Cosmetics and toiletries manufacturer Swallowfield has announced a £0.8 million pre-tax operating loss for the half year to January 5, as it works to re-balance its dependence away from two key customers.
The news comes just days after it was revealed that its chief executive Ian Mackinnon is to step down from the helm at the AIM-listed company.
The Wellington-based manufacturer, which makes products for household name brands, predicted in a November profits warning that its half-year results would be impacted over moves by its two major clients to bring more of their manufacturing processes back in-house.
Swallowfield has been working develop and launch new products and also expand its clientele in response, but said new measures had not had sufficient time to bed in and offset a 19% fall in revenues to £25.5 million during the six months.
During the same period last year, Swallowfield's two lead customers accounted for 47% of revenue, while in this first half-year, the same two customers accounted for 24% of its business.A further five key client accounts account for 47% of revenue.
Meanwhile, it added that a strategy to increase revenues through direct exports were succeeding with overseas sales increased by 37% and now representing 35% of revenue. It said that it anticipated UK and European economies to remain "fragile".
Looking ahead, Swallowfield said that its full year results would be dependent upon the timing of new product launches and the strength of the underlying market.
Ian Mackinnon said: "The last few months have been difficult for us and we are very disappointed to have made an operating loss in the first half.
"We have a good pipeline of new product and new customer launches over the next six to 12 months and these should allow us to recover lost ground and ensure that the risk profile of the business is much reduced. We have taken immediate action to reduce our cost base, whilst ensuring that we have sufficient resource to deal with the expected future increases in demand. We fully expect to come out of this difficult situation in better shape for the future."
Mr Mackinnon announced his resignation this week, after 13 years with the business. He has agreed to stay on for around six months while Swallowfield seeks a new CEO and to support a smooth transition.
Swallowfield chairman Stephen Boyd said: "He has led the business through very difficult circumstances and we wish him well for the future."