Swallowfield Changing Tack As It Agrees Manufacturing Unit Disposal.

(Alliance News) - Personal care and beauty products maker Swallowfield PLC on Monday announced the sale of its Manufacturing business to focus on Owned Brands operations.

Shares were 18% higher in morning trading in London at 227.81 pence each.

The business has been sold for GBP35 million to Knowlton Development Corp Inc, the largest custom formulator and manufacturer in North America.

Swallowfield's Finance Director Matthew Gazzard and Sales & Marketing Director Jane Fletcher will both move to Knowlton with the manufacturing unit.

After the sale, Swallowfield also plans on changing its name, to Brand Architekts Group PLC.

"The proposed disposal of the Manufacturing business is a transformational development for the group, which will see the Owned Brands business become the sole focus of operations. As announced in March, the board determined the Manufacturing business needed a streamlined and simplified operation, and undertook a detailed strategic review to determine the appropriate course of action," said Chair Brendan Hynes.

"Following careful consideration of the options available, the board strongly believes the proposed disposal enhances the long-term prospects of both businesses and is in the best interests of all stakeholders."

"It is the board's belief the transaction also provides the Manufacturing business with a clearer vision for the future while protecting the value of the business by being part of a larger group, which is less affected by volatile market conditions. The board also believes a sole focus on pursuing the opportunities provided by the stronger margin Owned Brands business will leave the group better positioned to drive future value for shareholders."

On the trading front, Swallowfield said revenue for the 52 weeks to June 29 rose 7% year-on-year, though climbed 5% if accounting for the fact the prior financial year had an extra week.

A single-digit revenue decline in Brands was offset by a "significant" recovery in Contract Manufacturing. Swallowfield expects a slight rise in annual pretax profit. In its year ended June 2018, pretax profit was GBP4.5 million, up 45% on the year before that.

The Brands unit was hurt by lower UK consumer confidence and a poor retail environment, but international sales fared better. Brand revenue fell 3% on a 52-week basis, with Manufacturing rising 15%.

"The group has made significant strides over the last five years developing the Brands portfolio, both organically and through acquisition, and this has not only delivered superior financial returns but has also given the group greater control over its own destiny," said Chief Executive Tim Perman.

"We believe the opportunities to grow this business will be significantly enhanced through a simplified strategic focus and we have a strong and experienced brand team to drive this forward. The proceeds from the disposal provide the group with the financial strength to invest in further organic and acquisitive growth and we are confident of being able to profitably realise further market opportunities in the future."

By George Collard; [email protected]

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