TIDMBAR
RNS Number : 0510O
Brand Architekts Group PLC
30 September 2019
Brand Architekts Group plc
("Brand Architekts" or the "Group")
Final results for the year ended 29 June 2019
Business Transformation to Brand only
and
Board Succession
Brand Architekts Group plc, formerly known as Swallowfield PLC,
announces its final results for the 52 weeks ended 29 June
2019.
Results
2019 2018
Brands MFG* Central Total Total
GBPm GBPm GBPm GBPm GBPm
Revenue 19.7 62.0 (4.4) 77.3 73.9
Underlying Operating
Profit 3.6 2.5 (1.7) 4.4 5.5
Adjusted PBT 5.1 5.0
Reported PBT 4.1 4.5
EPS - Adjusted 25.3 23.2
EPS - basic 20.7 20.9
Dividend per share -
paid and proposed 6.5p 6.2p
Net Debt 7.2 11.8
*Disposal on 23 Aug
2019 for 35.0
Brendan Hynes, Executive Chairman commented:
"On the 23 August 2019 the Group disposed of its Manufacturing
business for GBP35m to KDC/One Inc. This transformational deal is
another significant milestone for our strategy of accelerating the
growth of our Owned Brands business and simplifying the Group. We
will now focus all our time, resources and investment growing and
developing the higher margin part of our business.
The value achieved on disposal represents a very good return for
shareholders, it also strengthens our balance sheet, moving the
Group from a net debt position of GBP11.8m last financial year end,
to a significant positive cash position on completion of
GBP24.0m.
The new Group has been renamed the Brand Architekts Group Plc
and has an outstanding, stand-alone operational team with an
excellent track record and strong relationships with our retail
customers. The business is now well capitalised and we will use
some of the proceeds from the disposal to grow the business
organically and through selective acquisitions that will deliver
further profitability and scale.
We are now well positioned to continue to build a more
profitable and sustainable business, which will generate further
shareholder value."
Business review statement
Over the last four years we have developed, both organically and
through acquisition, a growing portfolio of brands that are owned
and managed by the Group and which we control from formulation
development through to distribution.
Following the disposal of the Manufacturing business, we now
have complete focus on the Owned Brands business as well as the
necessary financial resources to invest and grow the business
further.
Financial highlights
-- Group Revenues for the 52 weeks increased by 8% to GBP77.3m
(2018: GBP71.6m on a comparable 52 week basis).
-- Owned Brands represented 25% of revenues and 59% of underlying operational profits.
-- Owned Brand revenues decreased by 6.7%, impacted by lower
consumer confidence and by challenges faced by retailers in a
restricted marketplace.
-- Adjusted profit before taxation* increased by 1% to GBP5.1m (2018: GBP5.0m).
-- Underlying operating profit** decreased by 19% to GBP4.4m (2018: GBP5.5m).
-- Adjusted EPS increased by 9% year on year to 25.3 pence (2018: 23.2 pence).
-- Proposed final dividend of 4.35p per share (2018: 4.2p), in
addition to the interim dividend of 2.15p already paid, to give a
full year dividend of 6.5p (2018: 6.2p), an increase of 5%.
-- Net Debt as at 29 June 2019 decreased to GBP7.2m (2018: GBP11.8m).
*calculated as per page 6
**as per note 6
Operational highlights
-- Creation of a solely Owned Brands business following the
disposal of the Contract Manufacturing Business for GBP35 million,
a premium to the market capitalisation of the Group as at 15 July
2019. Net proceeds receivable by the Company are GBP33.75
million.
-- Ongoing business renamed Brand Architekts Group plc on 29
August 2019 to reflect sole focus on Owned Brands.
-- New product development ("NPD") continues with 80 new products launched in the year.
-- Net cash as at 31 August of GBP24m.
-- Net Assets as at 31 August of GBP38m.
Dividend
Given our strong cash position and confidence in the business it
is the Board's intention to propose a final dividend of 4.35 pence.
Together with the interim dividend already paid of 2.15 pence, this
represents a total dividend for the year of 6.5 pence, an
improvement of 5% over the prior year (2018: 6.2p).
It remains the Directors' intention to align future dividend
payments to the underlying earnings and cash flow of the
stand-alone business, taking into account the investment and
operational requirements of the business.
Board succession
Following the successful completion of the deal to dispose of
the Manufacturing business on 23 August, which represents a
fundamental change to the scale of business for the Group, the
Board has mutually agreed with Tim that he will step down from the
PLC Board and as Chief Executive and leave the company on 30
September 2019.
Brendan Hynes will take on an executive Chairman role until a
permanent replacement is appointed. The successful brand management
team remains in place and unchanged and will continue to be
supported until the end of the calendar year by Mathew Gazzard,
formerly Group Finance Director and Jane Fletcher, formerly Group
Sales and Marketing Director, under the transitional services
agreement. In addition, we will be putting in place an interim CFO
to work on the transition and to support the stand-alone Brands
business, until a full CFO is appointed.
The Board wishes to thank Tim for his contribution to the Group
during his time with us and wish him all the very best for the
future.
