Interim Results
Churchill China PLC
28 August 2003
FOR IMMEDIATE RELEASE 28 AUGUST 2003
CHURCHILL CHINA PLC
INTERIM RESULTS
for the six months ended 30 June 2003
Churchill China plc, is pleased to announce its results for the six months ended
30 June 2003.
Key Points:
• Performance in-line with expectations, despite unsettled market conditions
• Sales of £23.7m (2002: £24.3m)
• Dining Out sales up at £10.5m, Dining In sales reduced by £0.7m following
capacity reduction
• Profit before exceptional items and taxation £0.5m (2002: £0.5m)
• Adjusted earnings per share before exceptional items were 3.3p (2002:3.4p).
• Exceptional cost of £1.3m due to restructuring of manufacturing operations
• Loss before taxation (after exceptional items) £0.8m (2002: profit £0.4m)
• Loss per share after exceptional items was 8.1p (2002: earnings per share of
2.2p).
• Interim dividend increased to 3.3p per ordinary share (2002: 3.0p)
• Operating cash generation remained positive at £0.3m after exceptional items
of £0.5m
Stephen Roper, Chairman, said:
'We are pleased that trading is on track and anticipate strong sales in our
Dining Out division in the fourth quarter following a creditable sales
performance in the first half despite difficult trading conditions. The
restructuring of the Dining In division is proceeding to plan, we have reduced
manufacturing volumes, sourced replacement product and look forward to seeing
the benefits from this process in early 2004.'
For further information, please contact:
Stephen Roper, Chairman Today on: 020 7466 5000
Churchill China Plc thereafter on: 01782 577566
Tim Anderson Tel No: 020 7466 5000
Lisa Baderoon
Buchanan Communications
CHAIRMAN'S STATEMENT
I am pleased to report that in the first half of the year the Group's
performance in all major areas has been in line with management's expectations.
In the six months to 30 June 2003, profit before exceptional items and taxation
was £0.5m (2002: £0.5m), a sound performance delivered against a background of
unsettled markets. The Dining Out division, which services hotels, restaurants
and pubs recorded further growth, a creditable performance in difficult market
conditions. Our Dining In division, which supplies UK and international retail
markets has performed in line with internal projections but slightly down on the
comparable period. This is due to the effects of the reduction in manufacturing
volumes, a consequence of the restructuring programme initiated at the beginning
of the year.
The restructuring programme has led to an exceptional cost of £1.3m (2002:
£0.2m) resulting in a loss before taxation of £0.8m (2002: profit £0.3m). The
programme was initiated to address the underperformance of the Dining In
division and will reduce manufactured output levels in this division by 65% by
the end of the year compared to 2002. In the last five years manufacturing
output levels in the division will have fallen by 85%. By the year end sourced
turnover, at significantly improved margins, which will have risen to almost
£20m on an annualised basis. The benefits of this restructuring will begin to be
seen in the second half of this year and full efficiencies will become evident
in 2004. The programme is progressing to plan
Financial Performance
Group turnover for the half year was slightly down at £23.7m (2002: £24.3m)
reflecting a reduction in manufactured volumes sold in Dining In. Operating
profit before exceptional items was £0.5m (2002: £0.5m). The exceptional cost
charged against profit in respect of the restructuring of manufacturing
operations was £1.3m in the first half. A further impairment of tangible fixed
assets of £0.8m has been charged directly against revaluation reserves. The
operating loss after exceptional items was £0.5m (2002: profit £0.3m).
Adjusted earnings per share before exceptional items were 3.3p (2002: 3.4p). The
loss per share after exceptional items was 8.1p (2002: earnings 2.2p).
Operating cash generation remained positive at £0.3m (2002: £0.7m) after £0.5m
of exceptional costs and a continued investment of £0.8m in stock to support the
move to sourcing in Dining In and the development of the Dining Out division.
Overall cash balances fell to £0.4m (2002: £1.4m).
Dividend
The Group's underlying cash generative nature allows us to continue to declare
dividends even during a period of restructuring and change. The Board is pleased
to announce an increase in the interim dividend to 3.3p per share, (2002: 3.0p)
reflecting future trading prospects and continued operating cash generation.
Dining Out
The Dining Out division has produced another strong performance, particularly
given weaker tourism and a slowdown in hospitality markets worldwide. Sales grew
from £10.4m to £10.5m. We have continued to reap the benefits of our investment
in new products and geographic expansion and maintain our emphasis on providing
the best possible service to our clients. I am delighted to say that products
launched in 2002 have delivered year on year growth. Of particular note is the
performance of our new Alchemy range which has allowed us to develop into the
four and five star markets and continues to lead our expansion at home and
overseas. We look forward to further progress from new introductions planned for
the second half of 2003 and early in 2004.
