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Swallowfield boosted by acquisition

Newly bought businesses have helped drive a near-four-fold increase in adjusted operating profits

Swallowfield boosted by acquisition

Swallowfield's (SWL) acquisition of Brand Architekts has had a significant impact on both the group's share price (up 125 per cent since the deal was announced in June) and interim numbers. Sales from new businesses contributed 31 per cent to overall revenue growth and adjusted operating profits rose by nearly 300 per cent, excluding £343,000-worth of one-off acquisition costs.

IC TIP: Buy at 340p

Own-brand beauty products now make up a quarter of group revenues, albeit boosted by the acquisition of both Brand Architekts and The Real Shaving Company in 2015. Management expects this division to grow at a faster rate than the manufacturing business, although there are no current plans to ink more deals. Instead the group plans to use Brand Architekts' "close relationship" with retailers to launch a number of innovative new products.

Both the acquired companies and the original group businesses received currency-driven boosts during the period, although sales still rose 7 per cent on an underlying basis. With the majority of costs coming in dollars, however, exchange rates had a negative impact there, stunting margin growth. Even so, these interim numbers beat N+1 Singer expectations: the broker upgraded underlying divisional forecasts for the full year to June 2017 but still expects pre-tax profits of £4.4m, giving EPS of 20.7p (FY2016: £1.6m and 12.4p).

 

SWALLOWFIELD (SWL)

ORD PRICE:340pMARKET VALUE:£57m
TOUCH:330-350p12-MONTH HIGH / LOW:368p153p
DIVIDEND YIELD:0.9%PE RATIO:18
NET ASSET VALUE:113p*NET DEBT: 29%

Half-year to 7 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201627.51.18.50.80
201739.72.09.71.70
% change+44+91+14+113

Ex-div: 4 May

Payment: 26 May

*Includes intangible assets of £9.2m, or 54.6p a share