Investor Briefing
Full Year Results
September 2014
Chairman: Brendan Hynes
Chief Exec: Chris How
Group FD: Mark Warren
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Agenda
•
•
•
•
•
•
Where are we
What we do
Our market
Full Year Results
Progress vs Strategy
Outlook
3
Where are we ?
2012/13:
Sales decline and losses
July 2013:
New CEO, Chairman
2013/14:
Stabilisation and Re-Focus
Feb 2014:
New Strategy outlined
------------------------------------------------------------------------------------------------------------Sept 2014:
Return to profitability
Strategy starting to deliver
Near Term:
Return to historical performance norms
Mid Term:
Exceed historical performance norms
4
What do we do ?
• We formulate and produce quality products for
many of the world’s leading personal care and
beauty brands
5
WhereLocations
do we do it ?
Swallowfield Group
USA
UK Factories
France
New York
Sales Office
Bideford
Wellington
Île de France
Sales Office
China
Czech Republic
Factory
Factory (JV)
Tabor
Shanghai
6
Our Market
7
Our Customers
PRESTIGE 17%
GROCERY
RETAIL 11%
BEAUTY AND FASHION
RETAIL
34%
MASS BRANDS 38%
8
Sales by Product Type
Colour
Cosmetics
Hair Powders
2%
(non Hot Pour)
Pencils 7%
7%
Food /
Medical
3%
Aerosols
48%
Hot Pour
(Lips, Underarm)
11%
Gift &
Fragrance
10%
Tubes/Liquids
/Roll-Ons
12%
9
BusinessLocations
by Geography
5%
Invoiced
ROW
62%
Invoiced
to UK
33%
Invoiced
to EU
10
Who do we compete against ?
Large / Regional
• Colep
• McBride
• Fareva
• Intercos
• Mibelle
• LF Beauty
Smaller / Local
• Wear Valley
• Sanmex
• Barony
• Hampshire
• Laleham
• Broad Oak
Big enough to give real expertise, small enough to give
tailored service
11
What makes us competitive ?
Formulation
Innovation
Geographic
Flexibility
Our ability to fill and pack
products in UK, Central
Europe and Asia enable us
to tailor our offer to meet a
variety of customer needs
around, cost, quality,
complexity and lead-times
Expertise in
our ‘Drive’
Categories
We have an industry
reputation for quality,
expertise and cost
competitiveness in our drive
categories (eg. Aerosols, Hot
Pour Products). These
product categories also
have significant barriers to
entry in terms of skill and
assets required
Our talented chemists have
an industry –wide reputation
for developiong great new
product formulations
.especially in our Drive and
Build product categories
Packaging
Innovation
Our team works across our
customer base to design
innovative and effective
packaging solutions
72% of Sales in
own /shared IP
By developing formulas rather than
simply ‘receiving ‘them for mixing
and filling , our contract become
more secure and more value
added
Quality
Customer
Base
The vast majority of our
products are developed and
produced for strong brands
or more premium beauty
and fashion retailers.
Grocery private label
products account for less
than 10% of our contribution
margin
Regulatory
Expertise
Our team are able to advise
customers as to regulatory
requirements across a broad
range of product types and
across a variety of
geographies thereby
enhancing the potential of
these products in export
markets
12
Market ‘Tailwinds’
• Some recovery in consumer spending esp. prestige brands
• Input prices in calm waters
• Supply chain shift from price to quality (post horsemeat)
• Brand owners want to concentrate on brand building not
manufacturing
• ‘Re-shoring’
13
Market ‘Headwinds’
• Stronger pound vs Euro (some –ve impact but natural hedge)
• UK Supermarket environment
• Intense price and promotion activity for some mass brands
creates downward price pressure
• Need to manage net debt ahead of likely interest rate rises
14
Performance and Full Year
Results
15
FY2014 Summary
• A year of stabilisation and re-focus
• Return to profitability
• Reduction in net debt
• Strong growth in contribution margin
• New strategy now in place and starting to deliver
16
Financial Headlines
* Pre Exceptional items; 2013 restated for IAS19
Sales £’m
51
1
49
0.8
47
0.6
45
0.4
43
0.2
41
0
39
-0.2
37
-0.4
35
-0.6
FY13
6
FY14
Adjusted EPS* pence
FY13
5.6
2
5.4
0
5.2
-2
5
-4
4.8
-6
4.6
FY14
FY14
Net Debt £’m
5.8
4
FY13
Operating Profit* £’m
FY13
FY14
17
Full Year Results (53wks to 28
th
June 2014)
FY2014
50.03
14.04
28.1%
(13.27)
0.77
(0.37)
0.40
(0.26)
0.14
0.02
0.16
FY2013
restated
48.59
12.70
26.2%
(13.15)
(0.45)
