Final Results
Churchill China PLC
19 March 2002
For Immediate Release 19 March 2002
CHURCHILL CHINA PLC
PRELIMINARY RESULTS
for the year ended 31 December 2001
Churchill China plc, is pleased to announce its preliminary results for the year
ended 31 December 2001.
Key Points:
• Sales up by 4% to £52.0m (2000:£49.9m)
• Pre-tax profit before exceptional item up 25% at £3.0m (2000:£2.4m)
• £337,000 exceptional profit on asset disposal
• Earnings per share up 18% to 19.9p (2000:16.9p)
• Full year dividend up 28% to 9p per ordinary share (2000: 7p per share)
• Net cash: £2.1m
• Net asset value per share: £2.58
Stephen Roper, Chairman, said:
'2001 was a year of solid growth for Churchill with both increased sales and
profits. The group continues to be cash generative and has added to shareholder
value through an increased dividend. We now look forward with enthusiasm to
achieving further growth in the year ahead.'
For further information, please contact:
Stephen Roper, Chairman Today on: 020 7466 5000
Churchill China plc thereafter on: 01782 577566
Tim Anderson
Lisa Baderoon
Buchanan Communications Limited Tel No: 020 7466 5000
CHAIRMAN'S STATEMENT
2001 was a year of solid performance for Churchill. There has been an increase
in both sales and profit for the Group in a year of mixed trading. Early in
January 2002 our trading statement painted a positive picture from our buoyant
trading during the pre Christmas period, which was well received by the stock
market.
Sales increased by 4% to £52.0m (2000:£49.9m) resulting in profit before
exceptional items and taxation of £3.0m (2000: £2.4m). In addition there was an
exceptional profit of £0.3m, as a result of the sale of land. This trading
improvement is reflected in the final dividend recommended by the directors of
6p (2000: 5p per share) per share bringing the total dividend to 9p per share
(2000: 7p per share) for the full year.
The first half of 2001 saw positive growth in both the Dining In and Dining Out
divisions. In the UK our success with national catering groups running
restaurants, wine bars and similar outlets, continued. We also enjoyed a small,
but encouraging recovery in Europe which contributed to the growth of Dining
Out. It has also continued to grow its share of the UK market and achieved an
increase in sales despite the effects of foot and mouth disease in Britain and
the slowdown in tourism that was subsequently compounded by the events of
September 11.
The above mentioned factors did however affect both divisions in the second half
of the year, resulting in a slow down of activity levels and reduced our
expected growth. Our export sales to the US in retail and catering were down in
the second half following an excellent performance by both divisions in the
first 6 months. By contrast, the Group saw positive growth into mainland Europe
for the first time in 5 years reflecting improvements in both volume and margin.
Dining In achieved a substantial growth in UK sales. Outsourcing has enabled us
to provide our major UK customers with a much wider choice of ceramic products
and price points. The key strategy of providing this 'One Stop Shop' is now
gaining real momentum. Furthermore outsourcing substantially reduces our cost
base and its contribution is increasing year on year. This sector made
significant advances during 2001 and growth will continue in the current year.
Dining In continues to make further progress within its portfolio of classical
and traditional English designs manufactured in the UK for a number of key
export markets. On licensed products, Harry Potter has been a great success
and has given us the confidence to expand our licensing opportunities for the
coming year.
Strategies continue to be pursued to bring Dining In back to profit, whilst at
the same time ensuring the continued growth of our successful Dining Out
business. These strategies, together with our customer-driven focus, give the
Board confidence for our prospects in 2002, even though we anticipate a slow
start to the year.
Financial Performance
Turnover increased by 4% to £52.0m (2000: £49.9m) and this, together with
improved margins led to an improvement in operating profit of £0.4m to £2.8m
(2000: £2.4m), a rise of 17%. While the Group's share of profits from its
associate company fell slightly, an increase in interest receipts on
significantly higher average cash balances contributed to an improvement in
profit before exceptional items and taxation of 25% to £3.0m (2000: £2.4m).