Dining In
The Dining In division has been focussed primarily on managing the changes
arising from the restructuring programme. Sales at £13.2m (2002: £13.9m) were,
as anticipated, below last year's total, the fall being entirely attributable to
reduced output levels arising from the restructuring plan. Importantly, our
Housewares business is performing well, founded on strong and successful
relationships with key suppliers who have met our requirements in a year of
significant change. We have made significant progress in certain geographic
markets, most notably the USA with both increased sales to new customers and
existing key accounts. We envisage a significant improvement in contribution
from our sales in the second half of this year given a higher proportion of
sourced product compared with last year
Move to AIM (the 'Alternative Investment Market')
As mentioned at the time of our preliminary announcement in March 2003, the
Board had confirmed its intention of transferring the Company's listing from the
Official List of the UK Listing Authority to the Alternative Investment Market
(AIM) of the London Stock Exchange. The Company's shares began trading on AIM on
22 April 2003 and we are pleased with the performance of Churchill's share price
since this move.
AIM is now established as the dominant market for smaller and growing companies
and as a dedicated market for smaller companies it provides a higher profile for
the businesses traded on it and cost savings for both companies and their
investors. Currently there are also significant tax advantages available to both
new and existing shareholders.
Current Trading and Prospects
Current trading for both divisions in the year to date remains in line with our
performance targets.
Our Dining Out business continues to perform well, winning new accounts both in
the UK and overseas markets. In addition new products launched in the last few
weeks, including Energy and Alchemy cookware designed by Sebastian Conran, will
maintain this impetus and sustain our reputation for innovation.
The restructuring programme within the Dining In division is being implemented
succesfully. This programme is reducing manufacturing capacity and increasing
the range of sourced products available to our customers. We continue to build
strong customer relationships based upon our technical expertise, design,
logistics and competitive pricing.
Taken together, these initiatives give us confidence in Churchill's future
prospects underpinned by lower operating costs. We look forward to a progressive
improvement in profitability.
Our employees have once again demonstrated that they are a loyal, skilled and
hardworking workforce. This has been a particularly demanding period and our
employees at all levels continue to demonstrate considerable flexibility and
initiative in meeting the challenges we face in moving our business forward. I
thank them for their efforts
Stephen Roper
Chairman
28 August 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2003
Unaudited Unaudited Total
Six months to Six months to Six months to
30 June 30 June 30 June
2003 2003 2003
Before
exceptional Exceptional Total
items items
Note £000 £000 £000
Turnover 1 23,724 - 23,724
Operating (loss) / profit 2 469 (1,024) (555)
Share of operating profit of associate
net of impairment 2 51 (294) (243)
Profit on disposal of fixed asset - - -
Net interest receivable 19 - 19
(Loss) / profit on ordinary activities
before taxation 539 (1,318) (779)
Tax on (loss) / profit on ordinary
activities 3 (190) 106 (84)
(Loss) / profit on ordinary activities
after taxation 349 (1,212) (863)
Dividends 4 (352)
Retained (loss)/profit for the period (1,215)
Pence per
share
(Loss) / earnings per ordinary share
Basic 5 (8.1)
Adjusted 5 3.3
Diluted (loss) / earnings per ordinary share
Basic 5 (8.1)
Adjusted 5 3.3
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2003 - continued
Unaudited Unaudited Unaudited
Six months to Six months to Six months to
30 June 30 June 30 June
2002 2002 2002
Before
exceptional Exceptional Total
items items
Note £000 £000 £000
Turnover 1 24,277 - 24,277
Operating (loss) / profit 2 506 (167) 339
Share of operating profit of associate
net of impairment 2 - - -
Profit on disposal of fixed asset - - -
Net interest receivable 24 - 24
(Loss) / profit on ordinary activities
before taxation 530 (167) 363
Tax on (loss) / profit on ordinary
activities 3 (171) 41 (130)
(Loss) / profit on ordinary activities
after taxation 359 (126) 233
