Cosmetics and toiletries group
The company's manufacturing plants in the Czech Republic and China now each account for around 10 per cent of turnover. But, as the costs of manufacturing in and shipping from China "are increasing rapidly", it's not so surprising that Swallowfield is aiming to sell a lot more Chinese-made products locally. Management hopes that low-cost lipsticks and shower gels will maintain sales in depressed western markets, while better margins come from similar sales in new markets such as Latin America and South Africa. At the same time, automating production processes in the Czech Republic will reduce costs, while input costs such as aluminium may be close to a cyclical peak. The figures also benefited from lower net finance costs and a 19 per cent tax charge, which is down from 22 per cent last year.
Broker Smith & Williamson expects turnover of £58m for 2012 and pre-tax profit of £1.7m. Swedish activist investor Peter Gyllenhammar owns 30 per cent of the group's shares and Western Selection has 17 per cent.
|ORD PRICE:||114p||MARKET VALUE:||£12.9m|
|TOUCH:||113-115p||12-MONTH HIGH:||142p||LOW: 99p|
|DIVIDEND YIELD:||5.5%||PE RATIO:||12|
|NET ASSET VALUE:||119p||NET DEBT:||35%|
|Year to 30 June||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
A PE ratio of 12 isn't that pricey, while the shares offer investors an above-average dividend yield. And while lean pickings look likely in mature markets, decent growth prospects in emerging markets should offset that. Buy.
Last IC View: Buy, 133.5p, 25 February 2011