Interim Results

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

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