Interim Results
Churchill China PLC
5 September 2000
INTERIM RESULTS
for the six months ended 30 June 2000
Churchill China plc, is pleased to announce its interim
results for the six months ended 30th June 2000.
Key Points:
* Group sales, £22.9 million (1999 : £22.1 million)
* Return to profit with pre-tax profit of £0.3m (1999 : £1.5
million loss before exceptional items)
* Adjusted earnings per share of 2.3p (1999: 11.0p loss per
share)
* Net debt at 30th June 2000 of £1.8 million (7% geared)
(1999: £2.3m, 9% geared)
* Net asset value of £2.34 per share (1999: £2.29 per share)
* Interim dividend reinstated at 2.0p per ordinary share
(1999: 0.0p)
Stephen Roper, Chairman, said:
'1999 saw the Group make bold and sometimes painful decisions.
2000 is seeing the start of a return from these actions and I
can now see tangible improvements continuing over the long
term ... it is now a priority that shareholders should be able
to enjoy the value which is inherent within Churchill. The
board believe this value can be unlocked following the great
progress made over the last year.'
For further information, please contact:
Stephen Roper, Chairman Today on: 0207 466 5000
Churchill China plc thereafter on: 01782 577566
Tim Anderson
Lisa Baderoon
Buchanan Communications Ltd Tel No: 0207 466 5000
CHAIRMAN'S STATEMENT
I am pleased to report that the difficult decisions taken some
12 months ago are now producing a recovery in all areas of the
business and we have continued to build on the return to
profitability achieved in the second half of 1999.
Financial Performance
For the half year to 30 June 2000 group sales were £22.9m
(1999 : £22.1m), an increase of 3%. Pre-tax profits of £0.3m
(1999 : £1.5m loss before exceptionals) reflecting an improved
performance from both divisions.
As a result of the positive first half performance, earnings
per share increased to 2.3p (1999 : 11.0p loss per share,
before exceptional items).
Following the improved trading performance of the Group over
the last six months, the Directors are delighted to confirm
that the interim dividend has been re-instated at 2.0p (1999:
0.0p). This should provide a sound indicator of our
confidence for the next year.
Operating cash generation improved considerably, returning to
the pattern established over many years. We finished the half
year with net debt of £1.8m (7% geared) following a cash
outflow of £0.2m. This modest outflow was principally due to
an increase in stock primarily associated with new product
introductions in Dining Out and the development of our
outsourcing business. It is expected that debt will fall in
the second half year despite continued investment in the
growth areas of our business. Capital expenditure at £0.5m was
mainly directed at the Dining Out division.
The Group's net asset value remains strong at £2.34 per
share.
Dining Out
Twelve months ago the Dining Out division was showing a return
to growth after a minor deterioration in its long-term
performance. At that time our first priority was to ensure
the continued growth of the division and this has been
achieved in the first half of 2000 with sales reaching a
record £9.8m (1999 : £9.2m). Operating profits increased by
78% to £1.4m (1999: £0.8m) benefiting not only from the
substantial increase in sales, but a further improvement in
manufacturing efficiency.
The UK showed very healthy growth whilst exports remained
flat. The eating out market is predicted to grow world-wide
over the long term.
The strategies for maintaining growth in this profitable
division are all demonstrating positive progress.
* To win more new customers, particularly major national and
international operators.
We continue to develop the business infrastructure. Key
account management is improving and developing so that our
direct relationships with large restaurant, pub and hotel
groups are becoming ever closer.
* Introduce innovative products which respond to changing
trends.
Over the last 12 months a series of outstanding products
have been launched which have captured the imagination of
the market. Snack Attack, Voyager and further additions to
our coffee range have all been targeted at growth sectors.
Product research and design continues to benefit from a
close working relationship with both chefs and concept
creators.
* Build on our established reputation as the market leader in
service and logistics.
