Preliminary Results

RNS Number : 1334J

Churchill China PLC

08 April 2020

 

For immediate release

8 April 2020

CHURCHILL CHINA plc

("Churchill" or the "Company" or the "Group")

PRELIMINARY RESULTS

For the year ended 31 December 2019

Further delivery of strategic plan in 2019. Response to COVID-19 underway

Further to the trading update issued in relation to summary level results and COVID-19 on 24 March 2020, Churchill China plc (AIM: CHH), the manufacturer of innovative performance ceramic products serving hospitality markets worldwide, is pleased to announce its Preliminary Results for the year ended 31 December 2019.

Key Highlights:

Financial 2019

· Operating profit before exceptional items up 22% to £11.2m (2018: £9.2m)

o  including £0.4m from ten months of ownership of Furlong Mills

· Profit before exceptional items and  tax up 19% to £11.2m (2018: £9.4m)

· Reported profit before tax after exceptional items £11.3m (2018: £8.8m)

· Adjusted earnings per share up 17% to 81.7p (2018: 69.6p)

· Basic earnings per share 82.6p (2018: 65.6p)

· Cash generated from operations £11.3m (2018: £8.3m)

· Net cash and deposits of £15.6m (2018: £17.4m)

Business 2019

· Total revenues up 17% at £67.5m (2018: £57.5m)

o  including £4.8m from ten months of ownership of Furlong Mills

· Ceramics (like for like) revenue growth 9% (2018: 7%)

· Export revenues up 13%

· Increased sales of Hospitality added value product

· Higher levels of investment in capital expenditure, acquisition of Furlong Mills and purchase of products and brand from Dudson

· Performance continues long term growth trend

COVID-19

· Action taken to safeguard staff and mitigate short term impact on the business

· Manufacturing operations temporarily suspended,  substantial reduction in short term cash cost of operation

· Cash reserves conserved, final dividend suspended

· Strong business, financial position and forward debt capacity supports resilience

· Continuous appraisal of operational response

Alan McWalter, Chairman of Churchill China, commented:

"Churchill has in the past proved itself to be a well run and resilient business capable of dealing with significant external shocks. This reflects our strong, well resourced operations, our experienced management team and our long term approach to business.

Whilst our immediate actions are focused on the short term, we believe that our core strategies remain sound and that we are well positioned to continue to prosper in the longer term."

Analyst conference call

A conference call for analysts will be held at 11.00am this morning, 8 April 2020. Analysts who require dial-in details please contact Buchanan at  [e-mail]  or telephone [phone]. 

For further information, please contact:

Churchill China plc	Tel: [phone]
David O'Connor / David Taylor / James Roper
Buchanan	Tel: [phone]
Mark Court / Charlotte Slater
Investec	Tel: [phone]
David Flin / Alex Wright / Virginia Bull

This announcement contains information which, prior to its disclosure, was considered inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (MAR)

 

CHAIRMAN'S STATEMENT

Introduction

I am pleased to report that our performance in 2019 maintained the strong record of progress we have established in recent years. Our business strategy, emphasising innovation, differentiation and service, has continued to deliver value to all our stakeholders and to demonstrate long term resilience and sustainability.

We have acted quickly to face the challenges presented by COVID-19 and the rapidly changing business environment. Churchill has prioritised the safety of its employees and other stakeholders and has acted quickly to ensure this. Our contingency planning process is underway based on the assessment of a number of business scenarios and we have begun to adjust our plans accordingly. Our exposure to the hospitality industry will undoubtedly impact our performance in the immediate future, but we have implemented appropriate actions to substantially reduce the cash cost of our operations in the short term.

Churchill has a strong, ungeared balance sheet including high levels of liquid cash. We have further undrawn facilities and the opportunity to utilise our substantial asset base to secure additional facilities if required.

The current business climate is as uncertain as it has been for many years. Whilst the medium and long term effects of the present crisis are as yet unclear, Churchill is a well invested, resilient and highly responsive business led by an experienced management team. We are well positioned to meet the current challenges and we have a considerable ability to adjust our forward strategy to ensure that we continue to deliver value to our stakeholders.

Financial Review 2019

Total revenues increased by 17% to £67.5m (2018: £57.5m) with further strong growth in Hospitality ceramics export sales and the inclusion of revenue of £4.8m from Furlong Mills for ten months of the period.