Outlook
We expect the economic and consumer uncertainty seen in the UK
in the second half year to June 2019 to continue into our new
financial year. The slow-down in momentum in our Owned Brands
business will be addressed by enabling management to focus on this
business following the disposal, innovative NPD and a stronger
focus on distribution in both the UK and internationally.
Given the strength of our balance sheet, we also remain alert to
further acquisition opportunities which offer the potential to
build scale and deliver incremental shareholder value
Following the successful disposal of the Manufacturing business,
we are confident that our new strategic focus will enable us to
deliver the best outcome for all our stakeholders.
For further information please contact:
Swallowfield plc
-------------------- ----------
Brendan Hynes Executive Chairman via Alma
-------------------- ----------
Shaun Dobson / George 0207 496
Tzimas N+1 Singer (Nomad) 3000
-------------------- ----------
Josh Royston / Hilary 0203 405
Buchanan / Sam Modlin Alma PR 0205
-------------------- ----------
Strategic Report
Fundamental transformation - focus on brands
Over the last four years our stated strategy has been to
develop, both organically and though acquisition, a portfolio of
brands that are owned and managed by the Group and which we control
from formulation development through to distribution.
As at 29 June 2019, Owned Brands represented 59% of group
underlying operation profits.
Following a strategic review process, the Board concluded that
the Manufacturing business would be better served as part of a
business with bigger scale and that GBP35 million sale proceeds
represented excellent value for shareholders. With the disposal of
the Manufacturing business in August 2019, we have accelerated our
strategic re-alignment and will now be 100% focused on the brands
that we own and control. The disposal has also strengthened the
balance sheet, eliminated group debt and leaves the group in a
significantly cash positive position.
The Board believe that we are now better positioned to drive
further value by focusing solely on our Owned Brands business with
its higher margins, lower capital investment requirements and
superior financial returns.
New name - stronger focus
The new group is now called Brand Architekts Group plc, which
more appropriately reflects the future focus of the group
Strategic priorities
The challenging market conditions, particularly in the UK
require us to have a clear strategic focus. The strategic
priorities for the Group are:
-- Build Scale: Accelerate sales and profit growth organically and via accretive acquisitions
-- New Product Development (NPD): Continue to execute at pace
-- International expansion: Develop new customers in new geographies
-- On-line expansion: Accelerate E-commerce and digital presence
-- Build organisation capability: Continue to invest in people and skills
Progress against our strategic priorities
-- New Product Development (NPD)
We are pleased that the pace of NPD continues with over 80 new
lines launched over the 12 month period across 11 brands.
We continue to evaluate and develop the brand portfolio to
ensure that we are focusing the appropriate level of resource and
support to drive maximum performance and growth. Within the
portfolio we have defined a number of 'Drive' brands where we are
specifically focused on extending distribution, new product
development, international growth and increasing support through
both instore and digital promotion.
-- International expansion
Our focus continues on developing sales in new international
markets and building relationships with appropriate distribution
and retail partners for our brand portfolio. Bi-lingual pack
formats have been developed for specific brands, allowing us to
maximise opportunity whilst carefully managing inventory levels.
The launch of the Dirty Works brand into France and Belgium has
been followed by new distribution in the Middle East. Our range of
therapeutic bath solutions, Dr Salts, has launched successfully in
South Africa; the Real Shaving Company has launched in New
Zealand.
-- On-line expansion
We continue to invest in the area of developing in-house
expertise to grow the reach of Owned Brands business within multi
channels to market. Strong relationships with key e-tailers have
been established enhancing the breadth of distribution and partners
for our brand portfolio.
-- Build organisation capability
We will continue to build and develop the stand alone capability
of our Owned Brands business by investing in further Marketing,
Digital, Technical and Supply chain skills.
Financial review
Group statutory revenue at GBP77.3m from continuing and
discontinued operations was up 5% against prior year. The Owned
Brands business endured a difficult year against strong
comparatives, declining by 6.7%, adversely impacted by the decline
in consumer confidence and retailer pressures. In the Group's
Manufacturing business, revenues increased by 13% against prior
year comparators, driven by increased volumes through the launch of
three new contract wins.
On a comparable 52-week basis, revenue increased by 8% to
GBP77.3m (2018: GBP71.6m). The weakness of Sterling against the US
dollar has increased sales revenue by GBP0.5m. Revenue increase on
a constant currency basis would have been 4.0%.
The adverse currency impact on revenue has been offset by an
equivalent favourable currency impact on cost of goods, reflecting
the Group's broadly natural hedge profile.
The pressure experienced on the margin accretive Owned Brands
revenues, whilst slightly offset by higher volume sales in the
Manufacturing business, has resulted in a reduction in the
underlying operating profit at GBP4.4m (2018: GBP5.5m).
Underlying operating profit is shown before charges for
share-based payments, with a charge made of GBP0.1m (2018:
GBP0.3m). Share options are put in place in order to incentivise
the Group's wider management team (including the Executive
Directors) and to ensure that their interests are aligned with
shareholders.
The net effect is that the Group made an adjusted operating
profit of GBP4.3m (2018: GBP5.2m). Adjusted profit before tax
increased to GBP5.1m (2018: GBP5.0m).
