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Swallowfield PLC   -  SWL   

Half-year Report

Released 07:00 05-Mar-2019

RNS Number : 8135R
Swallowfield PLC
05 March 2019
 

Swallowfield plc

("Swallowfield" or the "Group")

Interim results

 

Swallowfield plc, a market leader in the development, formulation, and supply of personal care and beauty products, including its own portfolio of brands, announces its interim results for the 28 weeks ended 12 January 2019

 

Financial highlights

·      Group revenue increased by 3.7% to £41.4m. Brands sales grew 1.3% to £12.5m, against a strong comparative H1 FY18. Strong volume recovery from Manufacturing sales with growth of 8.8%.

·      Strong margin in Brands has continued despite a challenging external environment.

·      Manufacturing margin in H1 has been significantly impacted by the continuing high level of material cost inflation and a weaker product mix. This will be mitigated by secured price increases in H2 (as previously announced) and a more positive product mix.

·      Underlying operating profit reduced to £1.6m, with a strong recovery anticipated in H2, driven by the above actions and cost base optimisation in our Manufacturing business.

·      Significant reduction in net debt to £6.8m from year end £11.8m due to working capital normalisation.

·      Interim dividend increased by 7.5% to 2.15 pence.

 

 

 £m unless otherwise stated

2019

2018




 Reported results ¹



 Revenue

£41.4m

£39.9m

 Underlying operating profit ¹

£1.63m

£3.40m

 Adjusted basic earnings per share ¹

7.9p

13.7p

 Statutory results



 Revenue

£41.4m

£40.0m

 Operating profit before exceptional items

£1.43m

£2.99m

 Basic earnings per share

3.1p

13.1p

 Total dividend per share

            2.15p

2.0p

 Net debt

£6.8m

£7.0m

 

¹ Underlying operating profit is calculated before LTIP, amortisation of acquisition related intangibles, exceptional items and net borrowing costs.  Adjusted earnings per share is calculated using operating profit before exceptional items and amortisation of acquisition related intangibles.

 

Operational highlights

·      Strong innovation and new product development (NPD) momentum has continued in Brands with new launches and re-stages across 3 'Drive' brands and 3 'Build' brands.

·      Focus on international and e-commerce distribution expansion in Brands, supported by further investment in organisational capability.

·      Manufacturing delivering significant year on year growth, fuelled by volume performance of new contracts, with further new business in the prestige sector secured for the second half.

·      Actions taken to streamline Manufacturing portfolio and optimise cost base, with strategic review to be concluded in H2. 

 

Brendan Hynes, Non-executive Chairman, commented: "This first half year has been impacted by significant material cost inflation, as previously signalled in the Manufacturing segment of our business. Our Brands business continues to perform well against very strong comparatives. Actions have been taken to improve the margin performance of our Manufacturing business in the second half of the year and beyond. Swallowfield therefore remains well positioned to regain its positive growth momentum."

 

Tim Perman, Chief Executive, commented: "During my first eight months as CEO of Swallowfield plc, my focus has been working towards a consistently profitable Manufacturing business whilst continuing to invest in the development of our Brands business, which has continued to underpin the Group's profit margins. The prevailing market conditions require a clear strategic focus for the Group and with our strategy to accelerate Brands growth and to simplify Manufacturing we are confident in delivering further profitable growth."

 For further information please contact:


Swallowfield plc



Tim Perman

 Chief Executive Officer

 01823 662 241

Matthew Gazzard

 Group Finance Director

 01823 662 241

Shaun Dobson / Jen Boorer

 N+1 Singer

 0207 496 3000

Josh Royston / Sam Modlin

 Alma PR

 07780 901979

 

Note: This announcement contains information that was previously inside information for the purposes of Article 7 of regulation 596/2014 (MAR).

 

Business review

 

Group revenue growth in the period was 3.7% at £41.4m (2018: £39.9m). This was driven by 8.8% growth in our Manufacturing business and a modest level of growth in our Brands business.

 

At the start of the period the Group saw strong momentum in Brands with positive Christmas gifting sales. However, the pace of growth across the brand portfolio has since slowed due to lower UK consumer confidence and pressures within the retail environment. This has resulted in softening demand and retailer reductions in category space and promotional activity which has impacted our business. We have made good progress in growing International sales which underpins our belief that there is a significant opportunity for sustained international growth in Brands, a key strategic objective for the Group. Continued focus on supply chain efficiency and an improved sales mix has resulted in a continued strong gross margin, despite retail pressures.