All new products, as with our existing range, are supplied
on an ex-stock basis. E.commerce provides further
opportunities to improve our customer service. We carefully
foster our distribution network.
* Utilise the planned manufacturing capacity reductions in
the Dining In (retail) division to increase volume growth in
Dining Out.
This process is ongoing and already a number of distinct
products and processes including our extensive and growing
range of coffee cups and mugs have been transferred into a
specialised and modern unit within the main Dining In
factory.
Dining In
In contrast, the challenges for Dining In have been far more
demanding in an environment where life styles are changing
rapidly and competition from Far Eastern suppliers is intense.
Nevertheless, there was a small increase in sales in the six
months to 30 June to £13.1m (1999: £12.9m) and operating
losses were reduced substantially to £1.1m (1999: £2.2m before
exceptional items). Sales have increased despite a 20% fall
in manufactured output through a combination of much improved
average prices and for the first time additional sales of
outsourced product.
The strategies which we have developed for Dining In needed
not only to address life styles and Far East competition, but
the ongoing strength of sterling in our main markets at home
and abroad.
* Provide major UK retailers with a 'One Stop Shop' through a
range of price points and products covering earthenware,
stoneware, porcelain and bone china.
To achieve this goal, the division started an outsourcing
programme at the end of 1999 to run alongside its own
manufactured products. We have made an excellent start.
Our sales growth in the UK has already shown that we are
winning back market share.
* Reduction of Dining In manufacturing capacity and an
ongoing transfer of facilities to Dining Out.
The initial plan was actioned in June 1999 with the result
that Dining In manufacturing capacity fell by 20%. Higher
values on the residue of the Dining In manufacturing are now
being achieved.
* Concentrate UK retail sales for both manufactured and
outsourced goods on the main stream of casual life styles
under the Churchill and Jeff Banks brands.
We continue to expand our listings for new products with
major retail groups.
* Focus exports sales on classical and traditional English
design with increased use of the Queens brand.
Our recent product launches of Applebee and traditional
English prints are not only achieving higher unit values,
but opening new business particularly in the US.
Dining In is now set on a new direction. Whilst this year
will still be loss-making, current order levels indicate a
further reduction in losses during the second half. The impact
of outsourcing going forward with improved values on a reduced
manufacturing base should see this division on target at or
about break-even in 2001.
James Sadler Purchase
Churchill China acquired certain assets, principally stocks,
goodwill and intellectual property from the Receivers of James
Sadler & Sons Limited in March 2000 for a cash consideration
of £250,000. This purchase, within the Dining In division,
has now been fully integrated into our existing factories and
sales team.
James Sadler is the leading brand in teapots world-wide. Our
key focus will be targeted at the gift and collectible
segments of the market. This distinctly British brand will be
the vehicle for Churchill's development into the wider
giftware business. We envisage a full return on our
investment over the next 12 months and a continuing flow of
value to shareholders in the future.
Shareholder Value
In the year to date seven directors have bought almost 350,000
shares. There have also been significant share purchases by
Steelite International plc ('Steelite'), one of our major
competitors in the Dining Out market.
I cannot speak for Steelite or comment on its motivation, but
as far as the directors are concerned, we believe the present
price does not reflect the value of the business. Churchill
has a depth of expertise from design through manufacturing,
sales, marketing, IT and logistics.
Clearly our Dining Out division is a valuable business, it
provides a high value product into a stable, strong and
growing market sector. Its strengths are in its commitment to
customer service and increasingly in a reputation for
innovation. The market it serves is growing and enjoys a high
level of repeat business. This market position should ensure
that it will continue to deliver value to shareholders over a
long period.
The position of the Dining In division is less clear. The
strategies we have implemented are showing the first signs of
working and the business is regaining customers lost in
recent years through its flexible approach. The strengths of
its manufacturing base, management resources and design skills
have been complemented with a wider product range available
from overseas partners. Our task over the next few years is
to earn a return on the assets invested in the business.
Board Changes
In May this year the Board was strengthened by three key
appointments.
