Swallowfield Interim Results

Swallowfield have now released their interim results, the income statement is below:

We can see that profits for the first half of this year are fairly flat – the profit after tax is £535K, only 16K up from last year.  Within this we see revenue is up £251K to £31.5M, with a fairly large increase in EU revenue, being offset by small reductions in UK and ROW revenue.  The cost of sales have increased somewhat to £447K to give a gross profit figure slightly down.

An increase in the income from the pension scheme is what pushes the profit slightly into the positive compared to last year.

The assets look like this:

The net tangibles assets have remained fairly steady, with a reduction of only £150K.  We see that although assets have reduced, so have liabilities.  Although there is a small increase in property, plant and equipments the main points to note here are a £819K reduction in inventories to leave £7.6M; a £1.3M reduction in trade and receivables to leave £12.4M and a £569K reduction in the cash levels to leave these rather low, at £617K.  Without having any other information, it would seem that trading levels may have reduced somewhat.

Similarly, we can see that trade and other payable have decreased by 2.5M to give a total of £15.9M. There are other small movements in liabilities but these are not very significant.

Next, the cash flow.

The cash flow result is a little disappointing.  We see a £2.1M swing to the negative to produce a cash outflow of £569K for the half year.  The two largest causes for this are the fact that inventories are decreasing by less than last year and the fact that payables are decreasing at a faster degree than receivables.  Other than this, there is a £115K increase in capex on property plant and equipment to leave this at £838K and a repayment of some debt – there seems to be a net £1.4M pay back of debt, which drags the cash flow down further.  It should be noted, then, that taking this into account, the outflow of cash is less than the repayment of debt, hence showing a decrease in net debt – these figures are better than they initially seemed, then.

There is a desire to grow export markets due to the week market in the UK and the group expects to start shipping new products in the second half, which should help revenues.  It is also noted that, although the prices of raw materials increased during the first half, these prices are showing signs of stabilizing.  Two new products Swallowfield seem particularly excited about are a wood clenched cosmetic pencil (not sure what this is but they have generated a few new business wins on the back of this) and a sun care aerosol product.

Overall then, to be honest, these results are not that exciting!  The profit remains steady with a slight increase in revenue, the net assets are fairly flat but both payables and receivables have fallen, the cash flow is slightly negative but with the repayment of some debt, the net debt has reduced slightly and the interim dividend remains the same (although the board are looking to strengthen the dividend cover in future).  In my opinion, these results are a bit of a side show to the board room wranglings that are still taking place.   After being forced to resign, it seems the board have had to reinstate McDowell at the request of Western Developments.   There is also a rumour that Gyllenhammar is looking to sell his stake (that would only be a good thing for SWL in my opinion)

I am going to Hold on to my shares here to see what happens with regards to the largest shareholders.