 

Sales in our Manufacturing business recovered strongly during the period, reflecting robust volume demand from existing and new customers. The Manufacturing business continues to win new volumes and will see a good level of revenues for the balance of the year. The well signalled impact of continuing high input costs and lower margin mix resulted in lower gross margins for the period, particularly when compared to the prior year period which included the remaining contribution from a higher margin contract. As previously indicated, gross margins will significantly improve in H2 due to agreed price increases, and positive mix from new contract wins. In addition, the focus on cost base optimisation which will equate to annualised cost savings of £1.0m, will also contribute to a strong profit recovery in H2.

 

Overheads increased in line with sales in our Manufacturing business and increased slightly as a percentage of sales in our Brands business as a result of investment in organisational capability. However, it was predominantly the effect of the lower gross margins generated in our Manufacturing business that resulted in the Group making an underlying operating profit of £1.63m, down significantly versus the comparable period (2018: £3.40m). The high margin Brands division continues to represent the majority of operating profit.

 

The overall effective rate of Group taxation for the period was 19.0% (2018: 19.0%) of pre-tax profits. The current year tax charge reflects standard UK and the Czech Republic rates of taxation.

 

This resulted in adjusted earnings per share of 7.9p (2018: 13.7p).

 

Strategic Report

 

The prevailing market conditions require a clear strategic focus for the Group.    

 

Our strategy is based on five key value drivers: 

 

·      Portfolio of international, national and exclusive Brands

·      Distribution expansion of Brands business

·      Simplified, profitable Manufacturing business

·      Category know-how: NPD, technical, formulation & regulatory expertise

·      Performance culture: commercial acumen, speed, responsiveness, flexibility.

 

Our Brands business develops and markets a portfolio of personal care and beauty brands that are distributed across major retailers in the UK and internationally. The strategic priority for Brands is to accelerate sales and profit growth, organically and via earnings accretive acquisitions.

 

Our Manufacturing business formulates and manufactures personal care and beauty products for a customer base that includes many of the world's leading beauty brands. The strategic priority for Manufacturing is to streamline and simplify the business and actions are already underway in this regard.

 

The following summarises the progress made in each part of the business in this period.

 

Brands

·      New product development executed at pace

·      Positive Christmas gift sales

·      3 'Drive' brands and 3 'Build' brands restaged with new graphics

·      Ecommerce development with increased focus on e-tailers

·      Positive progress with the development of new international strategy

·      Investment in organisational capability to strengthen team

 

Manufacturing

·      3 significant new contracts fully embedded with increased volumes

·      New margin accretive wins in prestige sector

·      Price increases secured to mitigate cost price inflation (H2 impact); on track to deliver a more profitable performance from Manufacturing.

·      Utilising all 3 European sites to maximise increasing customer demand

·      Continuing to focus on R&D and innovation in areas of core capability particularly aerosols and hot pours

·      Actions to rationalise certain areas of the cost base taken in the period; strategic work underway with full review of structural footprint nearing completion

 

 

Net debt and cash flow

 

Net debt significantly decreased from a year-end position of £11.8m to £6.8m (2018: £7.0m). The key component to the reduction in debt has been the collection of year end debtors and the partial unwinding of material and component inventory which had strategically been bought ahead to secure supply.

 

Finance costs of £0.22m (2018: cost £0.18m) comprised interest expense of £0.15m (2018: £0.1m) plus a pension scheme notional finance charge of £0.07m (2018: charge £0.08m). Finance income is the receipt of £0.39m (2018: nil) dividend income from our investment holding in SCCTC.

 

Capital expenditure was £0.6m, in line with depreciation. We expect capital expenditure to remain ahead of depreciation for the full financial year as we continue to invest in key strategic development projects and in further line efficiency programs.

 

 

Defined benefit pension scheme

 

The defined benefit pension scheme underwent its last triennial valuation as of 5 April 2017. The deficit on a statutory funding basis was £2.6m and the Group has entered into a deficit recovery plan and schedule of contributions of £0.2m per annum.