Ceramic revenue growth, excluding the effects of the acquisition of Furlong Mills, was 9% (2018: 7%) with sales rising to £62.7m (2018: £57.5m).  UK revenues increased by 3% to £23.6m (2018: £23.0m). Export revenues were £4.6m higher (+13%) at £39.1m (2018: £34.5m).

Within these figures there was, mainly in the second half year, a contribution from the purchase of products and IP from Dudson. Sales from Dudson products were marginally above our initial targets at £1.2m (2018: £0.0m). Retail sales, as forecast, were lower than in 2018.

Gross margins grew within our Ceramics business as we continued to increase sales of added value product.

Operating profit before exceptional items increased by 22% to £11.2m (2018: £9.2m) with Furlong Mills contributing £0.4m (4%) of this increase. On a like-for-like basis operating profit increased by 18%. Operating profit margins increased to 16.7% (2018: 16.0%). Growth in operating profit arose mainly from improved revenues and a further increase in the proportion of our business represented by added value products. We have continued to invest in the extension of distribution in our export markets, in product development and in improved customer service.

Profit before exceptional items and income tax rose by 19% to £11.2m (2018: £9.4m), largely as a result of the increase in operating profit. This strong performance maintains our record of profit growth. In the five years to the end of 2019 we have increased profit before income tax at a compound rate of 21% per annum.

Adjusted earnings per share improved by 17% to 81.7p (2018: 69.6p).

During the year we purchased, in two stages, the remaining equity in our associate company, Furlong Mills Limited, at a net cash cost of £2.9m. As a result of this we now consolidate Furlong Mills as a subsidiary of Churchill. As we acquired a higher value of assets than the overall consideration paid, negative goodwill of £0.1m was generated. In accordance with accounting standards, this has been credited to the Income Statement and treated as an exceptional item.

Reported profit before tax rose to £11.3m from £8.8m in 2018.

Basic earnings per share, including the above exceptional items, improved by 26% to 82.6p (2018: 65.6p)

We have continued to generate a good operating cash flow of £11.3m in the year (2018: £8.3m). Working capital requirements were slightly higher reflecting an increased level of inventory attributable to the establishment of a stock holding in our new European warehouse and a higher level of sales.

Capital expenditure rose to support the increased level of activity within our business. In addition to the £2.1m spent on the purchase of equipment and intellectual property from Dudson, we have invested a further £3.7m (2018: £2.1m) in developing our operations. This expenditure includes projects to extend our manufacturing space and to provide additional kiln capacity for added value production which we expect will be completed in the first half of 2020. All our operations are well invested.

We continue to enjoy a strong, ungeared, balance sheet with net assets of £41.8m. Despite the significant level of investment during the year net cash and deposits remained high at £15.6m (2018: £17.4m). Churchill's business model emphasises the generation of cash and this provides flexibility in adverse conditions. Our assets are largely tangible and also give us a high degree of short term liquidity. We retain significant forward capacity to manage our cash flow and to raise additional finance if necessary.

Dividend

The Board is aware of the importance of dividend income to shareholders and our long term policy remains that the owners of the business should receive an appropriate return. However, given the current levels of uncertainty in relation to COVID-19, the Board believes the most appropriate position at this time is not to propose a final dividend in respect of 2019 (2018: 20.3p per ordinary share). Whilst the Group continues to maintain high levels of cash and deposit balances, it has put in place a number of actions to preserve its operational position. We plan to retain cash within the business to provide forward flexibility at present. The Board will review its dividend policy at the earliest opportunity once the overall impact of COVID-19 is more certain.

Business 2019

Ceramics

We have continued to make good progress within our Ceramics business in line with the strategies that we have articulated. As 2019 demonstrates, we now enjoy a much wider spread of revenue from a number of different markets.

Export revenues increased by 13% and now represent 62% of Ceramics sales (2018: 60%). The business' progress in overseas markets has been maintained, with Europe and the USA both contributing strongly to growth. Our established market positions have further developed and we have continued to invest in regional operations. This export growth is the outfall of consistent investment in new product development and in the building of appropriate distribution channels.