Total exceptional costs of GBP0.7m were incurred by the Group in
the current period. This is in part due to the GMP equalisation
charge on the Group's DB Pension Scheme of GBP0.3m netted off by a
GBP0.2m release of previously provided for contingent consideration
(included in continuing operations) and GBP0.7m of "one off" costs
relating to the Group's disposal of the Manufacturing business and
wider restructure (included in discontinued operations). In 2018
there was an exceptional charge of GBP0.28m mainly relating to the
writing down of the investment in Sterling Shave Club.
The overall effective rate of the new Group taxation for the
period was 11.1% (2018: 19%) of pre-tax profits. The effective tax
rate fell due to Group investment income.
This results in adjusted earnings per share of 25.3p (2018:
23.2p).
A reconciliation of underlying operating profit to statutory
profit before taxation is shown below:
2019 2019 2018 2018
2019 Continuing Discontinued 2018 Continuing Discontinued
Total operations operations Total operations operations
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------------------- ----------- ------------- --------------------- ----------- -------------
Underlying profit
from operations
(see note 6) 4,428 2,355 2,073 5,470 3,319 2,151
--------------------- --------------------- ----------- ------------- --------------------- ----------- -------------
Charge for
share-based
payments (115) (115) - (297) (297) -
--------------------- --------------------- ----------- ------------- --------------------- ----------- -------------
Adjusted operating
profit 4,313 2,240 2,073 5,173 3,022 2,151
Net borrowing costs 757 (144) 901 (173) (161) (12)
--------------------- --------------------- ----------- ------------- --------------------- ----------- -------------
Adjusted profit
before taxation 5,070 2,096 2,974 5,000 2,861 2,139
Amortisation of
acquisition-related
intangibles (260) (260) - (197) (197) -
Exceptional (costs) (717) (48) (669) (279) (279)
Profit before
taxation 4,093 1,788 2,305 4,524 2,385 2,139
--------------------- --------------------- ----------- ------------- --------------------- ----------- -------------
The Group's strategic investment shareholding in Shanghai Colour
Cosmetics Technology Company Limited (SCCTC) has reduced from 19%
to 13.3% within the period. However, the carrying value remains
unchanged during the period, based on a fair value of SCCTC's
commercially, externally assessed valuation of the business. The
initial cost of this investment was GBP0.14m and this is now valued
at GBP1.39m. This improved valuation reflects a strong trading
performance, supplying customers in Europe and the USA. Income
totalling GBP1.15m was received in the year (2018: GBP0.19m). This
investment was part of the Manufacturing business on disposal and
is classified as held for sale at the period end.
Net debt and cash flow
Net debt decreased significantly to GBP7.2m (2018: GBP11.8m). A
re-balancing of the Group's working capital from the prior year has
helped 'normalise' the net debt closing balance. The Group
maintains a broadly natural hedge position on the Euro and US
Dollar, and manages timing differences through a multi-currency
invoice finance facility. At the reporting date, the Group was
maintaining a hedged position by holding Euro and US Dollar cash
balances, whilst drawing on its GBP facility. Note 11 provides an
analysis of net debt.
The components of working capital highlight the unwinding of the
impact of the introduction of the three new major account wins in
the Manufacturing business which were being implemented at the end
of the prior year. This aspect combined with a more linear shape to
trade debtors have positively impacted the total working capital
invested at year end.
Financing costs of GBP0.4m (2018: GBP0.36m) comprised interest
expense of GBP0.26m (2018: GBP0.21m) plus a pension plan notional
finance charge of GBP0.13m (2018: charge GBP0.15m). Finance income
is the receipt of GBP1.15m (2018: GBP0.19m) income from our
investment holding in SCCTC.
Capital expenditure was GBP1.1m which was behind the level of
depreciation. We have continued to make a number of investments to
improve line efficiencies and support incremental new customer
contracts.
Defined benefit pension plan
The defined benefit pension plan underwent its last triennial
valuation on 5 April 2017. The deficit on a statutory funding basis
was GBP2.6m and the Group entered into a revised deficit recovery
plan and schedule of contributions in July 2018. Under this there
is a commitment to make deficit reduction payments of GBP318k per
annum (previously GBP108k per annum) for seven years and GBP210k
for a further three years, and to pay certain administration costs
and the PPF levy for the life of the plan. This commitment will be
re-assessed once the results of the next triennial valuation at 5
April 2020 are available.
Accounting Standards require the discount rate used for
valuations under IAS19 'employee benefits' 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
plan'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 lower than they were at 30 June 2018. This
has resulted in lower discount rates being adopted for accounting
purposes compared to last year. In addition, inflation rates are
higher than last year. The combination of these two factors have
materially increased the fair value of the plan liabilities as
measured under IAS 19, which combined with the anticipated
investment return performance, has translated into an increased
liability under the IAS19 methodology. For accounting purposes at
29 June 2019, the Group recognised under IAS19 'employee benefits',
a net liability of GBP9.4m (2018: GBP4.5m).