Jonathan Sparey joined the Board as Non-Executive Director.
Jonathan is a partner with LEK Consulting, a leading
international corporate strategy firm which has worked
extensively with the Group over the last 18 months,
particularly in relation to the development of our strategy
for the Dining Out division.
Simon Bell and Ralph Grundy, Marketing Director (Dining In)
and Sales & Marketing Director (Dining Out) respectively, have
both been promoted to the Board. May I take this opportunity
of firstly welcoming them to the Board and also thanking them
for their invaluable contribution and commitment to Churchill
over the past years. I am confident that they will play an
integral part in the future development of the Group.
Prospects
1999 saw the Group make bold and sometimes painful decisions.
2000 is seeing the start of a return from these actions and I
can now see tangible improvements continuing over the long
term.
Churchill is a substantial well-established business which has
achieved its market position over generations. It also has a
strong management team and an asset base which reflects years
of sustained and careful investment.
The Board is mindful of the patience exhibited by shareholders
over the past two years. Whilst the efforts of the Board have
quite rightly been concentrated on realigning the business to
meet significant changes in the market place, it is now a
priority that shareholders should be able to enjoy the value
which is inherent within Churchill. The board believe this
value can be unlocked following the great progress made over
the last year.
No end of praise must go to the employees throughout the
Group. We have learnt to adapt and embrace a new culture in
our methods of working. The talent at Churchill and the value
created from long-term investment has seen the Group return to
what I believe will be years of profitable expansion. Nothing
is certain, but after a short period of disappointing
performance, our prospects are very exciting.
I look forward to reporting on further progress at the end of
the year.
Consolidated profit and loss account
For the six months ended 30 June 2000
Unaud-
ited Unaudi- Audited
Six ted Year
months six ended
to 30 months 31
June to 30 Dece-
June mber
2000 1999 1999
Before Excep- Before Excep-
excep- tional excep- tional
Note Total tiona items Total tional items Total
items items
1999 1999 1999 1999 1999
£000 £000 £000 £000 £000 £000 £000
Turnover 1 22,918 22,160 - 22,1607 45,577 - 45,577
Operating
profit/
(loss) 1 337 (1,412)(3,663) (5,075) (433)(4,085)(4,518)
Share of
operating
profit of
associate 67 27 76
Income from
fixed asset
investments - - 65
Interest
payable and
similar
charges (62) (73) (154)
Profit/(loss)
on ordinary
activities
before
taxation 342 (5,121) (4,531)
Tax on
profit/(loss)
on ordinary
activities (99) 477 405
Profit/(loss)
on ordinary
activities
after taxation 243 (4,644) (4,126)
Dividends (213) - -
Retained
profit/(loss)
for the period 30 (4,644) (4,126)
Pence Pence Pence
per per per
share share share
Earning/
(loss)
per
ordinary
share
Basic 3 2.3 (43.6) (38.7)
Adjusted 3 2.3 (11.0) (3.7)
Diluted
earnings/(loss)
per ordinary
share
Basic 3 2.3 (43.6) (38.7)
Adjusted 3 2.3 (11.0) (3.7)
Consolidated Balance Sheet
as at 30 June 2000
Unaudited Unaudited Audited
30 June 30 June 31 December
2000 1999 1999
£000 £000 £000
Fixed Assets
Intangible Assets 297 294 188
Tangible Assets 16,031 17,658 16,744
Investments 934 843 890
17,262 18,795 17,822