 

For accounting purposes at 12 January 2019, the Group recognised under IAS19 'employee benefits', a deficit of £6.6m (June 2018: £4.5m). 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 slightly higher than they were at 30 June 2018. This has resulted in marginally higher discount rates being adopted for accounting purposes compared to last year, which has been coupled with a small increase in expectations of long term inflation, the combined effect leaving the fair value of the scheme liabilities increased, with a weak  investment return performance decreasing the value of the schemes assets. This has translated into an increase in liability under the IAS19 methodology.

 

 

 

Dividends

 

The Board is pleased to announce that it has approved an interim dividend of 2.15 pence per share             (2018: 2.0 pence). This dividend will be paid on 24 May 2019 to shareholders on the register on 3 May 2019.

 

The Directors' intention is to have a progressive 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.

 

 

Outlook

 

There is clearly a considerable level of uncertainty in the current business environment and we expect consumer demand to remain subdued. We are confident that the strategic focus of the Group will enable us to deliver the best outcome for all stakeholders.

 

We expect the current pace of innovation and new product development to continue in Brands, accompanied by an enhanced focus on distribution in both the UK and internationally, which will help to mitigate the slowdown in retail demand in this business.

 

In our Manufacturing business, we expect a significant second half recovery given the visibility of the order book and as we benefit from the positive impact of pricing initiatives, product mix and cost base optimisation already implemented.  We will also be finalising our strategic work, commenced in the period, to streamline the portfolio of activities in this segment of our business.

 

We are a market leader in our field with a strong and growing portfolio of owned brands, and whilst we are seeing the impact of the challenges faced in the wider environment, we are confident in a materially improved performance in the second half and believe results will be broadly in line with market expectations for the full year demonstrating profitable growth.

Group Statement of Comprehensive Income

 








28 weeks ended

28 weeks ended

12 months ended



12 Jan 2019

6 Jan 2018

30 June 2018



(unaudited)

(unaudited)

(audited)

Continuing operations

Notes

£'000

£'000

£'000






Revenue

2

41,441

39,962

73,945

Cost of sales


(34,239)

(32,012)

(60,253)

Gross profit


7,202

7,950

13,692

Commercial and administrative costs


(5,773)

(4,953)

(8,716)

Operating profit before exceptional items


1,429

2,997

4,976

Exceptional items

3

(869)

(25)

(279)

Operating profit


560

2,972

4,697

Finance income


386

-

191

Finance costs

4

(218)

(175)

(364)

Profit before taxation


728

2,797

4,524

Taxation


(138)

(532)

(891)

Profit after taxation


590

2,265

3,633

Other comprehensive (loss) / income for the period:





Re-measurement of defined benefit liability


 

(1,617)

 

407

 

1,403

Items that will be reclassified subsequently to profit or loss





Exchange differences on translating foreign operations


 

(50)

 

54

 

30

Gain on available for sale financial assets


 

529

 

158

 

156

Other comprehensive (loss) / income for the period


 

(1,138)

 

619

 

1,589

Total comprehensive (loss) / income for the period


 

(548)

 

2,884

 

5,222











Profit attributable to:





Equity shareholders


537

2,205

3,542

Non-controlling interests


53

60

91






Total comprehensive (loss) / income attributable to:





Equity shareholders


(601)

2,824

5,131

Non-controlling interests


53

60

91











Earnings per share





- basic

- diluted

5

5

3.1p

3.0p

13.1p

12.7p

20.9p

20.3p






Dividend





Paid in period (£'000)

Paid in period (pence per share)


720

4.2p

590

3.5p

933

5.5p

Proposed (£'000)

Proposed (pence per share)

 

6

368

2.15p

337

2.0p

720

4.2p

 

 

 

 



 

Group Statement of Changes in Equity

 

 

 

Share Capital

Share Premium

Revaluation

 of investment reserve

Exchange Reserve

Pension re-measurement reserve

 

Retained Earnings

Non-controlling interest

Total Equity

Group

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance as at June 2018

 

857

 

11,987

 

1,247

 

(112)

 

(2,491)

 

15,455

 

79

 

27,022

Dividends

-

-

-

-

-

(720)

-

(720)

Non-controlling interest

-

-

-

-

-

-

53

53

Share based payments

-

-

-

-

-

143

-

143

Transactions with owners

 

-

 

-

 

-

 

-

 

-

 

(577)

 

53

 

(524)

