Profits slide at beauty manufacturer Swallowfield as costs bite

By

Barbara Santamaria

Published
Mar 5, 2019

Rising input costs and a weaker product mix impacted the financial performance of Swallowfield, a UK cosmetics manufacturer, in the first half of the year, according to its latest trading update.

The company, which develops and manufactures cosmetic products for many of the world’s leading beauty brands as well as its own labels, has revealed that its underlying operating profit fell to £1.63m in the first half of the year ended 12 January 2019, down significantly from £3.40m in the comparable period in 2018.

The firm’s Manufacturing Business was mostly to blame for the decline, particularly when compared to the prior year which included the contribution from a higher margin contract.

However, both the Manufacturing and Brands businesses generated revenue increases, helping group revenue increase by 3.7% to £41.4m during the period. The company said Brand sales grew 1.3% to £12.5m, while Manufacturing sales grew 8.8% to £31.2m.

POSITIVE OUTLOOK

In light of the decline in profitability, the company said it has secured price increases with its manufacturing clients for the second half, and that new contract wins in the prestige sector will deliver a stronger margin.

“This first half year has been impacted by significant material cost inflation, as previously signalled in the Manufacturing segment of our business,” said Brendan Hynes, chairman of Swallowfield.

“Actions have been taken to improve the margin performance of our Manufacturing business in the second half of the year and beyond. Swallowfield therefore remains well positioned to regain its positive growth momentum.”

Additionally, the company will continue to drive growth in its Brands division, which includes labels such as Super Facialist, Dirty Works, Fish, Argan 5, Kind Natured and Senspa.

"During my first eight months as CEO of Swallowfield plc, my focus has been working towards a consistently profitable Manufacturing business whilst continuing to invest in the development of our Brands business, which has continued to underpin the Group's profit margins. The prevailing market conditions require a clear strategic focus for the Group and with our strategy to accelerate Brands growth and to simplify Manufacturing we are confident in delivering further profitable growth," commented Tim Perman, chief executive.