Interim Results
Churchill China PLC
31 August 2004
For Immediate Release 31 August 2004
CHURCHILL CHINA PLC
INTERIM RESULTS
for the six months ended 30 June 2004
Churchill China plc, is pleased to announce its results for the six months ended
30 June 2004.
Key Points:
• Sales of £23.7m (2003: £23.7m)
• 17 per cent revenue growth in hospitality products
• 134 per cent increase in profit before exceptional items and taxation to
£1.3m (2003: £0.5m)
• Profit before taxation £1.3m (2003: loss £0.8m)
• Adjusted earnings per share before exceptional items were 8.2p (2003:
3.3p)
• Earnings per share 8.2p (2003: loss 8.1p)
• Interim dividend increased to 3.7p per ordinary share (2003: 3.3p)
• Placing of Steelite International plc 17 per cent holding to institutional
shareholders
Stephen Roper, Chairman, said:
'We are extremely pleased with the strong first half performance, particularly
with our hospitality products. We feel confident that we will meet expectations
for the full year.'
For further information, please contact:
Stephen Roper, Chairman Today on: 020 7466 5000
Churchill China Plc Thereafter on: 01782 577566
Tim Anderson/ Lisa Baderoon/ Rebecca Skye Dietrich Tel No: 020 7466 5000
Buchanan Communications
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report that in the first half of the year the Group's overall
performance has been in line with expectations. Profit before taxation was £1.3m
(2003: £0.5m before exceptional items and taxation), representing a 134 per cent
increase on a comparable basis. Profit after exceptional items but before
taxation was £1.3m (2003: loss £0.8m)
The Group is differentiated from other quoted UK china manufacturers through its
strong position as a supplier to the hospitality industry. We have achieved our
highest level of sales growth in several years to hotels, restaurants and pubs,
with a 17% increase in sales in the first half. This performance was well ahead
of our expectations. Whilst sales to retail customers have reduced from last
year this mainly reflects the loss of capacity arising from 2003's restructuring
and the need to transfer productive capacity to support the growth in sales to
the hospitality trade.
The 2003 restructuring process has clearly benefitted levels of profitability
and more closely aligned our business with our customers needs. We are now
concentrating on securing the long term efficiency benefits which will flow from
the new production configuration.
Financial Overview
In the six months to 30 June 2004 Group turnover for was unchanged at £23.7m
(2003: £23.7m).
Operating profit increased to £1.2m (2003 £0.5m before exceptional items)
reflecting the benefits of last years restructuring and the progress made in
sales of hospitality products. This performance was marginally affected in the
short term by the need to transfer capacity configured for retail to the
manufacture of hospitality products.
Adjusted earnings per share before exceptional items were 8.2p (2003: 3.3p).
Basic earnings per share after exceptional items were 8.2p (2003: loss 8.1p)
Operating cash generation in the half year was good at £1.0m (2003: £0.3m) after
an outflow in respect of increased stock levels of £1.0m. Stock levels increased
from £9.1m to £10.1m reflecting higher sourced sales and the establishment of
stocks to support sales of new introductions.
Cash balances at the half year were £2.5m. The increase in cash balances of
£0.8m included the proceeds of the disposal of surplus buildings and equipment
at the Group's Longton site of £1.0m, the sale of which was completed in March
2004
Dividend
The Board is pleased to announce an increase in the interim dividend to 3.7p per
share, (2003: 3.3p) reflecting improved profitability and continued cash
generation.
Steelite Shareholding
The succesful placing of Steelite International plc's 17 per cent holding with a
number of new institutions, earlier this year increased both the breadth and
quality of Churchill's institutional shareholder base.