Our UK sales have also increased after a period of consolidation. The actions implemented in the last eighteen months to improve our competitive position have worked well and revenues in the UK increased by 3%. We benefit from wide distribution across a range of sectors and have a deep and long established presence in what is a replacement orientated market.

In April 2019 we purchased product and brand intellectual property from Dudson in order to accelerate two key elements of our strategic development; growing sales of added value product and the extension of our distribution channels overseas. The Dudson range has now been integrated into our Hospitality offering and we have established a number of separate distribution arrangements in key market sectors. Total sales under the Dudson brand in the period following acquisition were £1.2m, slightly ahead of our original estimates.

The translation of sales from standard to added value product remains an important part of our long term strategy and we have achieved a further increase in the proportion of our revenue attributable to added value product which now represents over 47% of our Hospitality sales. This increase reflects the substantial investment in innovation, product and market research and new product development made in recent years.  Stonecast continues to grow strongly and our Studio Prints range has made further progress. The purchase of intellectual property in the Dudson Evo and Harvest products, which use distinctive glaze technology, will provide additional opportunities to continue to grow added value product revenues.

Churchill's core values are innovation, technical performance and service. The strength of our established relationships with end users, distributors and agents in the UK and worldwide is of great value to the business.

Materials

The acquisition of control of Furlong Mills in February 2019 has secured an important part of our supply chain. Furlong is a ceramic materials manufacturer based in Stoke on Trent and provides processed clay body and glaze to Churchill and other major manufacturers. Longer term we wish to maintain our position of producing a high quality technical performance ceramic and continuing to innovate and differentiate our product and we believe our increased investment in Furlong and its leading position in applied material science will support this.

Furlong Mills has traded in line with our expectations during the ten months of our ownership, total revenues were £7.8m, of which £3.0m was sold to Churchill.  Operating profit for the period was £0.4m.

Operations

We have continued to make substantial progress in the evolution of our manufacturing and logistics operations, again in line with our established strategies and business plan.

The growth of our business in 2019 and continued orientation towards differentiated product provided several challenges for our operational team. Activity levels remained high and the acceleration of our capital investment programme also brought additional demands. We have also prioritised initiatives aimed at improving the sustainability of our operations. New product development has continued. We expect to complete two major projects in the first half of 2020 which will provide additional production space and first stage kiln firing capacity. Both of these projects represent important long term investments and will improve our efficiency and flexibility as well as increasing overall capacity.

The integration of Dudson product manufacture into our operations, including new technologies and processes, has been completed successfully.

During the year we established a third party logistics facility in Rotterdam. This investment allows us to provide further service improvements to our European customer base and to mitigate the potential impact of Brexit on our delivery security. Long term we continue to expect that Europe will provide further growth opportunities and the ability to supply within market will support this development.

Brexit

We have reviewed our exposure to the ongoing Brexit process. A major part of our revenue is earned outside the UK and our manufacturing process, in part, relies upon materials and equipment sourced from overseas. We believe we have identified, developed and implemented, where appropriate plans to mitigate the effect of potential disruption on our business where possible.

People

As I commented on earlier in this statement, 2019 was a record year for our business. This performance reflects the knowledge, strength and commitment of our team at all levels of our operations. We have built a strong business with a sound, long term, business plan. I once again thank all our employees for their contribution to Churchill's success. The qualities inherent within the Churchill team will stand the business in good stead in the coming months.

We have continued to invest in the development of all our staff and have maintained our commitment to increased training and to continuous improvement programmes. We have a high level of engagement with our workforce and it is encouraging to see the result of this in their performance.

COVID-19

The short and long term impact of COVID-19 is not yet clear. The Company has acted quickly to assess the impact on its business and to develop and implement a set of immediate responses to the impact upon our operations in the short term. Our first priority was to ensure the safety of our employees. To that end we commenced a programme of distancing within certain operations on 19 March and on 25 March we suspended production at our Sandyford site and furloughed the majority of our workforce.  We retain the ability to meet short term demand from inventories held in our logistics operations in the UK, Rotterdam and Chicago.

Given that the majority of our costs are represented by production materials, labour and energy, the suspension of manufacturing operations, supported by the Government's Coronavirus Job Retention Scheme has, in the short term, substantially lowered the cash cost of our operations to below £1m per month. We anticipate that our current cash reserves, which are highly liquid, will provide a significant level of forward cover during and beyond the present lock down period.