After exceptional profits of £0.3m arising from the sale of surplus land, pre
tax profit rose by 36% to £3.3m (2000: £2.5m).
Adjusted earnings per share rose by 18% to 19.9p per share (2000: 16.9p). Cash
generation remained strong across the year with operating cash generation of
£3.7m despite an increase in working capital requirements associated with the
growth of Dining Out sales and Dining In's sourcing operation. Overall net cash
balances rose by £1.0m to £2.1m (2000: £1.1m) after higher tax and dividend
payments. Whilst capital expenditure of £2.0m (2000: £0.9m) was higher than in
recent years, much of this was in respect of developing access to our Sandyford
site and will not recur. Underlying capital expenditure remained constrained.
The position of the Group's final salary pension scheme, which is closed to new
entrants, has been reviewed in the light of the requirements of FRS 17. The
Directors are pleased to report that this review shows the fund has a net
surplus of £0.4m representing 2% of scheme assets.
Shareholder Value
I would like to take this opportunity to reiterate the Board's commitment to
improving overall returns to investors. We have met our short term objectives
and have seen a return to progressive dividend payments and delivered further
growth in underlying net asset value, which at 31 December 2001 was £2.58 per
share.
The Board is pleased to report a final dividend of 6p per share bringing the
total dividend for the year to 9p per share ( 2000 : 7p per share). This
represents a 28 per cent increase in dividend compared to a 25 per cent increase
in profit before exceptional items. At the date of my report, the yield on our
shares is 5.0% gross. We intend to continue to pursue a progressive dividend
policy, with the expectation that future dividend growth will accompany
improving profits.
The Group continues to be cash generative, and has delivered £7.7m operating
cash flow over the last 2 years enabling Churchill to maximise investment
opportunities which are essential to support our objectives of improved returns.
Board Changes
After more than 40 years of operational positions within the Company, at the end
of March 2002, I will be moving to the position of non-executive Chairman. May I
take this opportunity to thank all my colleagues, employees, shareholders and
customers for their support over the years. I have very much enjoyed my time at
Churchill and look forward to continuing to serve the Company in my new role.
Prospects
For the year as a whole we anticipate further growth in both divisions.
However, the slow down experienced in the second half of 2001 is likely to
continue in to the first half of this year.
A number of actions have been implemented to further reduce manufacturing costs
in the Dining In division and these will be complete by the end of June. We are
currently in the process of rationalising our UK manufacturing base by
transferring all production and key processes in this division to our main
Marlborough factory. As a consequence, a number of redundancies have now been
advised.
The Dining Out division continues to win new business in the UK and Europe and
the division will benefit further in 2002 from the recent launch of Alchemy
China which targets a totally new sector of the market for Churchill; namely 4
and 5 star hotels and restaurants world wide.
In spite of a quiet start to the year for the Dining In division it is pleasing
to report a substantial increase in the number of retail listings for the US
market following recent international trade fairs. It is these volumes allied
to our main line UK and European business which will enable us to perform more
efficiently as the year progresses. Outsourcing and new licensed business will
again show significant growth within the Dining In business.
To improve profits in difficult markets was a fine achievement last year. We now
look forward with enthusiasm to achieving further growth in the year ahead. I
would like to thank both shareholders and employees for their continued support.
Operating Review
Dining Out
Sales increased by over 3% but margins were considerably improved reflecting a
strong performance in all areas of the business.
Dining Out has continued to grow its share of the UK market and this increase in
sales was achieved despite the effects of foot and mouth disease in Britain and
the slowdown in tourism which was compounded by the events of September 11.
We have experienced continued growth in the UK particularly in the area of major
accounts for pubs, restaurants and contract catering. This is due in part to our
new focus on client management where we have employed additional resources to
win and manage key accounts.
Alchemy, our exciting new china product was launched last October and is
specifically targeted at the 4-star and 5-star hotel and restaurant market. The
initial response to Alchemy has been very positive with the product being sold
into the USA, Canada, Germany and the UK despite launching at a difficult time
in the market.
Churchill has continued to lead the way in product innovation and design, much
of which is shaped by the needs and ideas of our customers.
