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Swallowfield’s real potential as a ‘quality’ play lies in the opportunity to grow the higher-margin brands business. Brands accounted for 31 per cent of first-half sales and 57 per cent of first-half profit, and in the 2017 financial year the division’s operating margin before central costs of 16 per cent was almost double that of the manufacturing business. A strong brand gives its owner increased pricing power allowing it to grow and protect its margins. A strong brand also means more reliable sales growth. These factors translate into what investors refer to as high ‘earnings quality’. This dynamic is reflected in the rise in margins over recent years and forecasts of more of the same (see graph).

So arguably the more significant news from last month’s trading update was not the manufacturing disappointment but that brand revenue increased by 16 per cent in the 12 months and that the division’s profitability “will be significantly above both management’s expectations and the prior year as a result of improving margins”.

Brand margins are being enhanced by the company bringing the manufacture of recently acquired brands in-house. The most recent brand acquisition was the £3m purchase of men’s hair styling brand ‘Fish’, which will hopefully build on the strong growth Swallowfield has enjoyed from the product category. Meanwhile, the company has been investing in its manufacturing facilities to boost efficiency and is also expanding into international markets. Overseas sales made up 24 per cent of brand sales last year, although challenging conditions in North America have been a drag.

The appointment of Tim Perman as chief executive following a succession period of several months should also keep the group’s focus firmly on brand growth given his previous job as PZ Cussons' group brand director and divisional global beauty director.

If, as management expects, the manufacturing business is poised to get back into its stride and net debt moves downwards quickly, investors may start to focus more on the potential for the brands division. There could even be positive news on these fronts in the company’s full-year results announcement scheduled for 25 September. The existing sales growth and margin trends suggest scope for a noteworthy re-rating of the shares should the strategic shift be a success.

Nice rise today on wake of recent BOD buys and recent news article. -
"Beauty products group Swallowfield (SWL) is attempting to move up the beauty-industry value chain by investing in brands. The hope is this will boost the returns it generates from its know-how in product innovation and manufacturing.

SWL:LSE
Swallowfield PLC

1mth
Today change
5.96% Price (GBP)
302.00
Such strategies do not always progress smoothly, and for Swallowfield, the financial year to the end of June has been a case in point. The share price performance and valuation seem to reflect recent mixed fortunes. However, where it really matters (brands), the recent progress made by the company has been encouraging. Meanwhile, the problems faced by the group’s manufacturing business that have been the source of recent woe, may soon abate.They also explain why the company is looking to take more control over its own destiny through the ownership of brands as opposed to its traditional role of supplying owners of top brands.

The financial year before last saw a rash of product launches by key customers, which resulted in bumper trading for the manufacturing division and the 12 months to mid-2018 was always going to pale in comparison. This issue was compounded by two other disappointments that surfaced at the manufacturing business during the second half: the commencement of three major contracts was delayed, and the company was unable to adjust for a sharp increase in raw-material prices quickly enough to protect margins. To add to investor concerns, a jump in working capital will result in a sharp increase in net debt to £11m at the year end; the size of the rise in debt being the cause for concern rather than the actual debt level which represents 1.7 times forecast cash profits. The company also has a £5.7m pension deficit.

The good news is that the delayed contracts are expected to be up and running soon and management has a plan in place to revive margins. Meanwhile, following the year end, working capital is expected to quickly get back down to more normal levels bringing net debt down sharply. Nevertheless, the negative developments, which were revealed in a year-end trading update last month, were enough to make house broker N+1 downgrade cash profit forecasts for the manufacturing division by £1.7m. Given that group cash profit in 2017 was £5.2m, the magnitude of the setback may have been expected to have very painful ramifications for overall profit forecast. However, this was not the case thanks to the much-better-than-expected progress made by Swallowfield’s brands. Indeed, the overall impact on N+1 Singer’s 2018 and 2019 EPS forecasts were downgrades of just 4 per cent and 5 per cent respectively.

WOW.
Your fake short must really be under!
You know, Warren Buffet has got it wrong on many occasions?
Page 24 - it's called due diligence.
Monthly chart - anyone and everyone knows you don't use monthly charts unless your desperate to find a reason as your way out.
"however it is not something i am at liberty to comment upon
due to the ethical nature and market sensitivity "- why not? It's not against the law (or rules) to talk about ethical. As for market sensitivity I very much think you fake short would make any difference unless your trying to suggest you have inside info which if you have, you certainly should not be posting here as a PI. Don't worry though, its ok to dream you work for some big finance company.

Well you have answered your own question. The ii’s will become involved again if HYR successfully get enough feed stock to make the business profitable. Whether that is via a closed loop contract or another way. Now there has been no figures released as to whether there would be enough from one contract or whether it would take many. HYR needs this to happen quickly though as finances for HYR are pretty dire atm. So we just have to play the waiting game.