Dividends
The Board is pleased to announce that it will be proposing a
final dividend of 4.35 pence. Together with the interim dividend
already paid of 2.15 pence this represents a total dividend for the
year of 6.5 pence, an improvement of 5% over the prior year (2018:
6.2p). If approved, the final dividend will be paid on 6 December
2019 to shareholders on the register on 15 November 2019. The
shares will be marked as ex-dividend on 14 November 2019.
Group Statement of Comprehensive Income
For the 52 weeks ended 29 June 2019 and 53 weeks ended 30 June
2018
2019 2018*
Notes GBP'000 GBP'000
Revenue 6 19,676 21,085
Cost of sales (12,680) (12,705)
--------------------------------------------------------------------- ------ --------- ---------
Gross profit 6,996 8,380
Commercial and administrative costs (5,016) (5,556)
--------------------------------------------------------------------- ------ --------- ---------
Operating profit before exceptional items 1,980 2,824
Exceptional items 7 (48) (279)
--------------------------------------------------------------------- ------ --------- ---------
Operating profit 1,932 2,545
--------------------------------------------------------------------- ------ --------- ---------
Finance income - -
Finance costs (144) (160)
--------------------------------------------------------------------- ------ --------- ---------
Profit before taxation 8 1,788 2,385
--------------------------------------------------------------------- ------ --------- ---------
Taxation 9 (198) (453)
--------------------------------------------------------------------- ------ --------- ---------
Profit for the year 1,590 1,932
--------------------------------------------------------------------- ------ --------- ---------
Profit on Discontinued Operations after taxation 12 2,050 1,701
--------------------------------------------------------------------- ------ --------- ---------
Profit for the year 3,640 3,633
===================================================================== ====== ========= =========
Other comprehensive income/(loss):
Items that will not be reclassified subsequently to profit or loss:
Re-measurement of defined benefit liability (4,011) 1,403
---------------------------------------------------------------------
Items that will be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations (35) 30
(Loss)/gain on financial assets held at fair value (6) 156
Other comprehensive (loss)/income for the year (4,052) 1,589
--------------------------------------------------------------------- ------ --------- ---------
Total comprehensive (loss)/income for the year (412) 5,222
===================================================================== ====== ========= =========
Profit attributable to:
--------------------------------------------------------------------- ------ --------- ---------
Equity shareholders 3,539 3,542
--------------------------------------------------------------------- ------ --------- ---------
Non-controlling interests 101 91
Total comprehensive income attributable to:
--------------------------------------------------------------------- ------ --------- ---------
Equity shareholders (513) 5,131
--------------------------------------------------------------------- ------ --------- ---------
Non-controlling interests 101 91
Earnings per share
- basic 10 20.7p 20.9p
- diluted 10 20.0p 20.3p
Dividends
Paid in year (GBP'000) 1,088 933
Paid in year (pence per share) 6.35p 5.5p
Proposed (GBP'000) 745 720
Proposed (pence per share) 4.35p 4.2p
*2018 comparatives have been restated for discontinued
operations - see note 6 for further information.
Group Statement of Financial Position
For the 52 weeks ended 29 June 2019, and 53 weeks ended 30 June
2018
2019 2018
Restated - Note 13
Notes GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 21 11,438
Intangible assets 12,817 13,852
Deferred tax assets 1,714 803
Investments - 1,391
---------------------------------------------- ------ -------- -------------------
Total non-current assets 14,552 27,484
Current assets
Inventories 5,211 13,825
Trade and other receivables 3,475 19,283
Assets held for resale 12 22,700 -
Cash and cash equivalents 11 381 934
Current tax receivable 285 109
---------------------------------------------- ------ -------- -------------------
Total current assets 32,052 34,151
---------------------------------------------- ------ -------- -------------------
Total assets 46,604 61,635
---------------------------------------------- ------ -------- -------------------
LIABILITIES
Current liabilities
Trade and other payables 6,628 23,709
Interest-bearing loans and borrowings 1,139 1,127
Current tax payable 527 503
---------------------------------------------- ------ -------- -------------------
Total current liabilities 8,294 25,339
---------------------------------------------- ------ -------- -------------------
Non-current liabilities
Interest-bearing loans and borrowings 2,091 3,230
Post-retirement benefit obligations 9,417 4,489
Deferred tax liabilities 1,061 1,555
Total non-current liabilities 12,569 9,274
---------------------------------------------- ------ -------- -------------------
Total liabilities 20,863 34,613
---------------------------------------------- ------ -------- -------------------
Net assets 25,741 27,022
---------------------------------------------- ------ -------- -------------------
EQUITY
Share capital 857 857
Share premium 11,987 11,987
Revaluation of investment reserve 1,241 1,247
Exchange reserve (147) (112)
Pension re-measurement reserve (6,502) (2,491)
Retained earnings 18,160 15,455
---------------------------------------------- ------ -------- -------------------
Equity attributable to holders of the parent 25,596 26,943
---------------------------------------------- ------ -------- -------------------
Non-controlling interest 145 79
---------------------------------------------- ------ -------- -------------------
Total equity 25,741 27,022
---------------------------------------------- ------ -------- -------------------