Profit for the period

-

-

-

-

-

537

-

537

Other comprehensive income:









Re-measurement of defined benefit liability

-

-

-

-

(1,617)

-

-

(1,617)

Exchange difference on translating foreign operations

-

-

-

(50)

-

-

-

(50)

Gain on available for sale financial assets

-

-

529

-

-

-

-

529

Total comprehensive income for the year

-

-

529

(50)

(1,617)

537

-

(601)

Balance as at 12 January 2019

 

857

 

11,987

 

1,776

 

(162)

 

(4,108)

 

15,415

 

132

 

25,897

 

 

Balance as at June 2017 as restated

 

844

 

11,744

 

1,091

 

(142)

 

(3,894)

 

12,749

 

18

 

22,410

Dividends

-

-

-

-

-

(590)

-

(590)

Non-controlling interest

-

-

-

-

-

-

60

60

Share based payments

-

-

-

-

-

47

-

47

Transactions with owners

-

        -

-

-

-

(543)

60

(483)

Profit for the period

-

-

-

-

-

2,205

-

2,205

Other comprehensive income:









Re-measurement of defined benefit liability

-

-

-

-

407

-

-

407

Exchange difference on translating foreign operations

-

-

-

54

-

-

-

54

Gain on available for sale financial assets

-

-

158

-

-

-

-

158

Total comprehensive income for the year

-

-

158

54

407

2,205

-

2,824

 

844

 

11,744

 

1,249

 

(88)

 

(3,487)

 

14,411

 

78

 

24,751

 

 

Balance as at June 2017 as restated

844

11,744

1,091

(142)

(3,894)

12,749

18

22,410

Dividends

-

-

-

-

-

(933)

(30)

(963)

Issue of new shares

    13

      243

-

-

-

-

-

256

Non-controlling interest

-

-

-

-

-

-

91

91

Share based payments

-

-

-

-

-

97

-

97

Transactions with owners

     13

       243

-

-

-

(863)

61

(519)

Profit for the year

-

-

-

-

-

3,542

-

3,542

Other comprehensive income:









Re-measurement of defined benefit liability

-

-

-

-

1,403

-

-

1,403

Exchange difference on translating foreign operations

-

-

-

30

-

-

-

30

Gain on available for sale financial assets

-

-

156

-

-

-

-

156

Total comprehensive income for the year

-

-

156

30

1,403

3,542

-

5,131

Balance as at June 2018

857

11,987

1,247

(112)

(2,491)

15,455

79

27,022

Group Statement of Financial Position

 



As at

As at

As at



12 Jan 2019

6 Jan 2018

30 June 2018



(unaudited)

(unaudited)

(audited)


Notes

£'000

£'000

£'000




restated


ASSETS





Non-current assets





Property, plant and equipment


11,257

11,491

11,438

Intangible assets


12,575

9,387

12,707

Deferred tax assets


1,138

666

803

Investments


1,920

1,442

1,391

Total non-current assets


26,890

22,986

26,339

Current assets





Inventories


15,150

13,537

13,825

Trade and other receivables


14,792

17,325

19,283

Cash and cash equivalents


1,747

425

934

Current tax receivable


508

70

109

Total current assets


32,197

31,357

34,151

Total assets


59,087

54,343

60,490






LIABILITIES





Current liabilities





Trade and other payables


21,409

21,521

23,709

Interest-bearing loans and borrowings


1,140

541

1,127

Current tax payable


994

552

503

Total current liabilities


23,543

22,614

25,339

Non-current liabilities





Interest-bearing loans and borrowings


2,623

1,242

3,230

Post-retirement benefit obligations

8

6,614

5,665

4,489

Deferred tax liabilities


410

71

410

Total non-current liabilities


9,647

6,978

8,129

Total liabilities


33,190

29,592

33,468

Net assets


25,897

24,751

27,022






EQUITY





Share capital


857

844

857

Share premium


11,987

11,744

11,987

Revaluation of investment reserve


1,777

1,249

1,247

Exchange reserve


(163)

(88)

(112)

Re-measurement of defined benefit liability


(4,108)

(3,487)

(2,491)

Retained earnings


15,415

14,411

15,455

Total equity


25,765

24,673

26,943

Non-controlling interest


132

78

79

Total equity


25,897

24,751

27,022

 

 



 