Silly is certainly wrong. Frustrating would be more accurate. HYR hinges on getting feed stock or it will eventually go into receivership or be bought out. Frustrating for share owners and frustrating to read people making out that the share is just off the radar. It isn’t. It is just not wanted by ii’s as they deem it too much of a risk. If feedstock issue is resolved, then it will change. Until then, the most probable outcome could very well be A drew Black picking up another company cheaply.

That’s a silly question but the answer would be when HYR prove that they financially stable and that will be profit making. Currently they are not profit making, have debts, running on bare bones having cut back on many bod positions and employees. On top of this the company struggles to get feedstock from which they make their products and this is the major issue. The previous RNS was encouraging but it has not happened yet and even if it did, what figures are HYR looking at? A large amount of feedstock or would they need many of those contracts? Great products from a company that has gone through bad times and done well to survive this long but it still needs to become profit making.

I agree people will suffer, but I am not looking for it or causing it. That call I made last week to short ftse, soon to be made. More suffering, or will that be ftse dropping from people taking profits?

Last call, you are being pendantic. You have Implied people are looking for suffering of others when that is not the case. There is suffering in everything we do but it does not mean we are always guilty of causing it or looking for it. So I look for value stocks, some times I get them some time I don’t. But I am not responsible for others who suffer from their lack of judgement trying to find value in a declining stock. How many times have people heard the saying -don’t try to catch a falling knife? But people still try. That does not mean I’m out to make people suffer. I would be very happy if everyone made money but the realism is most loose.

Yes looking for value but certainly not looking for suffering. There is a difference in seeing stocks decline in value and why, as apposed to seeing people suffer. I posted the other day saying why I thought deb may fall further: High amount of shorts Sector unloved High debt Worries of bad or no brexit deal which will affect retail. I personally think deb may survive as they seem to be doing a great job turning the company around and I certainly hope they do survive in these days of internet but it does not blind me to not thinking it may drop further. If it does I could pick up some real value shares and if it does not, oh well. This certainly does not mean I want others to suffer. People just need to get savy in these times of changes. The internet has killed off many things but has provided opportunity to others. The internet has allowed even these delightful boards.

Knigelk it is not nice to see any company go bust as there is always others that suffer whether it is shareholders or the people who loose their jobs. Whether people short or not though, it is not the shorters that cause the company to go bust. The shorters only hurt the people going long and that is only if they sell. Like wise, the people going long hurt the shorters. Ofc there are other moral grounds that can be argued and I personally think the FCA should be stricter. But if the FCA was more strict how much business would be lost in this country? As for which platforms to use to short, any spread bet or CFD can be used and if you were wanting to short a large amount you can go directly to a broker. My advice would be to stay clear of shorting as you are likely to loose. Most people who get branded shorters on these boards likely do not short but want a lower entry price or simply enjoy winding up others safe behind a key board. Atb

5p certainly would be a price to get these for. Could be possible when you look at the negatives. High amount shorted. Retail sector unloved. Brexit fears of a no deal. (If no deal The pound will likely drop in value and to counter that drop interest rates will go up which could affect deb due to high debt. The other issue would be retail stocks, amongst others such as builders would be sold off in favour of US currency based stocks). So with so much uncertainty in the market how deb performs is not necessarily the deciding factor.

Ofc there is accumulation, but there is also selling. Hence the sideways movement.
Do not get me wrong though, I think DEB has done some great things in the last year, working on change around and I believe it will survive and create good profits for those buying in at these levels. I will certainly be buying if 10p hits and will add on any drops below that. Whether it happens or not, who knows?

Sorry oldtime, but not some shorters. DEB is 4th highest shorted share at 11.8%. That is massive.
The share is sadly still in a downward trend and some would see the sideward movement for the last 2 weeks as the sp consolidating after hitting the bottom on the downward trend line and not bouncing up.
Chart wise 10p looks on its way and the shorters are not the ones fighting the trend.
The sp needs to break 17.4p in order to confirm a change in direction.

atb

I think the beast from the east is old news. 63000, needs to pass through several trend lines to hit that final trend line. Shorter term I would call 7760.

Looks like some large buy order is getting filled. Some good solid trades going through.

Chilting- if you want to read up on another Woodford story check out RM2

Nighthawk, I presume that’s 40k in pounds and not euros?

I think it is your glass half full attitude that probably winds others up.
I was addressing comments to others when I mentioned insults and being polite.

Have a good day, I am off to build a wall.

Fundamentally star is looking very strong as riddler recently posted. I particularly like the fact that the loss was just £100k. With current sales, next 6 moth report should be showing a healthy profit.
Plenty of skin in here also from the bod.
Technically, star has been in a nice upward channel which broke into a previous sideways trending channel. Having then hit the top of the current trend line it has retraced to the bottom of previous sideways trend and bounced off it. This bounce here is very encouraging.

http://www.chartupload.com/viewer.php?file=32420715693002839965.png

Nice rise this morning.
Lets keep the insults under control and be polite even if DHC does like to wind people up here.
20p is very possible soon purely from a chart prospective.

http://www.chartupload.com/viewer.php?file=66248052232800716389.png