Interesting post pharma. My take is that Swallowfield is trying to re-position itself from being a contract filler to being the brand owner of personal care products with the much higher margins that can be achieved. I don't think the proliferation of brands is a problem. The sales force can push the extended range at little marginal cost. Most 'marketing' is done by paying for shelf space in supermarkets. I don't think the likes of Gillette and Cussons have a problem with premium-priced products sitting near their products on the shelves. If the premium products do well they'll just buy them out.
The shares have done well but I'm inclined to take some profits after the run they've had.
Having achieved initial success in developing its own brands, I don't understand why the company has spent £11M, admittedly raised through a placing, to buy Brand Architekts. This is a huge amount of money for a company the size of Swallowfield. After the acquisition, Swallowfield will have a real dog's breakfast of brands and not really enough money to do the brands justice through marketing. Even if Swallowfield could compete with brands from multinational cosmetic companies, these multinationals are also customers of Swallowfield so I don't think they will be too happy with the company developing competing brands. Best of luck Swallowfield but I just can't see how this business plan is going to work from a strategic viewpoint although there must be plenty of institutional investors who think it will, judging from the oversubscribed placing.
"The Alternative Investment Market (AIM) has shot up by 20% since the EU referendum. That's the sort of three-month performance we haven't seen since mid-2013, when the ISA exemption was lifted on AIM shares.In this kind of environment it may well ..."
I sold the 2nd 20% yesterday at about 175p, but the volume was not there to sell more. it took me the best part of 4 months to build up my stake in the dark days, when I bought in at a yield of about 8%.
An important question as to what sort of contribution The Real Shaving Company and the new own-brand products will make to earnings over the coming years. I imagine that the new ones will be on sale at Boots, in the first instance, as the recent full year accounts talk of MR being introduced this month in 350 outlets of a Health & Beauty product retailer, and Boots is listed as one of The Real Shaving Company's outlets.
Any thoughts as to what is up, other than the share price?
I felt that selling 20% of mine at 145p was already in frothy territory, but now they are on about 10x 2017 prospective eps or 25x 2015 eps. Do I trust brokers forecasts for 2 years out when there is just the one? Even less than when there are 15!!
I assume marginally below the bad results we expect!In fairness the results are being released in a reasonably timely manner;3 months from yearend is quite prompt.
How easy the company will find it to establish more profitable business remains to be seen.
Revenues marginally below market expectations, full year accounts for the year ended June 22nd 2013 to be published on September 19th. A fair wait there to see how the positives & negatives in the update pan out...
Reading between the lines of this announcement and other industry news, it seemms a top-ten SWL customer has been acquired by a global beast that has taken all sub-contracted goods back in house - a problem for SWL and all other contract fillers. Other contracting-out customers are being found but there is a timimg difference on losing all work from one customer and replacing it with work from new customers.
I assume a couple of Swallowfields major customers(Supermarkets?) have transfered their custom to cheaper overseas suppliers.How easy it will be to find replacement higher margin customers for perhaps more added value products remains to be seen.Clearly the dividend is not sustainable unless there is rapid improvement.I think if this was a more liquid share we would have seen a considerable fall in share price.
I am also a shareholder in another listed cosmetic manufacturer called Creightons(I think at one time the smallest company by market value to have a full,rather than AIM, stock exchange listing!),they have had a similar problem,but they have moved to supply of their products under their own various brand names rather than purely own brand although there has been some progress it has been slow building up a customer base.
Difficult to judge as to whether it is due to the likely poor results or continued fall out between PG & Western Selection(David Marshall) or both.
I note PG is also attempting to get rid of Directors at another company in which he has a significant interest,the listed antique shop Mallett,which is also doing poorly.
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