(0.49)
(0.94)
(0.39)
(1.33)
0.42
(0.91)
Change
1.44
1.34
1.9%
(0.12)
1.22
0.12
1.34
0.13
1.47
(0.40)
1.07
3.9
(4.7)
8.6
EBITDA
2.06
0.80
1.26
Net Debt
5.08
5.67
(0.59)
£m
Revenue
Contribution margin
Contribution margin %
Total overheads
Operating Profit / (loss) *
Exceptional Items
Operating Profit / (loss)
Finance costs
Profit / (loss) before taxation
Taxation
Profit / (loss) after taxation
Earnings per share * pence
* Pre exceptional
18
Financial summary
* Pre Exceptional items; FY2012 & 2013 restated for IAS19
Sales £’m
70
60
50
40
1.5
H2
10
1
H2
H2
H2
30
20
Operating Profit* £’m
2
0.5
H1
0
H1
H1
H1
H1
H1
-0.5
0
-1
FY 2011
FY 2012
FY 2013
FY 2014
Adjusted EPS* pence
12
10
8
6
4
2
0
-2
-4
-6
FY 2011
FY 2012
FY 2013
FY 2014
Net Debt £’m
6
5
4
3
H1
H1
H1
2
1
H1
H1
H1
0
FY 2011
FY 2012
FY 2013
FY 2014
FY 2011
FY 2012
FY 2013
FY 2014
19
FY14 Operational Performance Drivers
Sales Growth from….
• Prestige Brands
• Mass Brands
• USA
Margin Growth from…
• Material Prices
Cash improvement from…
• Inventory Reduction (Materials)
• Supplier Terms
20
Debt / Cash
• Debt financed against high quality receivables book
• Capital discipline aims at keeping expenditure < depreciation
• Tight management (esp. inventory) creating positive
improvements
• New relationship with HSBC – very supportive
21
Strategy
22
Strategy:
Our business strategy has been developed on two
complimentary platforms
‘Creating for
Tomorrow’
• 4 strategic pillars that will help us
create a stronger business in the mid
and long term
‘Delivering for
Today’
• 10 operational focus areas that we
will drive in order to deliver our more
immediate (i.e. current fiscal)
performance eg. pricing, cost,
quality, service, cash etc
23
• 4 Strategic Pillars
‘Creating for
Tomorrow’
• 1. Product Category Prioritisation
• 2. New Product Development
• 3. Cost Base Optimisation
• 4. Emerging new Category
24
1. Product Category Prioritisation
Our Aim
‘Drive’
•
•
•
•
Prioritise development resource
Achieve ‘best in class’ reputation for
consumer, technical and production
expertise
Invest in production assets to drive cost and
capacity
Grow sales double digit
‘Build’
•
•
•
Build existing business as resources allow
Aim to win all profitable tenders with
existing customers and profitable new ones
Selective investment in production
capability
‘Service’
•
•
Reduce resource consumption
Maintain service levels to existing customers
(as outlined in March)
Product Categories
Personal Care Aerosols : eg. Shave Gels, Deos, Hair
Styling, Dry Shampoo, Sun/Self Tan, Skin)
Hot Pour Products:
Lip Balms, Lip Butters, APD, Lip /
Extruded Pencils, Hair Styling
Roll- Ons
53% of Sales
Cosmetic Pencils
Hair Powders
Fragrance,
Aerosol Special Formats
Body Scrubs / Butters
Premium Liquids & Tube Filling
Gifts
37% of Sales
Household Aerosols
Basic Liquids
Foundation, Mascara, Nails
Facial Skincare
10% of Sales
25
1. Product Category Prioritisation – Progress
• FY14 product mix contributing to 190bps
improvement in contribution margin
• FY15 plan reflects strategy
Product
Category
FY 15 Projected
Sales Growth
Drive
+15%
Build
+6%
Service
Decline
• Wins on drive categories bringing in new brand and
retail customers
26
2. New Product Development
(as outlined in March)
(Swallowfield Brands)
•
Leverage existing capabilities in formulations, packaging, design,
manufacturing, distribution, retailer relationships etc
•
Opportunity to create and manage our own brands
•
Genuine ‘first to market’ opportunities identified
•
Target ‘masstige’ retail channels (2015)
•
No ‘head to head’ with existing customer base
27
2. New Product Development -Progress
(Swallowfield Brands)
•
Opportunities segmented to ‘strategic’ and ‘tactical’ brands
•
Trade presentations made on first ‘tactical’ brand – target first shipments in H1
•
Strategic brand 1: consumer validation completed, range formulation and
packaging finalised. First trade presentation in October, target first shipments
mid 2015
•
Strategic brand 2: Celebrity partner confirmed, target first shipments Autumn
2015
•
FY14 a year of organisational and brand development investment
28
3. Cost Base Optimisation (as outlined in March)
• Optimise asset utilisation across production sites
• Based on cost, leadtimes, brand/ customer constraints
• Drive improved labour costs, space reduction, more efficient
