Swallowfield outlines growth plans as sales drop

By Guy Montague-Jones

- Last updated on GMT

Related tags Profit

Swallowfield is expanding overseas and moving beyond basic contract
manufacturing in an effort to increase top-line growth.

The strategy was outlined after the company announced that sales figures had slipped 8.5 per cent to £23.5m (€30.7) for the 28 weeks ending 12 January due to contract timings and new customer product launches. Growth plans ​ The UK-based manufacturer is planning to reverse this trend by employing two growth strategies. Firstly, Swallowfield plans to offer more to its customers by developing into a service company offering market analysis, formulation, design and packaging development as well as product manufacturing, sourcing and logistics. Secondly, the company is pursuing several initiatives overseas including a joint manufacturing venture in China for which the final contracts are expected to be signed soon and a new production plant in the Czech Republic. The facility was opened in December and Swallowfield hopes it will provide the company with a competitive edge and increase its long-term profitability. "The labour costs are approximately a third of those in the UK for the type of work that will be undertaken in our new operation, thereby providing a significant net saving,"​ said CEO Ian Mackinnon. These major overseas investments will be followed by the opening of a sales bureau in France and plans are on the table for other offices abroad. However, the company is concerned about the potential impact on profitability especially as increases in oil prices and other commodities have put pressure on input costs. Profitability ​ So far Swallowfield has kept costs down as operating margins increased narrowly in the interim results although the fall in sales hit operating profit which fell 2.9 per cent to £0.85m before accounting for exceptional items. Despite the poor operating results, net profit for the period increased to £1.59m from £0.25m last year following the sale of the company's warehouse in Lowmoor for a cash consideration of £2.12m. The sale was also largely responsible for the reduction in Swallowfield's net debt by 64 per cent to £1.49m. Swallowfield's non-executive chairman, Shena Winning, said: "Despite a weaker economic outlook for 2008, the increasing operational and financial strength of the company puts us in a strong position for the future."

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