416          11,256,416          11,256,416
Dilutive potential ordinary shares:
executive share options                                        6,024                   -                   -
                                                          11,262,440          11,256,416          11,256,416
Adjusted basic earnings per share                               4.3p                3.8p                5.4p
Adjusted diluted earnings per share                             4.3p                3.8p                5.4p


Profit for the period of £1.59m (2007: interim £0.26m; full-year £0.44m) is
shown after deducting £1.02m (2007 adding: interim £0.24m; full-year £0.24m) in
respect of exceptional items.  Adjusted earnings per share has been calculated
by dividing the adjusted profit of £0.48m (after allowing for the notional tax
charge on exceptional items) (2007: interim £0.43m; full-year £0.61m) by the
weighted average number of shares in issue at 12 January 2008, 13 January 2007
and 30 June 2007 respectively.

Note 4 Dividends

The Directors have decided to declare an interim dividend payment of 1.4p per
ordinary share. No interim dividend was paid in 2007.

Note 5 Non-current assets held for sale
                                                               As at               As at                As at
                                                         12 Jan 2008         13 Jan 2007         30 June 2007
                                                         (unaudited)         (unaudited)            (audited)
                                                               £'000               £'000                £'000

Property, plant and equipment                                      -                 854                  854


Assets held for sale were included within the total assets of the Group's
Toiletries segment.  The assets incorporated the land and buildings at the
Group's separate warehousing facility.  The sale was completed on 28 December
2007.


Note 6 Reconciliation of cash and cash equivalents to movement in net debt

                                                      28 weeks ended      28 weeks ended      12 months ended
                                                         12 Jan 2008         13 Jan 2007         30 June 2007
                                                         (unaudited)         (unaudited)            (audited)
                                                              £000's              £000's               £000's

Increase in cash and cash equivalents in the                     892               2,671                1,802
period
Cash inflow from movement in borrowings                        2,432                 147                  147
Movement on finance leases                                        79                 198                  291
Change in net debt from cash flows                             3,403               3,016                2,240
Movement in fair value of derivative financial                   (6)                  17                   10
instruments
Movement in net debt in the period                             3,397               3,033                2,250
Net debt at the beginning of the period                      (4,882)             (7,132)              (7,132)
Net debt at the end of the period                            (1,485)             (4,099)              (4,882)


Note 7 Announcement of results

These results were announced to the London Stock Exchange on 28 February 2008.
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 company to review the financial information in the
half-yearly financial report for the 28 weeks ended 12 January 2008 which
comprises the group income statement, the group balance sheet, the group
statement of recognised income and expense, the group cash flow statement and
the related notes 1 to 7, set out on pages 6 to 8. We have read the other
information contained in the half yearly financial report which comprises the
Chairman's Statement only and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the financial
information.

This report is made solely to the company in accordance with guidance contained
in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information
performed by the Independent Auditor of the Entity'.  Our review work has been
undertaken so that we might state to the company those matters we are required
to state to them in a 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 company, for our review work, for this report, or for the
conclusion we have formed.

Directors' Responsibilities

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 polices and presentation applied to the interim figures 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 the basis of preparation.

Our Responsibility

Our responsibility is to express to the company a conclusion on the financial
information in the half-yearly financial report based on our review.

Scope of 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.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe
that the financial information in the half-yearly financial report for the 28
weeks ended 12 January 2008 is not prepared, in all material respects, in
accordance with the basis of accounting described in Note 1.

GRANT THORNTON UK LLP
AUDITOR
Bristol
27 February 2008




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