Group Statement of Changes in Equity
For the 52 weeks ended 29 June 2019 and 53 weeks ended 30 June
2018
Share Share Revaluation Exchange Pension Retained Non-controlling Total
Capital Premium of Reserve re-measurement Earnings interest Equity
investment reserve
reserve
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- -------- ------------ --------- --------------- --------- ---------------- --------
Balance as at
June 2018 857 11,987 1,247 (112) (2,491) 15,455 79 27,022
----------------- -------- -------- ------------ --------- --------------- --------- ---------------- --------
Dividends - - - - - (1,088) (35) (1,123)
Non-controlling
interest - - - - - - 101 101
Share based
payments - - - - - 254 - 254
Transactions
with owners - - - - - (834) 66 (768)
----------------- -------- -------- ------------ --------- --------------- --------- ---------------- --------
Profit for the
year - - - - - 3,539 - 3,539
Other
comprehensive
income:
Re-measurement
of defined
benefit
liability - - - - (4,011) - - (4,011)
Exchange
difference on
translating
foreign
operations - - - (35) - - - (35)
Fair value
movements for
financial
assets - - (6) - - - - (6)
Total
comprehensive
income for the
year - - (6) (35) (4,011) 3,539 - (513)
----------------- -------- -------- ------------ --------- --------------- --------- ---------------- --------
Balance as at
June 2019 857 11,987 1,241 (147) (6,502) 18,160 145 25,741
----------------- -------- -------- ------------ --------- --------------- --------- ---------------- --------
Share Share Revaluation Exchange Pension Retained Non-controlling Total
Capital Premium of Reserve re-measurement Earnings interest Equity
investment reserve
reserve
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- -------- ------------ --------- --------------- --------- ---------------- --------
Balance as at
June 2017 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 - - - (836) 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
Fair value
movements for
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
----------------- -------- -------- ------------ --------- --------------- --------- ---------------- --------
Cash Flow Statement
For the 52 weeks ended 29 June 2019 and 53 weeks ended 30 June
2018
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Profit before taxation 4,093 4,524 461 699
Depreciation 1,262 1,283 1,064 1,058
Amortisation 944 583 768 418
Finance income (1,146) (191) (1,182) (822)
Finance cost 389 364 382 363
(Increase) in inventories (2,129) (2,395) (877) (1,279)
Decrease /(increase) in trade and other receivables 1,252 (2,648) (1,693) 71
Increase in trade and other payables 3,059 944 7,712 2,563
(Decrease) in share-based payments provision (221) (1,666) (221) (1,666)
Contributions to defined benefit plans (282) (108) (282) (108)
Cash generated from operations 7,221 690 6,132 1,297
----------------------------------------------------- -------- -------- -------- --------
Finance expense paid (263) (209) (256) (208)
Taxation paid (593) (762) (197) (247)
----------------------------------------------------- -------- -------- -------- --------
Net cash flow from operating activities 6,365 (281) 5,679 842
----------------------------------------------------- -------- -------- -------- --------
Cash flow from investing activities
Dividend income received 1,146 191 1,182 822
Purchase of property, plant and equipment (1,088) (1,631) (900) (1,486)
Purchase of intangible assets (699) (3,850) (699) (3,850)
Purchase of subsidiary - (1,850) - (1,850)
Net cash flow from investing activities (641) (7,140) (417) (6,364)
----------------------------------------------------- -------- -------- -------- --------
Cash flow from financing activities
Movements in invoice discounting facility (4,027) 2,741 (3,637) 1,701
Proceeds from new loan - 3,000 - 3,000
Issue of new share capital - 256 - 256
Repayment of loans (1,127) (736) (1,127) (736)
Finance income received - - - -
Dividends paid (1,123) (963) (1,088) (933)
----------------------------------------------------- -------- -------- -------- --------
Net cash flow from financing activities (6,277) 4,298 (5,852) 3,288
----------------------------------------------------- -------- -------- -------- --------
Net (decrease) in cash and cash equivalents (553) (3,123) (590) (2,234)
Cash and cash equivalents at beginning of year 934 4,057 737 2,971
----------------------------------------------------- -------- -------- -------- --------
Cash and cash equivalents at end of year 381 934 147 737
----------------------------------------------------- -------- -------- -------- --------
1. Statutory Accounts
The financial information does not constitute statutory accounts
as defined in section 435 of the Companies Act 2006, but has been
extracted from the statutory accounts for the year ended June 2019
on which an unqualified audit report has been issued and which will
be delivered to the Registrar following their adoption at the
Annual General Meeting.
The statutory accounts for the financial year ended June 2018
have been delivered to the Registrar of Companies with an
unqualified audit report and did not contain a statement under
section 498 of the Companies Act 2006.
Copies of the 2019 Annual Report and Accounts will be posted to
shareholders with the notice of the Annual General Meeting. Further
copies may be obtained by contacting the Company Secretary at Brand
Architekts Group plc, 8 Waldegrave Rd, Teddington, TW11 8GT. An
electronic copy will be available on the Group's web site
(www.brandarchitektsplc.com).
2. Basis of preparation
The Group has prepared its consolidated financial statements in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union and also in accordance with IFRS
issued by the International Accounting Standards Board. These
financial statements have been prepared under the historical cost
convention, modified to include the revaluation of certain
non-current assets and financial instruments.