Dividends 4 (320)
Retained (loss)/profit for the period (87)
Pence per
share
(Loss) / earnings per ordinary share
Basic 5 2.2
Adjusted 5 3.4
Diluted (loss) / earnings per ordinary share
Basic 5 2.1
Adjusted 5 3.3
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2003 - continued
Audited Audited Audited
Year ended Year ended Year ended
31 December 31 December 31 December
2002 2002 2002
Before
exceptional Exceptional Total
items items
Note £000 £000 £000
Turnover 1 50,904 - 50,904
Operating (loss) / profit 2 1,971 (338) 1,633
Share of operating profit of associate
net of impairment 2 30 - 30
Profit on disposal of fixed asset - 75 75
Net interest receivable 42 - 42
(Loss) / profit on ordinary activities
before taxation 2,043 (263) 1,780
Tax on (loss) / profit on ordinary
activities 3 (441) 89 (352)
(Loss) / profit on ordinary activities
after taxation 1,602 (174) 1,428
Dividends 4 (959)
Retained (loss)/profit for the period 469
Pence per
share
(Loss) / earnings per ordinary share
Basic 5 13.4
Adjusted 5 15.0
Diluted (loss) / earnings per ordinary share
Basic 5 13.4
Adjusted 5 15.0
CONSOLIDATED BALANCE SHEET
as at 30 June 2003
Unaudited Unaudited Audited
30 June 30 June 31 December
2003 2002 2002
£000 £000 £000
Fixed assets
Intangible Assets 153 199 176
Tangible assets 11,912 14,319 13,750
Investments 840 1,092 1,099
12,905 15,610 15,025
Current assets
Stocks 10,148 8,893 9,362
Debtors: amounts falling due within one year 10,301 9,759 11,288
Cash at bank and in hand 434 1,447 1,620
20,883 20,099 22,270
Creditors: amounts falling due within one year (7,947) (8,303) (9,430)
Net current assets 12,936 11,796 12,840
Total assets less current liabilities 25,841 27,406 27,865
Creditors: amounts falling due after one year - (12) (6)
Provisions for liabilities and charges - (123) (32)
Net assets 25,841 27,271 27,827
Capital and reserves
Called up share capital 1,066 1,066 1,066
Share premium account 1,967 1,967 1,967
Revaluation reserve 1,316 2,111 2,100
Other reserves 253 253 253
Profit and loss account 21,239 21,874 22,441
Equity shareholders' funds 25,841 27,271 27,827
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 June 2003
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 30 June 31 December
2003 2002 2002
£000 £000 £000
Net cash inflow from operating activities
(reconciliation to operating (loss) / profit - note 6) 250 736 2,027
Returns on investments and servicing of finance
Net interest received 19 24 44
Taxation
UK corporation tax paid (374) (158) (507)
Capital expenditure and financial investment
Purchase of tangible fixed assets (488) (750) (1,258)
Sale of tangible fixed assets 51 66 112
Net cash outflow for capital expenditure and financial
investment (437) (684) (1,146)
Equity dividends paid (639) (639) (959)
Financing
Issue of ordinary shares - 8 8
Payment of principal under finance leases (7) (7) (13)
Net cash (outflow) / inflow from financing (7) 1 (5)
Decrease in net cash (1,188) (720) (546)
NOTES TO THE INTERIM RESULTS
for the six months ended 30 June 2003
1. Analysis of turnover
The Directors consider that the Group's activities are a single class of
business. However for additional shareholder information turnover is analysed
as follows:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 30 June 31 December
2003 2002 2002
£000 £000 £000
Turnover
Dining Out 10,506 10,383 22,397
Dining In 13,218 13,894 28,507
23,724 24,277 50,904
Geographic Turnover
United Kingdom 13,662 14,460 31,265
Rest of Europe 5,546 5,293 10,689
North America 3,389 3,235 6,648
Australasia 533 522 1,203
Far East 238 120 233
Other 356 647 866
23,724 24,277 50,904
2. Exceptional Items
Costs arising from the restructuring of manufacturing operations and the
resulting write down of tangible fixed assets and investments have been treated
as exceptional and have been charged in arriving at the loss before tax for the
year. These exceptional costs comprise:
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 30 June 31 December
2003 2002 2002
£000 £000 £000
Restructuring costs 459 125 296
Impairment of tangible fixed assets 565 42 42
Impairment of investments 294 - -
1,318 167 338
A credit of £106,000 (2002: £41,000) has been included in the corporation tax
charge in relation to the exceptional items.
The cash outflow in relation to exceptional items in the period was £459,000.
In addition to the above a further impairment of £772,000 relating to tangible
fixed assets has been charged directly against revaluation reserves (see note
8).