We are continually reviewing medium and longer term business scenarios as part of our contingency planning process. As a business we enjoy a wide spread of revenue both in terms of geography, distribution channels and product range and we are developing forward plans to provide flexibility should future market performance change from that previously experienced. Whilst we expect that Hospitality revenues may be lower in the short term and may take several months to recover to normal levels we retain the ability to optimise our UK manufacturing operations through a renewed focus on other sectors within the tableware market and other alternative measures.

Our record of consistent cash generation, regular investment and strong balance sheet gives us a significant level of flexibility in the medium term. We believe that, if necessary, we may reduce the ongoing level of expenditure on revenue and capital projects without significantly impacting our ability to re-focus or grow our business.

Outlook

2019 was a very successful year, reinforcing the substantial progress made in developing and implementing long term growth strategies. Churchill has been repositioned as a business and offers innovative and differentiated products across a wide spread of markets. 2020 had started well with performance ahead of our expectations and in other circumstances this would be the basis of a further improvement in performance. However, the as yet unknown impact of COVID-19 on our markets will undoubtedly have an impact on current year performance, particularly in the first half year.

Churchill has in the past proved itself to be a well run and resilient business capable of dealing with significant external shocks. This reflects our strong, well resourced operations, our experienced management team and our long term approach to business. We enjoy a high degree of operational and financial flexibility in the short and medium term. We have already adjusted our forward plans both to manage our cash and reduce costs where appropriate, but also to prepare for changes in our market environment longer term. Whilst our immediate actions are focused on the short term, we believe that our core strategies remain sound and that we are well positioned to continue to prosper in the longer term.

As a result of the evolving COVID-19 position and consequent lack of forward visibility, no formal guidance will be given on future financial performance at the present time. We intend to reinstate guidance as soon as practicable and, in the meantime, will continue to update investors as appropriate.

Alan McWalter

Chairman

8 April 2020

 

Churchill China plc
Consolidated Income Statement
for the year ended 31 December 2019
					Audited		Audited
					Year to		Year to
					31 December 2019		31 December 2018
					£000		£000
				Note
Revenue				1	67,502		57,479
Operating profit before exceptional item					11,242		9,237
Exceptional items				2	117		(541)
Operating profit					11,359		8,696
Share of results of associate company					(22)		185
Finance income				3	124		110
Finance costs				3	(168)		(144)
Profit before exceptional item and income tax					11,176		9,388
Exceptional item				2	117		(541)
Profit before income tax					11,293		8,847
Income tax expense				4	(2,136)		(1,649)
Profit for the year					9,157		7,198
Profit for the year is attributable to: Owners of the Company					9,063		7,198
Non-controlling interests					94		-
					9,157		7,198
					Pence per		Pence per
					Share		share
Basic earnings per ordinary share				5	82.6		65.6
Adjusted earnings per ordinary share				5	81.7		69.6
Diluted earnings per ordinary shares				5	81.8		65.0
Diluted adjusted earnings per ordinary share				5	80.9		69.0

 

Churchill China plc
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2019
				Audited		Audited
				Year to		Year to
				31 December 2019		31 December 2018
				£000		£000
Other comprehensive (expense) / income
Items that will not be reclassified to profit or loss:
Actuarial loss on retirement benefit obligations				(996)		(175)
Items that may be reclassified subsequently to profit or loss:
Currency translation differences				(16)		23
Other comprehensive expense				(1,012)		(152)
Profit for the year				9,157		7,198
Total comprehensive income for the period				8,145		7,046
Attributable to:
Owners of the Company				8,051		7,046
Non controlling interests				94		-
				8,145		7,046
All the above figures relate to continuing operations