Dining In
Sales grew by almost 5% with margins remaining flat. Following the solid
progress made in the first half of the year from both the home and export
markets, volumes in the latter part of the year were badly affected by poor
economic conditions in a number of our overseas markets. Specifically sales to
the US fell back considerably in the last quarter; by contrast the UK remained
buoyant and in mainland Europe we saw growth for the first time in 5 years.
Outsourcing has continued to be a catalyst for revival for Dining In and is a
valuable means of reducing our costs. It has enabled us to offer a wider range
of ceramics, variety of design styles and a wider spectrum of pricing. In
particular, middle market stoneware has been well received by the retail trade
with more new and attractive glazes and shapes to follow. Similarly, mugs are
almost exclusively outsourced, turning a loss-making activity into profit.
The UK market showed excellent growth of 17% on the back of our successful 'One
Stop Shop' strategy, using a combination of our own manufactured and outsourced
goods.
We have achieved considerable success in the UK and a number of overseas markets
with the Harry Potter range of porcelain and bone china mugs. We are pursuing
further licensed business and have been successful in taking on the Cath Kidston
license for bone china tableware which has been particularly popular in the US
market. In the UK we have also been awarded the licences for Scooby Doo, Tom &
Jerry and Looney Tunes, which commence in the second quarter of 2002. These will
generate valuable new business in addition to the Harry Potter license.
Under the James Sadler brand, we have launched an attractive range of products
to commemorate the Queen's Golden Jubilee this year. Initial reaction has been
excellent both within the UK and in a number of overseas markets.
Strategies remain in place to restore profitability in the Dining In division
with a clear focus on classical and traditional manufactured designs and rapid
growth of outsourced products that will enable us to compete in the more casual
lifestyle products arena. These strategies together with our customer driven
focus will show further progress in 2002.
Stephen Roper
Chairman
Consolidated profit and loss account
for the year ended 31 December 2001
Total Total
2001 2000
Note £000 £000
Turnover 1 51,985 49,913
Operating profit 1 2,813 2,395
Share of operating profit of associate 124 143
Profit on disposal of fixed assets 2 337 -
Income from fixed asset investment - 48
Interest receivable / (payable) 104 -97
Profit on ordinary activities before taxation 3,378 2,489
Tax on profit on ordinary activities -921 -636
Profit on ordinary activities after taxation 2,457 1,853
Dividends 3 -958 -746
Retained profit for the period 1,499 1,107
Pence per Pence per
share share
Earnings per ordinary share
Basic 4 23.1p 17.4p
Adjusted 4 19.9p 16.9p
Diluted earnings per ordinary share
Basic 4 22.9p 17.4p
Adjusted 4 19.7p 16.9p
Consolidated balance sheet
as at 31 December 2001
2001 2000
£000 £000
Fixed assets
Intangible Assets 222 268
Tangible assets 14,767 15,229
Investments 1,092 993
16,081 16,490
Current assets
Stocks 8,459 7,049
Debtors: amounts falling due within one year 10,060 11,049
Cash at bank and in hand 2,167 1,124
20,686 19,222
Creditors: amounts falling due within one year -9,232 -9,655
Net current assets 11,454 9,567
Total assets less current liabilities 27,535 26,057
Creditors: amounts falling due after one year -19 -32
Provisions for liabilities and charges - -8
Net assets 27,516 26,017
Capital and reserves
Called up share capital 1,065 1,065
Share premium account 1,960 1,960
Revaluation reserve 2,122 2,165
Other reserves 253 253
Profit and loss account 22,116 20,574
Equity shareholders' funds 27,516 26,017
Consolidated cash flow statement
for the year ended 31 December 2001
2001 2000
£000 £000
Net cash flow from continuing operating activities 3,670 4,049
(reconciliation to operating profit - note 5)
Returns on investments and servicing of finance
Interest received/(paid) 109 -85
Dividends received - 48
Returns on investments and servicing of finance 109 -37
Taxation
UK corporation tax paid -814 -23
Capital expenditure and financial investment
Purchase of tangible fixed assets -2,011 -949