3. Taxation
The tax charge on profit before exceptional items represents an effective rate
of 35.2% (2002: 32.2%). The loss before taxation arising from the impairment of
tangible fixed assets has been disallowed for corporation tax purposes and in
the opinion of the Directors the recoverability of any deferred tax asset
attributable to the impairment is not currently sufficiently certain to allow
recognition within the financial statements.
4. Dividend
The proposed dividend has been calculated on 10,659,876 shares being those in
issue at 30 June 2003 qualifying for the dividend. The dividend will be paid on
2 October 2003 to shareholders on the register on 5 September 2003
5. (Loss) / earnings per ordinary share
Basic (loss)/earnings per ordinary share is based on the (loss)/profit on
ordinary activities after taxation and on 10,659,876 (2002: 10,653,633) ordinary
shares, being the weighted average number of ordinary shares in issue during the
period.
Adjusted earnings per ordinary share is based on the (loss)/profit on ordinary
activities after taxation and adjusted to take into account exceptional items
and profit on disposal of fixed assets.
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 30 June 31 December
2003 2002 2002
pence per pence per pence per
share share share
Basic (loss)/earnings per share (8.1) 2.2 13.4
Adjustments :
Exceptional items 11.4 1.2 2.3
Profit on disposal of fixed assets - - (0.7)
Adjusted earnings per share 3.3 3.4 15.0
Diluted basic (loss)/earnings per ordinary share is based on the profit on
ordinary activities after taxation and on 10,690,982 (2002: 10,730,677) ordinary
shares, being the weighted average number of ordinary shares in issue during the
period of 10,659,876 (2002: 10,653,633) increased by 31,106 (2002: 77,044)
shares, being the weighted average number of ordinary shares which would have
been issued if the outstanding options to acquire shares in the Group had been
exercised at the average price during the period.
Diluted adjusted earnings per ordinary share is based on the (loss)/profit on
ordinary activities after taxation and adjusted to take into account exceptional
items and profit on disposal of fixed assets.
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 30 June 31 December
2003 2002 2002
pence per Pence per pence per
Share share share
Diluted basic (loss)/earnings per share (8.1) 2.1 13.4
Adjustments :
Exceptional items 11.4 1.2 2.3
Profit on disposal of fixed assets - - (0.7)
Diluted adjusted earnings per share 3.3 3.3 15.0
6. Reconciliation of operating (loss)/profit to net cash inflow from operating
activities
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 30 June 31 December
2003 2002 2002
£000 £000 £000
Continuing operating activities
Operating profit before exceptional costs 469 506 1,971
Exceptional costs (1,024) (167) (338)
Operating (loss) / profit (555) 339 1,633
Depreciation 937 1,002 2,030
Impairment of tangible fixed assets-exceptional 565 42 42
Profit on sale of assets - (13) (27)
Goodwill amortisation 23 23 46
Increase in stocks (787) (434) (903)
Decrease / (increase) in debtors 987 301 (1,228)
(Decrease) / increase in creditors (920) (524) 434
Net cash inflow from continuing operating activities 250 736 2,027
The net cash inflow from continuing operating activities of £250,000 is stated
after an outflow of £459,000 in respect of exceptional items.
7. Reconciliation of decrease in net cash to movement in net cash
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 30 June 31 December
2003 2002 2002
£000 £000 £000
Decrease in cash during the period (1,188) (720) (546)
Cash outflow from decrease in debt and lease financing 7 7 13
Movement in net cash during the period resulting from
cash flows (1,181) (713) (533)
Currency movements - - (1)
Net cash at the start of the period 1,601 2,135 2,135
Net cash at the end of the period 420 1,422 1,601
8. Statement of total recognised gains and losses
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 30 June 31 December
2003 2002 2002
£000 £000 £000
(Loss) / profit for the period (863) 233 1,428
Unrealised reduction on impairment of properties (772) -
Currency translation differences - - (1)
(1,635) 233 1,427
Prior year adjustment - (166) (166)
(1,635) 67 1,261
9. Financial Information
(a) The interim financial statement has been prepared in accordance with the
accounting policies set out in the Annual Report for the year ended 31 December
2002.
(b) The interim financial statement was approved by the board on 27 August 2003.
Neither the interim financial statement nor comparative information for the six
months ended 30 June 2002 have been audited or reviewed.
(c) The interim financial statement set out above does not constitute statutory
accounts as defined by the Companies Act 1985. Statutory accounts for the year
ended 31 December 2002, including an unqualified audit report which did not
contain statements under Section 237 (2) or (3) of the Companies Act 1985 have
been filed with the Registrar of Companies.
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