Operating Review
Sales
Sales of hospitality products were £12.3m (2003: £10.5m) reflecting growth in
almost all markets and particular progress in the USA where we achieved a 60%
increase in sales. The UK and key European markets also performed well. This
growth has been achieved as a result of consistent investment in new product
development and additional resource in sales and marketing. Both the premium
Alchemy and middle market Churchill ranges are performing well. The market has
responded favourably to new launches, particularly range extensions associated
with Alchemy. These new introductions have helped Churchill penetrate the
international hotel chain market for the first time where we have secured a
number of major new installations.
Sales of our retail products were £11.4m (2003: £13.2m). These were lower, as
expected, following our 2003 restructuring, but were also affected by the need
to transfer manufacturing capacity to meet higher hospitality demand levels.
Sales of our sourced ranges increased by 42% to £8.3m (2003 £5.8m). Licensed
product continues to perform well. In strategic terms we have seen further
growth in key volume distribution channels with sales to our top ten customers
growing by 5 per cent. The retail market is still important to the Group overall
and we continue to build on our strong customer relationships through innovation
in product and design.
Manufacturing and Operations
Our restructuring programme was succesfully completed at the end of 2003 and as
a consequence we now have essentially one highly automated factory undertaking
the majority of the Group's manufacturing requirements. We have achieved
substantial cost savings and efficiency benefits. Our cost base going forward
will be affected by further rises in energy costs, however we expect these to be
largely offset by reductions in raw material costs.
The change in the balance of our business between manufactured and sourced sales
and the increasing service requirements of our customer base have required us to
consider investment in additional warehousing capacity. To this end we have
committed to building a new storage facility at our Sandyford site to replace
outdated facilities and third party storage arrangements. The cost of around £3m
will be funded from operating cash generation and the sale of surplus assets.
The new warehouse will be a state-of-the-art 56,000 square foot storage facility
and is expected to realise substantial service and cost benefits once it is
commissioned later in 2005. It also reflects Churchill's continued commitment to
our UK base and local community.
Sourcing
We continue to work with our key business partners to develop stable and high
quality sources of supply across a wide range of tabletop products. The
establishment of reliable alternative suppliers is an important part of our
strategy and we are pleased that these relationships are working well. Good
progress has been made in the first half of the year in building a comprehensive
glassware range and in developing our supply chain management systems to ensure
high levels of customer service.
Prospects
Current trading remains satisfactory and the Board is confident of meeting
expectations for the full year.
The very strong growth in sales of our hospitality products in the first half
has been outstanding. Sales in the second half year in this area are generally
characterised by a seasonal move towards replacements rather than new
installations as hotels, pubs and restaurants gear up for Christmas. As such,
whilst we expect to make further progress, at this stage it would be ambitious
to assume growth levels matching those achieved in the first half year. We
anticipate progress in sales of retail products, particularly those sourced from
overseas, as new listings achieved with major retailers come into effect during
the second half year.
Stephen Roper
Chairman
31 August 2004
Consolidated profit and loss account
for the six months ended 30 June 2004
Total Unaudited Unaudited Unaudited Audited Audited Audited
Six Six Six Six Year Year Year
months to months to months to months to ended ended ended
30 June 30 June 30 June 30 June 31 December 31 December 31 December
2004 2003 2003 2003 2003 2003 2003
Before Before
Total exceptional Exceptional Total exceptional Exceptional Total
items items items items
Note £000 £000 £000 £000 £000 £000 £000
Turnover 1 23,707 23,724 - 23,724 49,474 - 49,474
Operating 2 1,213 469 (1,024) (555) 2,727 (1,289) 1,438