Sale of tangible fixed assets 972 82
Purchase of investments -18
Net cash outflow for capital expenditure
and financial investment -1,057 -867
Acquisitions
Purchase of business - -250
Equity dividends paid -852 -213
Financing
Payment of principal under finance leases -13 -13
Net cash outflow from financing -13 -13
Increase in net cash 1,043 2,646
1. Turnover analysis
The Directors now consider that the Group's activities are a single class of
business. The previously disclosed segmental analysis is now no longer
appropriate. However for additional shareholder information turnover is analysed
as follows
2001 2000
£000 £000
Analysis by market sector
Dining Out 21,323 20,602
Dining In 30,662 29,311
51,985 49,913
Analysis by geographic market
United Kingdom 32,027 28,594
Rest of Europe 10,732 10,546
North America 6,704 8,087
Australasia 1,271 1,232
Far East 535 445
Other 716 1,009
51,985 49,913
2. Profit on disposal of fixed assets
2001 2000
£000 £000
Profit on disposal of fixed assets 337 -
The profit on disposal of fixed assets represents the net proceeds of the
disposal of two plots of surplus land during the year. Gross proceeds of
£945,000 were received against which costs of £499,000 for the construction of
access roads and £109,000 in respect value of the land sold have been charged.
3. Dividend
The Directors have declared or now recommend payment of the following dividends
in respect of the year ended 31 December 2001:
2001 2000
£000 £000
Ordinary dividend
Interim paid 3.0p (2000: 2.0p) per 10p ordinary share 319 213
Final proposed 6.0p (2000: 5.0p) per 10p ordinary share 639 533
958 746
The final dividend will be paid on 24 May 2002 to those shareholders on the
register at 2 April 2002
4. Earnings per ordinary share
Basic earnings per ordinary share is based on the profit on ordinary activities
after taxation and on 10,649,876(2000: 10,649,876) 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 profit on disposal
of fixed assets and income from fixed asset investment.
2001 2000
Pence Pence
per share Per share
Basic earnings per share 23.1 17.4
Adjustments :
Profit on disposal of fixed assets -3.2 -
Income from fixed asset investment - -0.5
Adjusted earnings per share 19.9 16.9
Diluted basic earnings per ordinary share is based on the profit on ordinary
activities after taxation and on 10,738,683(2000: 10,681,074) ordinary shares,
being the weighted average number of ordinary shares in issue during the year of
10,649,876(2000: 10,649,876) increased by 88,807 (2000: 31,198) 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 profit on disposal
of fixed assets and income from fixed asset investment.
2001 2000
Pence Pence
per share Per share
Diluted basic earnings per share 22.9 17.4
Adjustments :
Profit on disposal of fixed assets -3.2 -
Income from fixed asset investment - -0.5
Diluted adjusted earnings per share 19.7 16.9
5. Reconciliation of operating profit to net cash inflow from
operating activities
2001 2000
£000 £000
Continuing operating activities
Operating profit 2,813 2,395
Depreciation on tangible fixed assets 2,053 2,356
Loss on sale of assets 16 26
Goodwill amortisation 46 40
Increase in stocks -1,410 -763
Decrease/(Increase) in debtors 572 -1,080
(Decrease)/Increase in trade creditors -412 1,132
Decrease in provisions -8 -57
Net inflow from continuing operating activities 3,670 4,049
6. Reconciliation of net cash flow to movement in net cash
2001 2000
£000 £000
Increase in cash during the year 1,043 2,646
Cash outflow from decrease in debt and lease
financing 13 13
Movement in net cash resulting from cash flows
and movement in net cash in the year 1,056 2,659
Net cash at the start of the period 1,079 -1,580
Net cash at the end of the period 2,135 1,079
7. Statement of total recognised gains and losses
The Group has no recognised gains or losses other than those included in the
profit and loss account above and therefore no separate statement of recognised
gains and losses has been presented.
8. Financial Information
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 December 2001. Statutory accounts for
2001 will be delivered to the Registrar of Companies following the Company's
Annual General Meeting on 15 May 2002.
This information is provided by RNS
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