Group Cash Flow Statement

 



28 weeks ended

28 weeks ended

12 months ended



12 Jan 2019

6 Jan 2018

30 June 2018



(unaudited)

(unaudited)

(audited)



£'000

£'000

£'000

Cash flow from operating activities





Profit before taxation


728

2,797

4,524

Depreciation


667

651

1,283

Amortisation


154

122

583

Finance income


(386)

-

(191)

Finance cost


218

175

364

(Increase) in inventories


(1,325)

(2,107)

(2,395)

Decrease / (increase) in trade and other receivables


3,757

(540)

(2,648)

Increase  in trade payables


808

211

1,298

Increase / (decrease) in other payables


1,912

(521)

(354)

(Decrease) in share-based payments provision


(158)

(48)

(1,666)

Contributions to defined benefit plan


(175)

(54)

(108)

Cash generated from operations


6,200

686

                   690

Finance expense paid


(153)

(97)

(209)

Taxation paid


(202)

(321)

(762)

Net cash flow from operating activities


5,845

268

(281)

Cash flow from investing activities





Dividend income received


386

-

191

Purchase of property, plant and equipment


(639)

(1,067)

(1,631)

Purchase of intangibles


(23)

(18)

(3,850)

Purchase of subsidiary


-

(1,925)

(1,850)

Sale of property, plant and equipment


154

-

-

Net cash flow from investing activities


(122)

(3,010)

(7,140)

Cash flow from financing activities





(Repayment) / proceeds of invoice discounting facility


(3,596)

10

2,741

Proceeds from new loan


-

-

3,000

Issue of new share capital


-

-

256

Repayment of loans


(594)

(310)

(736)

Dividends paid


(720)

(590)

(963)

Net cash flow from financing activities


(4,910)

(890)

4,298

Net increase / (decrease) in cash and cash equivalents


813

(3,632)

(3,123)

Cash and cash equivalents at beginning of period


934

4,057

4,057

Cash and cash equivalents at end of period


1,747

425

934

 



 

 

Notes to the Accounts

 

Note 1 Basis of preparation

The Group has prepared its interim results for the 28-week period ended 12 January 2019 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 27 February 2019.

 

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 June 2019. 

 

The statutory accounts for the year ended June 2018, 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 is a market leader in the development, formulation, and supply of personal care and beauty products.

 

The reportable segments of the Group are aggregated as follows:

 

·      Brands - we leverage our skilled resources to develop and market a growing portfolio of Swallowfield owned and managed brands. These include organically developed Bagsy, MR. and Tru, plus the acquisitions of The Real Shaving Company (in 2015), the portfolio of brands included in The Brand Architekts acquisition (in 2016) and the latest acquisition 'Fish'.

 

·      Manufacturing - the development, formulation and production of quality products for many of the world's leading personal care and beauty brands.

 

·      Eliminations and Central Costs - other Group-wide activities and expenses, including defined benefit pension costs (closed defined benefit scheme), LTIP expenses, amortisation of acquisition-related intangibles, interest, taxation and eliminations of intersegment items, are presented within 'Eliminations and central costs'.

 

This is the basis on which the Group presents its operating results to the Board of Directors, which is considered to be the CODM for the purposes of IFRS 8.

 

 

 

 

 

 

 

 

 

 

 

 

 

a)   Principal measures of profit and loss - Income Statement segmental information:

 

 

 

28 weeks ended 12 January 2019


28 weeks ended 6 January 2018


Brands

Manufacturing

Eliminations and Central Costs

Total


Brands

Manufacturing

Eliminations and Central Costs

Total


£'000

£'000

£'000

£'000


£'000

£'000

£'000

£'000

UK revenue

10,055

19,915

-

29,970


10,111

17,734              

-

27,845








International revenue

2,360

9,111

-

11,471


2,186

9,931

-

12,117


 

12,415





 

12,297

              

                  

             

Revenue - External

29,026

-

41,441


27,665

-  

39,962



 

2,214

 

(2,250)



                        

 

1,037

 

(1,037)

                      

Revenue - Internal

36

-


-  

-  

Total revenue

12,451

31,240

(2,250)

41,441


12,297

28,702              

(1,037)

39,962             






Underlying operating profit/(loss)

 

2,580

 

230

 

(1,180)

 

1,630


 

2,575

 