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 signing of these accounts. On this basis,
they consider it appropriate to adopt the going concern basis in
the preparation of these accounts.
The consolidated financial statements are presented in sterling
and all values are rounded to the nearest thousand (GBP'000) except
where otherwise indicated.
3. Basis of consolidation
The Group financial statements consolidate the financial
statements of the Company and its subsidiary undertakings. The
results and net assets of undertakings acquired or disposed of
during a financial year are included in the Group Statement of
Comprehensive Income and Group Statement of Financial Position from
the effective date of acquisition or to the effective date of
disposal. Subsidiary undertakings have been consolidated using the
purchase method of accounting. In accordance with the exemptions
given by section 408 of the Companies Act 2006, the Company has not
presented its own Statement of Comprehensive Income.
4. Accounting Policies
The principal accounting policies which apply in preparing the
financial statements for the year ended 29 June 2019 are consistent
with those disclosed in the Group's audited accounts for the year
ended 30 June 2018, other than adopting IFRS9 and IFRS15 for the
first time. The transition impact of both of these news standards
has not been material to the Group.
5. Discontinued Activities
As a result of the agreed disposal of the manufacturing business
(completed post year-end), these operations have been disclosed as
discontinued and the related assets classified as held for sale at
the period end. See note 12 for further details.
6. 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 Brand Architekts Group 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 Fish brand acquired during this
financial year.
-- Manufacturing - the contracted development, formulation and
production of quality products for many of the world's leading
personal care and beauty Brands. This segment has been disposed of
post period end as described in Note 12.
-- Eliminations and Central Costs. Other Group-wide activities
and expenses, including defined benefit pension costs, share-based
payment 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 Directors, which is considered to be the Chief
Operating Decision Maker (CODM) for the purposes of IFRS 8.
Comparative full year numbers have been presented on the same
basis.
a) Principal measures of profit and loss - Income Statement
segmental information for 52 weeks ending 29 June 2019 and 53 weeks
ending 30 June 2018:
52 weeks ended 30 Eliminations and 2018
June 2019 Brands Manufacturing Central Costs Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
UK revenue 16,381 35,763 - 52,144 51,284
International
revenue 3,220 21,974 - 25,194 22,661
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Revenue - External 19,601 57,737 - 77,338 73,945
Revenue - Internal 75 4,235 (4,310) - -
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Total revenue 19,676 61,972 (4,310) 77,338 73,945
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Discontinued
Operation - (61,972) 4,310 (57,662) (52,860)
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Total Revenue 19,676 - - 19,676 21,085
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Underlying profit
from operations* 3,619 2,515 (1,706) 4,428 5,470
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Charge for
share-based
payments - - (115) (115) (297)
Amortisation of
acquisition-related
intangibles - - (260) (260) (197)
Exceptional costs - (669) (48) (717) (279)
Net finance income /
(costs) - 901 (144) 757 (173)
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Tax charge on
discontinued
operations - (255) - (255) (438)
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Segment Profit
included in
Discontinued
Operations - (2,492) 442 (2,050) (1,701)
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Profit before
taxation 3,619 - (1,831) 1,788 2,385
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Tax charge (198) (198) (453)
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Profit for the
period from
continuing
activities 3,619 - (2,029) 1,590 1,932
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
*The underlying profit net of eliminations and central costs are
as follows:
Continuing Discontinued Total
operations operations
- Brands - Manufacturing
GBP'000 GBP'000 GBP'000
Underlying profit from operations
- operating segments 3,619 2,515 6,134
Eliminations and central costs (1,264) (442) (1,706)
------------ ----------------- --------
Underlying profit from operations 2,355 2,073 4,428
53 weeks ended 30 Eliminations and 2017
June 2018 Brands Manufacturing Central Costs Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
UK revenue 17,086 34,167 - 51,253 44,732
International
revenue 3,968 18,724 - 22,692 29,582
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Revenue - External 21,054 52,891 - 73,945 74,314
Revenue - Internal 31 1,940 (1,971) - -
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Total revenue 21,085 54,831 (1,971) 73,945 74,314
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Discontinued
Operation - (54,831) 1,971 52,860 -
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Total Revenue 21,085 - - 21,085 74,314
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Underlying profit
from operations 4,806 2,539 (1,875) 5,470 5,617
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Charge for
share-based
payments - - (297) (297) (1,755)
Amortisation of
acquisition-related
intangibles - - (197) (197) (187)
Exceptional costs - - (279) (279) (343)
Net borrowing costs - (12) (161) (173) (217)
Tax charge on
discontinued
operations - (438) - - (438)
Segment Profit
included in
Discontinued
Operations - (2,089) 388 (1,701) -
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Profit before
taxation 4,806 - (2,421) 2,385 3,115
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Tax charge (453) (453) (543)
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
Profit for the
period from
continuing
activities 4,806 - (2,874) 1,932 2,572
--------------------- ------------------------- ----------------------- -------------------- ------------------------ ------------------------
*The underlying profit net of eliminations and central costs are
as follows:
Continuing Discontinued Total
operations operations
- Brands - Manufacturing
GBP'000 GBP'000 GBP'000
Underlying profit from operations
- operating segments 4,806 2,539 6,134
Eliminations and central costs (1,487) (388) (1,875)
------------ ----------------- --------
Underlying profit from operations 3,319 2,151 5,470
Inter segment revenue earned by Manufacturing from sales to
Brands is determined on commercial trading terms as if Brands were
a third-party customer.