Churchill China plc
Consolidated Balance Sheet
as at 31 December 2019
				Audited		Audited
				31 December		31 December
				2019		2018
				£000		£000
Assets
Non Current assets
Property, plant and equipment				19,769		14,847
Intangible assets				1,571		91
Investment in associates				-		1,732
Deferred income tax assets				1,103		1,107
				22,443		17,777
Current assets
Inventories				11,647		9,911
Trade and other receivables				10,951		9,719
Other financial assets				3,007		3,001
Cash and cash equivalents				12,572		14,380
				38,177		37,011
Total assets				60,620		54,788
Liabilities
Current liabilities
Trade and other payables				(11,105)		(9,561)
Current income tax liabilities				(1,022)		(1,063)
Total current liabilities				(12,127)		(10,624)
Non-current liabilities
Lease liabilities				(269)		-
Deferred income tax liabilities				(1,040)		(754)
Retirement benefit obligations				(5,343)		(5,443)
Total non-current liabilities				(6,652)		(6,197)
Total liabilities				(18,779)		(16,821)
Net assets				41,841		37,967
Equity attributable to owners of the Company
Issued share capital				1,103		1,103
Share premium account				2,348		2,348
Treasury shares				(446)		(729)
Other reserves				1,802		1,703
Retained earnings				37,034		33,542
				41,841		37,967

 

Churchill China plc
Consolidated Statement of Changes in Equity
as at 31 December 2019													Issued					Non-
										Retained			share	Share	Treasury	Other		controlling	Total
										earnings			capital	premium	shares	Reserves	Total	Interest	equity
										£000			£000	£000	£000	£000	£000	£000	£000
Balance at 1 January 2018										29,456			1,103	2,348	(579)	1,565	33,893	-	33,893
Comprehensive income
Profit for the period										7,198			-	-	-	-	7,198	-	7,198
Other comprehensive income
Depreciation transfer - gross										12			-	-	-	(12)	-	-	-
Depreciation transfer - tax										(2)			-	-	-	2	-	-	-
Remeasurement of post employment benefit obligations - net of tax										(175)			-	-	-	-	(175)	-	(175)
Currency translation										-			-	-	-	23	23	-	23
Total comprehensive income										7,033			-	-	-	13	(7,046)	-	(7,046)
Transactions with owners
Dividends										(2,840)			-	-	-	-	(2,840)	-	(2,840)
Proceeds of share issue										-			-	-	3	-	3	-	3
Share based payment										137			-	-	-	125	262	-	262
Deferred tax - share based payment										(9)			-	-	-	-	(9)	-	(9)
Treasury shares										(235)			-	-	(153)	-	(388)	-	(388)
Total transactions with owners										(2,947)			-	-	(150)	125	(2,972)	-	(2,972)
Balance at 31 December 2018										33,542			1,103	2,348	(729)	1,703	37,967	-	37,967
Comprehensive income
Profit for the period										9,063			-	-	-	-	9,063	94	9,157
Other comprehensive income
Depreciation transfer - gross										12			-	-	-	(12)	-	-	-
Depreciation transfer - tax										(2)			-	-	-	2	-	-	-
Remeasurement of post employment benefit obligations - net of tax										(996)			-	-	-	-	(996)	-	(996)
Currency translation										-			-	-	-	(16)	(16)	-	(16)
Total comprehensive income										8,077			-	-	-	(26)	8,051	94	8,145
Transactions with owners
Dividends										(3,356)			-	-	-	-	(3,356)	-	(3,356)
Proceeds of share issue										-			-	-	3	-	3	-	3
Share based payment										199			-	-	-	125	324	-	324
Deferred tax - share based payment										118			-	-	-	-	118	-	118
Treasury shares										(280)			-	-	280	-	-	-	-
Non-controlling interest on acquisition										-			-	-	-	-	-	1,902	1,902
Purchase of non-controlling interest										-			-	-	-	-	-	(1,996)	(1,996)
Write off of premium on purchase of non- controlling interest										(1,266)			-	-	-	-	(1,266)	-	(1,266)
Total transactions with owners										(4,585)			-	-	283	125	(4,177)	(94)	(4,271)
Balance at 31 December 2019										37,034			1,103	2,348	(446)	1,802	41,841	-	41,841

 