1,918

 

(1,089)

 

3,404

Charge for share based payments

 

-

 

-

 

(67)

 

(67)


 

-

 

-

 

(307)

 

(307)

Amortisation of acquisition-related intangibles

 

 

-

 

 

-

 

 

(133)

 

 

(133)


 

 

-

 

 

-

 

 

(100)

 

 

(100)

Exceptional costs

-

-

(869)

(869)


-

-

(25)

(25)

Net borrowing income / (costs)

 

-

 

-

 

168

 

168


 

-

 

-

 

(175)

 

(175)

Profit/(loss) before taxation

2,580

230

(2,082)

728


 

2,575

 

1,918

 

(1,696)

 

2,797

Tax charge

-

-

(138)

(138)


(532)

(532)

Profit/(loss) for the period

 

2,580

 

230

 

(2,220)

 

590


 

2,575

 

1,918

 

(2,228)

 

2,265

 

 

The segmental Income Statement disclosures are measured in accordance with the Group's accounting policies as set out in note 1.

 

Inter segment revenue earned by Manufacturing from sales to Brands is determined on normal commercial trading terms as if Brands were any other third party customer.

 

All defined benefit pension costs and LTIP expenses are recognised for internal reporting to the CODM as part of Group-wide activities and are included within 'Eliminations and central costs' above. Other costs, such as Group insurance and auditors' remuneration which are incurred on a Group-wide basis are recharged by the head office to segments on a reasonable and consistent basis for all periods presented and are included within segment results above.

 

b) Other Income Statement segmental information

 

The following additional items are included in the measures of profit and loss reported to the CODM and are included within (a) above:                                      

 

28 weeks ended 12 January 2019

Brands

Manufacturing

Eliminations and Central Costs

Total

 

£'000

£'000

£'000

£'000

Depreciation

6

661

-

667

Amortisation

-

21

133

154

 

 

 

 

 

 

 

c) Principal measures of assets and liabilities                  

 

The Groups assets and liabilities are managed centrally by the CODM and consequently there is no reconciliation between the Group's assets per the statement of financial position and the segment assets.

 

d) Additional entity-wide disclosures

 

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

 

Geographical segments

28 weeks ended

28 weeks ended

12 months ended


12 Jan 2019

6 Jan 2018

30 June 2018

(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000

UK

29,970

27,845

51,284

Other European Union countries

7,956

9,156

16,891

Rest of the World

3,515

2,961

5,770


41,441

39,962

73,945

 

In the 28 weeks ended 12 January 2019, the Group had two customers that exceeded 10% of total revenues, being 13.3% and 10.3% respectively. In the 28 weeks ended 6 January 2018, the Group had two customers that exceeded 10% of total revenues, being 12.7% and 10.4% respectively.

 

Note 3 Exceptional items

 

There was an exceptional items charge for the period ended 12 January 2019 of £0.9m. A structured redundancy program was executed during the first half of the financial year in our manufacturing business with related costs of £0.6m. A provision of £0.3m has been made in respect to the GMP equalisation on the Group's DB Pension scheme.

 

The prior year exceptional items charge represents the applicable proportion of the consolidated loss for the Sterling Shave Club Ltd. This investment was written off in the full year to 30 June 2018.

 

 

 

Note 4 Finance costs

28 weeks ended

28 weeks ended

12 months ended


12 Jan 2019

6 Jan 2018

30 June 2018


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000





Finance costs




Bank loans and overdrafts

153

97

212

Notional pension scheme costs

65

78

152


218

175

364

 

 

 

 

Note 5 Earnings per share

28 weeks ended

28 weeks ended

12 months ended


12 Jan 2019

6 Jan 2018

30 June 2018


(unaudited)

(unaudited)

(audited)





Basic and diluted




Profit for the period (£'000)

537

2,205

3,542

Basic weighted average number of




ordinary shares in issue during the period

17,135,542

16,865,401

16,934,762

Diluted number of shares

17,659,183

17,413,330

17,454,505

Basic earnings per share

3.1p

13.1p

20.9p

Diluted earnings per share

3.0p

12.7p

20.3p

 

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 6 January 2018 between the basic net earnings per share and the diluted net earnings per share due to the LTIP share options awarded to June 2017, to give a total of 547,929 share options. The difference at 12 January 2019 includes the net LTIP share options awarded to June 2018, to give a total of 523,641 share options that could be issued.