All defined benefit pension costs and share-based payment
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
underlying profit and loss reported to the CODM and are included
within (a) above:
52 weeks ended 29 June 2019 Eliminations and Central
Brands Manufacturing Costs Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------------- ---------------------- ---------------------------- -----------------
Depreciation 13 1,249 - 1,262
Amortisation - 700 260 960
53 weeks ended 30 June 2018 Eliminations and Central
Brands Manufacturing Costs Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------------- ---------------------- ---------------------------- -----------------
Depreciation 13 1,270 - 1,283
Amortisation - 386 197 583
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 - Continuing
and discontinued operations 52 weeks ended 53 weeks ended
29 June 2019 30 June 2018
GBP'000 GBP'000
--------------- ---------------
UK 52,144 51,284
Other European Union countries 17,482 16,891
Rest of the World 7,712 5,770
--------------- ---------------
77,338 73,945
--------------- ---------------
Geographical segments - Continuing
operations 52 weeks ended 53 weeks ended
29 June 2019 30 June 2018
GBP'000 GBP'000
--------------- ---------------
UK 16,456 17,021
Other European Union countries 609 520
Rest of the World 2,611 3,544
--------------- ---------------
19,676 21,085
--------------- ---------------
In the 52 weeks ended 29 June 2019, the Group had two customers
that exceeded 10% of total revenues, being 12% and 11%
respectively. In the 53 weeks ended 30 June 2018, the Group had two
customers that exceeded 10% of total revenues, this being 13% and
12% respectively.
7. Exceptional Items
The exceptional item of GBP0.048m in the current period is due
to the GMP equalisation charge on the Group's DB Pension Plan of
GBP0.288m offset by the release (credit) of unrequired earn-out
that arose in a prior-year of GBP0.240m.
8. Profit before taxation
2019 2018
GBP'000 GBP'000
(a) This is stated after charging/ (crediting)
Depreciation of property, plant and equipment of purchased assets 1,262 1,283
Amortisation of intangible assets 944 583
Research and development 1,039 972
Foreign exchange gains (37) (9)
Operating leases:
Hire of plant and machinery 125 80
Rent of buildings 782 679
(b) Auditors' remuneration
Audit services:
Audit of the Company financial statements - PKF Francis Clark 35 -
Audit of the Company financial statements - Grant Thornton UK LLP - 42
Audit of subsidiary undertakings - PKF Francis Clark 12 -
Audit of subsidiary undertakings - Grant Thornton UK LLP - 20
Audit related services:
Interim review - Grant Thornton UK LLP - 9
Taxation compliance services:
Corporation tax compliance - Grant Thornton UK LLP - 21
Other non-audit services:
Acquisition advice - Grant Thornton UK LLP - 19
(c) Earnings before interest, taxation, depreciation and amortisation ('EBITDA')*
Operating profit before exceptional items 4,053 4,976
Depreciation of property, plant and equipment 1,262 1,283
Amortisation of intangible assets 701 386
Amortisation of acquisition-related intangibles 260 197
EBITDA before exceptional operating items 6,276 6,842
Exceptional operating items (717) (279)
-------- --------
EBITDA after exceptional operating items 5,559 6,563
-------- --------
*Operating profit before exceptional items were derived from
continuing activities of GBP1,980,000 (2018: GBP2,824,000) and from
discontinued activities of GBP2,073,000 (2018: GBP2,150,000)
9. Taxation
2019 2018
(a) Analysis of tax charge in the year GBP'000 GBP'000
UK corporation tax:
- on profit for the year 528 901
- adjustment in respect of previous years (171) -
-foreign tax 77 (11)
Total current tax charge 434 890
-------- --------
Deferred tax:
-current year (credit) (28) (60)
-prior year charge / (credit) 47 61
Total deferred tax 19 1
-------- --------
Tax charge 453 891
-------- --------
Total tax charge of GBP453,000 (2018: GBP891,000) comprised tax
on ongoing operations of GBP198,000 (2018: GBP453,000) plus tax on
discontinued operations of GBP255,000 (2018: GBP438,000).