Churchill China plc
Consolidated Cash Flow Statement
for the year ended 31 December 2019
				Audited		Audited
				Year to		Year to
				31 December 2019		31 December 2018
				£000		£000
Cash flows from operating activities
Cash generated from operations (note 6)				11,327		8,260
Interest received				124		110
Interest paid				(38)		(1)
Income tax paid				(1,845)		(1,321)
Net cash generated from operating activities				9,568		7,048
Cash flows from investing activities
Purchases of property, plant and equipment				(3,914)		(2,042)
Proceeds on disposal of property, plant and equipment				96		80
Purchases of intangible assets				(1,721)		(59)
Purchase of subsidiary, net of cash acquired				370		-
Net cash used in investing activities				(5,169)		(2,021)
Cash flows from financing activities
Issue of ordinary shares				3		3
Purchase of treasury shares				-		(387)
Dividends paid				(3,356)		(2,840)
Purchase of non-controlling interest				(3,263)		-
New leases acquired				576		-
Payment of principal under finance leases				(161)		-
Net sale / (purchase) of other financial assets				(5)		(1)
Net cash used in financing activities				(6,206)		(3,225)
Net (decrease) / increase in cash and cash equivalents				(1,807)		1,802
Cash and cash equivalents at the beginning of the year				14,380		12,577
Exchange (loss) / gain on cash and cash equivalents				(1)		1
Cash and cash equivalents at the end of the year				12,572		14,380

 

1. Segmental analysis
for the year ended 31 December 2019
Audited Year to 31 December 2019 £000 Audited Year to 31 December 2018 £000 Revenue - segment Ceramics 62,681 57,479 Materials 7,787 - 70,468 57,479 Less: Inter segment revenue (2,966) - 67,502 57,479 Revenue - geographic United Kingdom 28,460 23,008 Rest of Europe 24,477 21,306 USA 7,232 6,054 Rest of the World 7,333 7,111 67,502 57,479 Operating profit before exceptional items Ceramics 10,840 9,237 Materials 402 - 11,242 9,237 Exceptional items Ceramics - (541) Materials 117 - 117 (541) Operating profit after exceptional items Ceramics 10,840 8,696 Materials 519 - 11,359 8,696 Unallocated items Share of results of associate (22) 185 Finance income 124 110 Finance costs (168) (144) Profit before income tax 11,293 8,847 2. Exceptional items In February 2019 the Group acquired control of Furlong Mills Ltd which had previously been accounted for as an associate company. As set out in note 8, the fair value of assets acquired was in excess of the consideration and so in accordance with IFRS3, the negative goodwill of £117,000 has been credited to the Income Statement as an exceptional credit. In 2018, changes in the law in relation to the calculation of Guaranteed Minimum Pensions (GMP's) required that defined benefit pension schemes must equalise for the GMP benefits between men and women. The Churchill Group Retirement Benefit Scheme includes such benefits and a one off sum of £611,000 was provided in for in 2018 reflecting the cumulative effect of these changes. Given the size and nature of this adjustment it was treated as exceptional. A related deferred tax credit of £104,000 was treated as exceptional. Additionally sums previously provided for costs relating to the disposal of property which were no longer required were released, generating an exceptional credit to profit of £70,000.
3. Finance income and costs
								Audited				Audited
								Year to				Year to
								31 December 2019				31 December 2018
								£000				£000
Finance income
Interest income on cash and cash equivalents								124				110
Finance income								124				110
Finance cost
Interest on pension scheme								(130)				(143)
Other interest								(38)				(1)
Finance costs								(168)				(144)
The interest cost arising from pension schemes is a non cash item
4. Income tax expense
								Audited				Audited
								Year to				Year to
								31 December 2019				31 December 2018
								£000				£000
Current taxation								1,729				1,552
Deferred taxation								407				97
Income tax expense								2,136				1,649

 

5. Earnings per ordinary share   

Basic earnings per ordinary share is based on the profit on ordinary activities after income tax attributable to shareholders of £9,063,000 (2018: £7,198,000) and on 10,974,010 (2018: 10,966,996) ordinary shares, being the weighted average number of ordinary shares in issue during the year. Adjusted earnings per share is calculated after adjusting for the post tax effect of the exceptional items detailed (Note 2).

	Audited Year to 31 December 2019			Audited Year to 31 December 2018
Pence per share
Basic earnings per share		82.6			65.6
(Less)/add: Exceptional items		(0.9)			4.0
Adjusted earnings per share		81.7			69.6

Diluted earnings per ordinary share is based on the profit on ordinary activities after income tax attributable to shareholders of £9,063,000 (2018: £7,128,000) and on 11,076,990 (2018: 11,069,061) ordinary shares, being the weighted average number of ordinary shares in issue during the year of 10,974,010 (2018: 10,966,996) increased by 102,980 (2018: 102,065) 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. Adjusted earnings per share is calculated after adjusting for the post tax effect of the exceptional items detailed (Note 2).