Adjusted earnings per share

                                                                                                           

Profit for the period (£'000)

537

2,205

3,542

Add back: Exceptional items

869

25

279

Add back: Amortisation of Acquisition Related Intangibles

133

 

100

 

197

Notional tax charge on above items

                  (190)

                     (24)

(90)

Adjusted profit before exceptional items

1,349

2,306

3,928

Basic weighted average number of




ordinary shares in issue during the period

17,135,542

16,865,401

16,934,762

Diluted number of shares

17,659,183

17,413,330

17,454,505

Adjusted basic earnings per share

7.9p

13.7p

23.2p

Adjusted diluted earnings per share

7.6p

13.2p

22.2p

 

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 6 January 2018 between the basic net earnings per share and the diluted net earnings per share due to the LTIP share options awarded to June 2017, to give a total of 547,929 share options. The difference at 12 January 2019 includes the net LTIP share options awarded to June 2018, to give a total of 523,641 share options that could be issued.

 

 

Note 6 Dividends

 

The Directors have declared an interim dividend payment of 2.15p per share (2018: Interim: 2.0p; Final: 4.2p).

 

 

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

 


28 weeks ended

28 weeks ended

12 months ended


12 Jan 2019

6 Jan 2018

30 June 2018


(unaudited)

(unaudited)

(audited)


£000's

£000's

£000's





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

813

(3,632)

(3,123)

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

 

4,190

 

300

 

(5,005)

Change in net debt resulting from cash flows

5,003

(3,332)

(8,128)

Net debt at the beginning of the period

(11,769)

(3,641)

(3,641)

Net debt at the end of the period

(6,766)

(6,973)

(11,769)

 

 

Note 8 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 2017 and revealed a funding deficit of £2.6m.  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 4 September 2018, the Company is expected to pay contributions to the Scheme to make good any shortfalls in funding and has agreed to pay £0.2m per annum. Contributions will subsequently increase from FY24 to a sufficient level to eliminate the deficit over the established 10 year recovery period. The magnitude of such payments will be reviewed following the next scheme funding valuation as at April 2020.

 

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

12 January 2019

£000's

28 weeks ended

6 January 2018

£000's

12 months ended

30 June 2018

£000's

Company pension contributions

-

-

-

Deficit recovery payments

175

54

108

Scheme administrative expenses

92

51

171

Pension Protection Fund premium

108

222

222

Total

375

327

501

 

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

 

 

28 weeks ended

12 January 2019

£000's

28 weeks ended

6 January 2018

£000's

12 months ended

30 June 2018

£000's

In Operating profit:

 

 

 

Company pension contributions

-

-

-

Scheme administrative expenses

96

88

171

Pension Protection Fund premium

58

119

222

GMP Equalisation

288

-

-

 

442

207

393

In Finance costs:

 

 

 

Unwinding of notional discount factor

65

78     

155

Total

507

285

548

 

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 12 January 2019 are:

 

 

 

 

12 January 2019


 

 

£000's

Increase in net pension and other benefit obligations


 

(2,125)

Reduction in deferred tax


 

361

Reduction in equity

 

 

1,764

 

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 higher than they were at June 2018. This has resulted in marginally higher discount rates being adopted for accounting purposes compared to last year, which has been coupled with a small increase in expectations of long term inflation, the combined effect leaving the fair value of the scheme liabilities increased, with a weak investment return performance decreasing the value of the schemes assets. This has translated into an increase in liability under the IAS19 methodology.

 

 

The key assumptions used were:

 

 

 

As at 12 January 2019

As at 6 January 2018

As at 30 June 2018

Discount Rate

3.05%

2.60%

2.80%

Rate of inflation (RPI)

3.20%

3.10%

3.00%

Rate of inflation (CPI)

2.10%

2.10%

2.00%

 

 

 

 

 

 

 

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

 

 

As at 12 January 2019

As at 6 January 2018

As at 30 June 2018

 

£000's

£000's

£000's

Present value of funded obligations

(29,065)

(29,471)

(27,502)

Fair value of scheme assets

22,451

23,806

23,013

(Deficit)

(6,614)

(5,665)

(4,489)

 

 

Note 9 Announcement of results

 

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 and on the Company's website.

 

 


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