(b) Factors affecting total tax charge for the year
The tax assessed on the profit before taxation for the year is
lower (2018: higher) than the standard rate of UK corporation tax
of 19.00% (2018: 19.00%). The differences are reconciled below:
2019 2018
GBP'000 GBP'000
Profit before taxation 4,093 4,524
-------- --------
Tax at the applicable rate of 19.00% (2018: 19.00%) 778 860
Effect of:
Adjustment in respect of previous years (124) (60)
Adjustment to deferred tax (7) -
Differences between UK and foreign tax rates 10 -
Permanent differences and other (168) 91
R&D tax credit (36) -
Actual tax charge 453 891
-------- --------
10. Earnings per share
2019 2018
Basic and Diluted
Profit for the year attributable to equity shareholders(GBP'000) 3,539 3,542
Profit for the year attributable to equity shareholder from continuing
operations(GBP'000) 1,489 1,841
Basic weighted average number of ordinary shares in issue during the year 17,135,542 16,934,762
------------- -------------
Diluted number of shares 17,659,183 17,454,505
------------- -------------
Basic earnings per share 20.7p 20.9p
------------- -------------
Diluted earnings per share 20.0p 20.3p
------------- -------------
Basic earnings per share continuing operations 8.7p 10.8p
------------- -------------
Diluted earnings per share continuing operations 8.4p 10.5p
------------- -------------
Basic earnings per share has been calculated by dividing the
profit for each financial year by the weighted average number of
ordinary shares in issue at 29 June 2019 and 30 June 2018
respectively. There is a difference at June 2019 between the basic
net earnings per share and the diluted net earnings per share of
0.7p due to the 523,641 share options awarded.
2019 2018
Adjusted earnings per share
Adjusted Profit for the year after tax (GBP'000) 4,330 3,928
Basic weighted average number of ordinary shares in issue during the year 17,135,542 16,934,762
Diluted number of shares 17,659,183 17,454,505
----------- -------------
Basic earnings per share 25.3p 23.2p
----------- -------------
Diluted earnings per share 24.5p 22.5p
----------- -------------
Adjusted profit for the current year from continuing and
discontinued operations of GBP4.33m is shown after adding back
Exceptional Items of GBP0.72m and Amortisation of Acquisition
Related Intangibles of GBP0.26m, and then deducting a notional tax
charge of GBP0.19m. Adjusted earnings per share has been calculated
by dividing the adjusted profit of GBP4.33m by the weighted average
number of ordinary shares in issue at 29 June 2019. The 2018
comparative figures have also been adjusted to a comparable
basis.
11. Note to Cash Flow Statement
(a) Reconciliation of cash and cash equivalents to movement in net debt:
2019 2018
GBP'000 GBP'000
(Decrease) in cash and cash equivalents (553) (3,123)
Net cash flow from changes in borrowings 5,154 (5,005)
--------------- -------------
Change in net debt 4,601 (8,128)
Opening net debt (11,769) (3,641)
--------------- -------------
Closing net debt (7,168) (11,769)
--------------- -------------
(b) Analysis of net debt: Closing 2018 Cash Flow Non-Cash Movement Closing 2019
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in hand 934 (561) 8 381
CID facility (8,346) 4,027 - (4,319)
Borrowings due within one year (1,127) (12) - (1,139)
Borrowings due after one year (3,230) 1,139 - (2,091)
--------------- ----------- ------------------ -------------
(11,769) 4,593 8 (7,168)
--------------- ----------- ------------------ -------------
12. Non-adjusting post period end events - discontinued
operations
In July 2019, the Group sold its 100% interest in Curzon
Supplies Ltd for consideration of GBP35m (completing the disposal
of the Manufacturing segment) which is the only operation presented
as discontinued operation in 2019. Curzon Supplies Ltd was
incorporated in March 2019.
Although the transaction completed after the period end it was
more likely than not to go through at the balance sheet date and so
results have been disclosed here. The financial results of this
business has been treated as discontinued operations in both the
current and prior year financial statements in line with IFRS5. The
remaining activities within the Group are referred to as continuing
operations.
As a result the following assets and liabilities have been
classified as held for sale:
2019
Net assets held for sale GBP'000
Property, plant and equipment 11,190
Intangible fixed assets 779
Equity instruments held at fair value 1,385
Inventories 10,743
Trade and other receivables 13,966
Trade and other payables (14,800)
Deferred tax liability (563)
22,700
--------------------
Result of discontinued operations 2019 2018
GBP'000 GBP'000
Revenue 57,663 52,860
Expenses other than finance costs (55,835) (50,709)
Investment Income 1,146 (12)
Exceptional costs (669) -
Tax (expense) / credit (255) (438)
Profit for the year 2,050 1,701
--------- ---------
Earnings per share from discontinued operations 2019 2019
P p
Basic earnings per share 12.6 10.0
Diluted earnings per share 11.6 9.7
Cashflow in respect of discontinued activities 2019 2018
GBP000 GBP000
Operating cash flows 6,717 1,619
Investing cash flows (602) (879)
Financing cash flows (3,637) 1,701
-------- -------
Total cash flows 2,478 2,441
-------- -------
Included in Exceptional costs in discontinued operations are
restructuring charges of GBP581k and deal fees of GBP88k.
13. Prior Year Adjustment
A deferred tax liability was not recognised in respect of
customer relationships and brands, which were assets that were
separately identified in the acquisition of Brand Architeks
Limited. This has historically resulted in an understatement of
Goodwill and the deferred tax liability of GBP1,145,000. This has
been restated in the comparative information. There has been no
impact to the previously stated retained earnings, net assets and
cash flows.
14. Annual Report
This report will also be available from the Company's registered
office and on the Company's website www.brandarchitektsplc.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SEMEFUFUSESU
(END) Dow Jones Newswires
September 30, 2019 02:02 ET (06:02 GMT)
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