	Audited Year to 31 December 2019		Audited Year to 31 December 2018
Pence per share
Diluted earnings per share	81.8		65.0
(Less)/add: Exceptional items	(0.9)		4.0
Diluted adjusted earnings per share	80.9		69.0

 

6. Reconciliation of operating profit to net cash inflow from continuing activities
							Audited				Audited
							Year to				Year to
							31 December 2019			31 December 2018
							£000				£000
Cash flows from operating activities
Operating profit								11,359			8,696
Adjustments for:
Depreciation and amortisation								2,375			1,725
Negative goodwill - exceptional								(117)			-
(Profit) / loss on disposal of property, plant and equipment								(22)			(91)
Charge for share based payment								324			262
Defined benefit pension cash contribution								(1,430)			(1,430)
Pension current service charge - non cash								-			611
Changes in working capital
Inventory								(906)			(95)
Trade and other receivables								304			(1,039)
Trade and other payables								(560)			(379)
Net cash inflow from operations								11,327			8,260

7. Dividend 

The Directors do not currently propose a final dividend for 2019. The Company's dividend policy will be reviewed at the earliest opportunity once the overall impact of COVID-19 is more certain.

The total dividend paid and proposed in respect of the year is 10.3p (2018: 29.0p).

 

8. Acquisition of subsidiary     

On 25 February 2019 Churchill acquired a further 9.5% of the issued ordinary share capital of Furlong Mills Limited for a total consideration of £454,000. Churchill's shareholding in Furlong Mills prior to the purchase was 46.1% and it had previously been accounted for as an associate company. As the February purchase increased Churchill's overall holding to 55.6% of the issued ordinary share capital, a controlling interest, it has been accounted for as a subsidiary from that date.

Furlong Mills is a ceramic materials manufacturer based in Stoke on Trent, providing processed clay body and glazes to Churchill and to other ceramic manufacturers.

The amounts recognised at fair value in respect of the identifiable assets acquired and liabilities assumed are as follows:

						£000
Property, plant and equipment						3,176
Inventory						830
Debtors						1,891
Cash and cash equivalents						824
Trade and other payables						(2,258)
Current income tax liabilities						(75)
Deferred income tax liabilities						(205)
Total identifiable assets						4,183
Goodwill						(117)
Non-controlling interest at acquisition						(1,902)
Total consideration						2,164
Satisfied by:
Cash and cash equivalents						454
Investment in associate at acquisition						1,710
						2,164
Net cash inflow arising on acquisition
Cash consideration						(454)
Less: Cash and cash equivalents acquired						824
Net cash inflow						370

9. Share buybacks

The Company did not buy back any shares during the year, but may consider making ad hoc share buybacks going forward at the discretion of the Board and subject to shareholder authorities being renewed at the forthcoming Annual General Meeting.

10. Basis of preparation and accounting policies 

The financial information included in the preliminary announcement for year to 31 December 2019 has been approved by the Board on 7 April 2020.

The preliminary financial statements do not constitute the statutory accounts of the Company within the meaning of section 434 of the Companies Act 2006, but are derived from those accounts, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed and adopted for use in the United Kingdom  and European Union.

This information has been prepared under the historical cost convention as modified by the revaluation of land and buildingsand financial assets and liabilities (including derivative instruments) at fair value through the profit and loss account. The same accounting policies, presentation and methods of computation are followed in the preliminary financial statements as were applied in the Group's financial statements for the year ended 31 December 2018, save for the adoption of IFRS 16 'Leases' effective from 1 January 2019.

The asset and corresponding liability on implementation on 1 January 2019 amounted to £234,000. In the year to 31 December 2019, IFRS 16 resulted in a £23,000 increase to operating profit and an £36,000 increase in interest payable.

Statutory accounts for the year ended 31 December 2018 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31 December 2019 will be delivered to the Registrar of Companies after the Company's Annual General Meeting on 11 June 2020 and will also be available on the Company's website (www.churchill1795.com) in May 2020. The auditors have reported on those accounts. Their report was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain a statement under section 438 (2) or (3) of the Companies Act 2006.

 

END

 

 

FR EANLXEDNEEFA