indirect labour and utilities
• Key project now in progress with positive p&l impact from start
of FY15
29
3. Cost Base Optimisation - Progress
• Bideford / Tabor project completed Sept 2014
• Consolidate Bideford from 3 buildings to 2 plus relocate some
filling lines to Tabor
• £200k pa conversion cost and overhead savings delivered
and in FY15 budget
• One time cash costs (£0.1m) slightly lower than planned
• Scope was extended to gain further operational
improvements resulting in higher non-cash write downs
(£0.26m)
30
4. New Category (as outlined in March)
• Identify higher margin, growth product category that can
become a new ‘drive category
• Likely to be in or adjacent to current portfolio
31
4. New Category
• Two projects in process with Food / Beverage partners
• Further categories to be explored in FY15
32
Outlook
• Challenging but stable market place
• Continued improvement in profitability and net debt
• Timing of new business wins drives stronger growth in H2 FY15
• Reviewing options to accelerate strategy pillars through
strategic investments
• Clear ambition to outperform historical profit norms
33
Operational Performance Drivers
FY 14
Sales Growth from*….
Margin Growth from*…
•
•
•
•
Prestige Brands
Mass Brands
USA
Material Prices
FY15
•
•
•
•
•
Drive Categories
Mass Brands
Fashion Retail
Grocery Retail
USA
•
•
Material Prices
Product Mix  drive
categories
Price Realisation
Cost Base Optimisation
•
•
Cash improvement from…
•
•
Inventory Reduction
(Materials)
Supplier Terms
Overhead s
*
•
Inventory Reduction
(Finished Goods)
•
Investment in New
Products /Brands
Partially offset by loss of high margin ‘overflow’ volumes on a prestige brand
34
Appendices
Investor contacts
• Swallowfield plc
– Chris How
– Mark Warren
• N+1Singer
– Jonny Franklin-Adams/Jen Boorer
• Investor Focus International
– Alan Bulmer
• JBP Public Relations
– Chris Lawrance
Tel: 01823 652241
Tel: 01823 652241
Tel: 020 7496 3000
Tel: 07831 654744
Tel: 0117 9073400
36
Financial calendar
Announcement of FY2014 Results
18 September 2014
AGM
13 November 2014
Interims FY2015 Results
February 2015
Interim FY2015 Dividend
May 2015
Biographies
Brendan M Hynes MBA, FCMA
Non-Executive Chairman
Brendan joined the Company as Non Executive Chairman on 1st July 2013. He was CEO of Nichols plc from 2007 to
2013 having previously been Group Finance Director. He has plc main board experience across a range of other
sectors including TMT, retail, consumer goods, buildings and automotive. Previous roles have included Executive
Director at knowledge Management Software plc and Group Finance Director at William Baird plc a branded
clothing business. He is also currently a non- executive director of Churchill China plc, of private, online education
business “Webexaminer”; a member of the CBI North West regional council and a member of the Criticaleye Advisory
Board. Previously he was a Director of the Consumer, Retail and Distribution (CRD) practice of PricewaterhouseCoopers
advising Times 100 companies. Brendan chairs the Nomination Committee and is a member of the Audit and
Remuneration Committee.
Chris How
Chief Executive Officer
Chris joined the Company as Chief Executive on 15th July 2013. He has extensive international experience across the
personal care and household sector, having held senior General Management and Sales & Marketing positions with PZ
Cussons and Colgate Palmolive. Chris has previously been Managing Director PZ Cussons Australia; Regional Director PZ
Cussons Europe, Asia, South Pacific; Managing Director PZ Cussons UK; General Manager, Colgate Palmolive Benelux; as
well as holding European and UK Sales Director positions within Colgate Palmolive. Chris is a member of the Cosmetics,
Toiletries and Perfumery Association (CTPA) executive.
Mark Warren BSc (Hons) FCCA
Group Finance Director
Mark joined the Company in January 2010 as Group Finance Director. Mark has extensive financial, commercial and
operational management experience from across a range of customer oriented businesses operating in global markets.
Mark previously held senior roles in GEC plc, Whitbread plc, Interbrew SA, Alpharma Inc. and most recently Actavis, one
of the world’s leading generic pharmaceutical companies. Mark is a member of the South West Regional Council of the
CBI.
31