Current Assets
Stocks 7,447 6,305 6,156
Debtors: amounts falling
within one year 9,307 9,176 9,951
Cash at bank and in hand 19 9 8
16,773 15,490 16,115
Creditors: amounts falling
due within one year (8,796) (9,355) (8,664)
Net current assets 7,977 6,135 7,451
Total assets less current
liabilities 25,239 24,930 25,273
Creditors: amounts falling
due after one year (39) - (45)
Provisions for liabilities
and charges (261) (538) (318)
Net assets 24,939 24,392 24,910
Capital and reserves
Called up share capital 1,065 1,065 1,065
Share premium account 1,960 1,960 1,960
Revaluation reserve 2,243 2,267 2,255
Other reserves 253 253 253
Profit and loss account 19,418 18,847 19,377
Equity shareholders' funds 24,939 24,392 24,910
Consolidated Cash Flow Statement
for the six months ended 30 June 2000
Unaudited Unaudited Audited
six six year to
months to months to 31
30 June 30 June December
2000 1999 1999
£000 £000 £000
Net cash flow from operating
activities (reconciliation to
operating profit/(loss) - note
4) 624 (578) 836
Returns on investments and
servicing of finance
Interest paid (54) (62) (133)
Dividends received - - 65
Returns on investments and
servicing of finance (54) (62) (68)
Taxation
UK corporation tax
received/(paid) 2 (25) (209)
Capital expenditure and
financial investment
Purchase of tangible fixed
assets (544) (547) (1,023)
Sale of tangible fixed assets 45 54 68
Net cash outflow for capital
expenditure and financial
investment (499) (493) (955)
Acquisitions
Purchase of business (250) - -
Equity dividends paid - - -
Financing
Payment of principal under
finance leases (7) - (8)
Net cash outflow from financing (7) - (8)
Decrease in net cash (note 5) (184) (1,158) (404)
Notes to the Financial Statements
1. Segmental analysis by class of business
The analysis by class of business of the Group's turnover and
operating profit/(loss) is set out below
Unaud- Unaud- Audi-
ited itted ted
Six Six Year
months months ended
to 30 to 30 31
June June December
2000 1999 1999
Before Before
excep- excep- excep- excep-
tional tional tional tional
items items items items
Total 1999 1999 Total 1999 1999 Total
£000 £000 £000 £000 £000 £000 £000
Turnover
Class of
business
Dining Out 9,802 9,253 - 9,253 19,972 - 19,972
Dining In 13,116 12,907 - 12,907 25,605 - 25,605
22,918 22,160 0 22,160 45,577 0 45,577
Operating
profit/(loss)
Class of
business
Dining Out 1,445 812 0 812 3,194 0 3,194
Dining In (1,108)(2,224) (3,663)(5,8877)(3,627) (4,085) (7,712)
Total
operating
profit/
(loss) 337 (1,412) (3,663) (5,075) (433) (4,085) (4,518)
Share of
profit of
associate 67 27 76
Income from
fixed asset
investments 0 65
Interest
payable and
similar
charges (62) (73) (154)
Profit/(loss)
before
taxation 342 (5,121) (4,531)
Cost arising from the 1999 restructuring of the Group's
manufacturing operation and resulting impairment for fixed
assets have been treated as exceptional. There exceptional
costs comprised:
Unaudited Unaudited Audited
Six Six Year
months months ended 31
30 June 30 June December
2000 1999 1999
£'000 £'000 £'000
Impairment of fixed assets - 2,729 2,729
Redundant and obsolete
stocks - 287 288
Restructuring costs - 647 1,068
3,663 4,085
A further impairment of fixed assets of £ nil (30 June and 31
December 1999: £917,000) has been charged directly against
revaluation reserves.
A credit of £ nil (30 June 1999: £195,000, 31 December 1999:
£289,000) has been included in the corporation tax credit in
relation to the restructuring costs.