profit /
(loss)
Share of operating
profit of associate
net of 9 51 (294) (243) 29 (350) (321)
impairment
Profit on - - - - - 18 18
disposal of
fixed asset
Net interest 43 19 - 19 27 - 27
receivable
Profit /
(loss) on
ordinary
activities 1,265 539 (1,318) (779) 2,783 (1,621) 1,162
before
taxation
Tax on
profit /
(loss) on
ordinary (364) (190) 106 (84) (843) 290 (553)
activities
Profit /
(loss) on
ordinary
activities 901 349 (1,212) (863) 1,940 (1,331) 609
after
taxation
Dividends 3 (399) (352) (1,070)
Retained
profit /
(loss) for
the period 502 (1,215) (461)
Pence per Pence per Pence per
share share share
Earnings / (loss)
per ordinary
share
Basic 4 8.2 (8.1) 5.7
Adjusted 4 8.2 3.3 18.2
Diluted
earnings /
(loss)
per ordinary
share
Basic 4 8.3 (8.1) 5.7
Adjusted 4 8.3 3.3 18.1
Consolidated balance sheet
as at 30 June 2004
Unaudited Unaudited Audited
30 June 30 June 31 December
2004 2003 2003
£000 £000 £000
Fixed assets
Intangible Assets 107 153 130
Tangible assets 11,328 11,912 11,443
Investments 756 840 761
--------- --------- ---------
12,191 12,905 12,334
--------- --------- ---------
Current assets
Stocks 10,102 10,148 9,144
Debtors: amounts falling due within one 9,514 10,301 11,008
year
Investments and other assets for sale 1,050
Cash at bank and in hand 2,500 434 1,717
--------- --------- ---------
22,116 20,883 22,919
Creditors: amounts falling due within (6,983) (7,947) (8,408)
one year --------- --------- ---------
Net current assets 15,133 12,936 14,511
--------- --------- ---------
Total assets less current liabilities 27,324 25,841 26,845
Creditors: amounts falling due after - - -
one year
Provisions for liabilities and - - (122)
charges --------- --------- ---------
Net assets 27,324 25,841 26,723
========= ========= =========
Capital and reserves
Called up share capital 1,078 1,066 1,070
Share premium account 2,104 1,967 2,013
Revaluation reserve 1,304 1,316 1,392
Other reserves 253 253 253
Profit and loss account 22,585 21,239 21,995
--------- --------- ---------
Equity shareholders' funds 27,324 25,841 26,723
========= ========= =========
Consolidated cash flow statement
for the six months ended 30 June 2004
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 30 June 31 December
2004 2003 2003
£000 £000 £000
Net cash inflow from operating 965 250 2,924
activities
(reconciliation to operating
profit / (loss) - note 5)
Returns on investments and
servicing of finance
Net interest received 40 19 25
--------- --------- --------
Taxation
UK corporation tax paid (129) (374) (731)
--------- --------- --------
Capital expenditure and
financial investment
Purchase of tangible fixed (540) (488) (1,231)
assets
Sale of tangible fixed assets 1,071 51 69
--------- --------- --------
Net cash inflow / (outflow) for
capital expenditure and
financial investment 531 (437) (1,162)
--------- --------- --------
Equity dividends paid (717) (639) (992)
--------- --------- --------
Financing
Issue of ordinary shares 99 - 50
Payment of principal under (6) (7) (13)
finance leases --------- --------- --------
Net cash inflow / (outflow) 93 (7) 37
from financing --------- --------- --------
Increase / (decrease) in net 783 (1,188) 101
cash ========= ========= ========
1. Analysis of turnover
The Directors consider that the Group's activities are a single class of
business.
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 30 June 31 December
2004 2003 2003
£000 £000 £000
Geographic Turnover
United Kingdom 14,213 13,662 30,697
Rest of Europe 5,476 5,546 10,821
North America 2,896 3,389 6,051
Australasia 460 533 916
Far East 194 238 346
Other 468 356 643
--------- --------- ---------
23,707 23,724 49,474
========= ========= =========
2. Exceptional Items
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 30 June 31 December
2004 2003 2003
£000 £000 £000
Restructuring costs - 459 972
Impairment of tangible fixed - 565 103
assets
Write down of stocks and work - - 214
in progress --------- --------- ---------
- 1,024 1,289
Impairment of investments - 294 350
--------- --------- ---------
- 1,318 1,639
========= ========= =========
Costs arising from the restructuring of manufacturing operations in 2003
and the resulting write down of tangible fixed assets and investments were
treated as exceptional and were charged in arriving at the profit before
tax for that year
A credit of £nil (30 June 2003: £106,000, 31 December 2003: £290,000) was
included in the corporation tax charge in relation to the exceptional
items.