2. Dividend
The proposed dividend has been calculated on 10,649,876 shares
being those in issue at 30 June 2000 qualifying for the
dividend. The dividend will be payable on 13 October 2000 to
shareholders on the register on 15 September 2000
3. (Loss)/earnings per ordinary share
Unaudited Unaudited Audited
six months six months Year
to to to 31
30 June 30 June December
2000 1999 1999
£000 £000 £000
pence per pence per pence per
share share share
Basic earnings/(loss)
per share 2.3 (43.6) (38.7)
Adjustments:
Income from fixed asset
investments - - (0.6)
Exceptional item - 32.6 35.6
Adjusted
earnings/(loss) per
share 2.3 (11.0) (3.7)
Diluted basic
earnings/(loss) per
share 2.3 (43.6) (38.7)
Adjustments:
Income from fixed asset
investments - - (0.6)
Exceptional item - 32.6 35.6
Adjusted
earnings/(loss) per
share 2.3 (11.0) (3.7)
The basic earnings/(loss) per ordinary share is based on the
profit/(loss) on ordinary activities after taxation and on
10,649,876 (1998: 10,649,876) ordinary shares, being the
weighted average number of ordinary shares in issue during the
period.
The adjusted earnings/(loss) per ordinary share is based on
the profit/(loss) on ordinary activities after taxation and
adjusted to take into account income from fixed asset
investments and exceptional costs.
Diluted basic earnings/(loss) per ordinary share is based on
the profit/(loss) on ordinary activities after taxation and on
10,666,663 (1999: 10,658,196) ordinary shares, being the
weighted average number of ordinary shares in issue during the
year of 10,649,876 (1998: 10,649,876) increased by 16,787
(1999: 8,320) 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 share price during the year.
Diluted adjusted earnings/(loss) per ordinary shared is based
on the profit/(loss) activities after taxation and adjusted to
take into account income from fixed asset investment and
exceptional costs.
4. Net cash inflow/(outflow) from operating activities
Unaudited Unaudited Audited
six six Year
months to months to ended
30 June 30 June 31 December
2000 1999 1999
£'000 £'000 £'000
Operating profit/(loss) 337 (5,075) (4,518)
Depreciation 1,208 1,497 2,784
Impairment of fixed assets - 2,729 2,729
Loss on sale of assets 4 2 33
Goodwill amortisation 11 16 122
Increase in stocks (1,161) (253) (104)
Decrease in debtors 634 1,311 540
Decrease in creditors (352) (1,090) (815)
(Decrease)/Increase in
provisions for liabilities
and charges (57) 285 65
Net cash inflow/(outflow)
from operating activities 624 (578) 836
5. Reconciliation of decrease in net cash to movement in net
debt
Unaudited Unaudited Audited
Six months Six months Year
to 30 to 30 ended
June June 31 December
2000 1999 1999
Decrease in cash during the
year (184) (1,158) (404)
Cash outflow from decrease
in debt and lease financing 7 - 8
Changes in net debt
resulting from cash flows (177) (1,158) (396)
Other cash items:
New finance leases - - (66)
Movement in net debt during
the year (177) (1,158) (462)
Net debt at the start of the
year (1,580) (1,118) (1,118)
Net debt at the end of the
period (1,757) (2,276) (1,580)
6. Statement of total recognised gains and losses for the six
months ended 30 June 2000
Unaudited Unaudited Audited
six months six months 12 months
to 30 to 30 to 31
June June December
2000 1999 2000
Reported profit/(loss) on
ordinary activities before
taxation 342 (5,121) (4,531)
Unrealised reduction
impairment of properties - (917) (917)
Total gains and losses
recognised for the period 342 (6,038) (5,448)
7. Basis of preparation
(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 1999.
(b)The interim financial statement was approved by the board
on 4 September 2000. Neither the interim financial
statement nor comparative financial information for the six
months ended 30 June 1999 have been audited or reviewed .
Comparative information for the year ended 31 December 1999
has been extracted from the audited financial statements
for that period.
(c)The interim financial statement does not constitute
statutory accounts as defined by the Companies Act 1985,
Statutory accounts for the year ended 31 December 1999,
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.
Latest directors dealings
- 1 day ago Judges Scientific
- 1 day ago Mitie Group
- 1 day ago NCC Group
- 1 day ago Worldwide Healthcare Trust
- 1 day ago JpMorgan China Growth & Income