The cash outflow in relation to exceptional items in the period was
£122,000 (30 June 2003: £459,000, 31 December 2003: £850,000)
3. Dividend
The proposed dividend has been calculated on 10,786,126 shares being those
in issue at 30 June 2004 qualifying for the dividend. The dividend will be
paid on 4 October 2004 to shareholders on the register on 10 September 2004
4. Earnings / (loss) per ordinary share
Basic earnings / (loss) per ordinary share is based on the profit / (loss)
on ordinary activities after taxation and on 10,731,877 (2003: 10,659,876)
ordinary shares, being the weighted average number of ordinary shares in
issue during the year.
Adjusted earnings per ordinary share is based on the 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
2004 2003 2003
pence per pence per pence per
share share share
Basic earnings per share 8.4 (8.1) 5.7
Adjustments :
Exceptional items - 11.4 12.6
Profit on disposal of fixed - - (0.1)
assets --------- --------- ---------
Adjusted earnings per share 8.4 3.3 18.2
========= ========= =========
Diluted basic earnings per ordinary share is based on the profit on
ordinary activities after taxation and on 10,800,070 (2003: 10,690,982)
ordinary shares, being the weighted average number of ordinary shares in
issue during the year of 10,731,877 (2003:10,659,876) increased by 68,193
(2003:31,006) 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 year.
Diluted adjusted earnings per ordinary share is based on the 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
2004 2003 2003
pence per pence per pence per
share share share
Diluted basic earnings per 8.3 (8.1) 5.7
share
Adjustments :
Exceptional items 11.4 12.6 (0.2)
Profit on disposal of fixed
assets --------- -------- ----------
Diluted adjusted earnings per 8.3 3.3 18.1
share ========= ======== ==========
5. Reconciliation of operating 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
2004 2003 2003
£000 £000 £000
Continuing operating
activities
Operating profit before 1,213 469 2,727
exceptional costs
Exceptional costs - (1,024) (1,289)
--------- --------- ---------
Operating profit / (loss) 1,213 (555) 1,438
Depreciation 614 937 1,612
Impairment of tangible fixed - 565 103
assets-exceptional
Profit on sale of assets 21 - 28
Goodwill amortisation 23 23 46
(Increase) / decrease in (958) (787) 218
stocks
Decrease in debtors 1,494 987 280
Decrease in creditors (1,320) (920) (923)
(Decrease) / increase in (122) - 122
provisions and liabilities --------- --------- ---------
Net inflow from continuing 965 250 2,924
operating activities ========= ========= =========
6. 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
2004 2003 2003
£000 £000 £000
Increase / (decrease) in cash 783 (1,188) 101
during the period
Cash outflow from decrease in 6 7 13
debt and lease financing
Currency movements (4)
--------- --------- --------
Movement in net cash during the 789 (1,181) 110
period resulting from cash
flows
Net cash at the start of the 1,711 1,601 1,601
period --------- --------- --------
Net cash at the end of the 2,500 420 1,711
period ========= ========= ========
7. Statement of total recognised gains and losses
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 30 June 31 December
2004 2003 2003
£000 £000 £000
Profit / (loss) for the 901 (863) 609
period
Unrealised reduction on - (772) (690)
impairment of properties
Currency translation - - (3)
differences --------- --------- ---------
901 (1,635) (84)
========= ========= =========
8. 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 2003.
(b) The interim financial statement was approved by the board on 27 August
2004. Neither the interim financial statement nor comparative information
for the six months ended 30 June 2003 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 2003, 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.
This information is provided by RNS
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