Interim Results

RNS Number : 0455L

Churchill China PLC

30 August 2012

 



For immediate release

30 August 2012

CHURCHILL CHINA plc

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

INTERIM RESULTS

For the six months ended 30 June 2012

Churchill China plc (AIM: CHH), the manufacturer and global distributor of ceramic and related products to hospitality and retail markets is pleased to announce its interim results for the six months ended 30 June 2012.

Key Points:

·     Group revenue for the six months to 30 June 2012 was £19.2m (2011: £19.2m). 

·     Profit before tax up 22% at £0.8m (2011: £0.7m)

·     Basic earnings per share up 25% to 5.9p (2011: 4.7p)

·     Cash  balances of £4.3m (30 June 2011: £4.0m)

·     Maintained interim dividend of 4.8p (2011: 4.8p)

·     Strong performance in UK Hospitality with sales up 8% to £13.9m (2011: £12.9m)

·     Operating profit in Retail business doubled to £0.4m (2011: £0.2m)

·     New website: www.churchill1795.com 

On prospects Jonathan Sparey, Chairman said: "Churchill China has delivered a healthy set of results in the first half of 2012 despite anaemic economic conditions in all of its major geographical markets.  We do not anticipate any improvement in these macro-economic conditions in the second half but are confident of continued measured progress based on the robustness of our business model."

For further information, please contact:

Churchill China plc	Tel: [phone]
Andrew Roper / David Taylor
Buchanan	Tel: [phone]
Tim Anderson / Fiona Henson
N+1 Brewin	Tel: [phone]
Robert Beenstock	Tel: [phone]
Richard Lindley

Chairman's Statement 

Introduction

I am pleased to report good progress in our trading performance in the first half of 2012 with operating profit increasing by 10%. A solid contribution from our Hospitality business was enhanced by a continued improvement from our refocused Retail business on Group revenues in line with the corresponding period last year.

Financial Review

Group revenue for the six months to 30 June 2012 was unchanged at £19.2m (2011: £19.2m), with stronger sales in our Hospitality business offsetting lower sales in Retail following our withdrawal from unprofitable business sectors.

Group operating profit increased by 10%. Operating margins were slightly lower in our Hospitality business given accelerated investment in sales, marketing and new product development and less favourable Euro exchange rates.  Margins improved in our Retail business given increased focus on more profitable sectors and continued cost reduction. We reduced our overhead costs and increased our focus on the long term growth of our Hospitality business. Earnings before interest, tax, depreciation and amortisation were maintained at £1.6m (2011: £1.6m).

Pre-tax profit increased by 22% to £0.8m (2011: £0.7m) with some benefit from higher interest income, although this was largely attributable to increased notional interest on our pension fund assets.

Earnings per share increased by 25% to 5.9p (2011: 4.7p).

Overall cash balances were £0.3m ahead of the same period last year at £4.3m. Operating cash generation was lower than last year with an outflow of £0.5m compared with an inflow of £1.6m in the six months to June 2011. This reduction was largely due to short term changes in the pattern of sales receipts in respect of the 2010 and 2011 year ends. Our trade receivables position remains well controlled and we expect improved cash generation in the second half of the year given normal seasonal trading patterns.

Dividend

We are recommending a maintained dividend of 4.8 pence per share (2011: 4.8p per share) at the interim stage but will review the actual performance of our second half which is traditionally the more profitable period, before confirming our future dividend policy. The dividend will be paid on 4 October 2012 to shareholders on the register at 7 September 2012.

Hospitality

Worldwide sales to our Hospitality customers were 8% higher at £13.9m (2011: £12.9m). This solid performance once again highlights the core dependability of this business during a period when many of our major markets have been affected by adverse economic conditions.

Our sales in the UK were flat. It has been well reported in the media that food sales in many major pub groups were rain affected, there is some evidence that eating out trends have been adversely impacted in the short term.

Churchill has allocated increased resource towards sales, marketing and innovative new product development in order to drive our business forward. It is therefore pleasing to record that sales to overseas markets grew by an average of 25%. The initial cost of establishing a wider international customer base inevitably has a slight effect on overall margin until critical mass is achieved in any given market.

Contribution to Group overheads was slightly down at £1.6m (2011: £1.8m) reflecting both the extra sales and marketing spend and slightly lower factory output.

We anticipate that our investments into our new website www.Churchill1795.com and the new London showroom will bring significant benefit in the medium term. We have had an excellent reaction from key clients since their launch.

Our continued programme for refurbishment in our UK manufacturing facility is very much predicated on our longer term goals of cost reduction, quality enhancement and flexibility.

Retail

Increased margins and a lower cost base ensured that our Retail business delivered improved contribution to group overheads despite the planned decline in sales to £5.3m (2011: £6.3m). The contribution from the Retail business increased to £0.4m (2011: £0.2m)

The 2012 new product ranges including our UK made fine china mugs have been very well received by our middle market clientele, suggesting our product launch strategy is correctly targeted.

Over the course of the last two years the objectives, customer base and structure of our Retail operation has undergone a transformation. I am happy to report that thanks to the best endeavours of the people concerned we have a vibrant business once more.

Prospects

Churchill China has delivered a healthy set of results in the first half of 2012 despite anaemic economic conditions in all of its major geographical markets.  We do not anticipate any improvement in these macro-economic conditions in the second half but are confident of measured progress based on the robustness of our business model.  We continue to expect a good second half year for our Hospitality business despite lower levels of new installations when compared to the significant contracts secured in the Middle East in 2011. We expect our growth to come from our core business and returns on investments made earlier in the year. We have confidence our Retail turnaround strategy is working and that the improvement it will be sustainable.

J.N.E Sparey

Chairman

29 August 2012

Churchill China plc

Consolidated Income Statement

For the six months ended 30 June 2012

		Unaudited		Unaudited		Audited
		Six months to 30 June 2012 £000		Six months to 30 June 2011 £000		Twelve months to 31 December 2011 £000
	Note
Revenue		19,178		19,182			42,296
Operating profit	1	736		664			2,713
Share of results of associate company		11		44			(41)
Finance income	2	95		21			52
Finance cost	2	(1)		(40)			(30)
Profit before income tax		841		689			2,694
Income tax expense	3	(198)		(177)			(598)
Profit for the period		643		512			2,096
		Pence per share		Pence per share			Pence per share
Basic earnings per ordinary share	4	5.9		4.7			19.2
Diluted basic earnings per ordinary share	4	5.8		4.7			19.2

All the above figures relate to continuing operations

Churchill China plc

Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2012

		Unaudited		Unaudited		Audited
		Six months to 30 June 2012 £000		Six months to 30 June 2011 £000		Twelve months to 31 December 2011 £000
Other comprehensive (expense)/income
Actuarial (loss)/gain on retirement benefit obligations		(33)		(47)			573
Exchange differences		-		(8)			(1)
Other comprehensive (expense)/income		(33)		(55)			572
Profit for the period		643		512			2,096
Total comprehensive income for the period		610		457			2,668
Attributable to:
Equity holders of the Company		610		457			2,668

All the above figures relate to continuing operations

Churchill China plc

Consolidated Balance Sheets

as at 30 June 2012

	Unaudited		Unaudited		Audited
	30 June		30 June		31 December
	2012		2011		2011
	£000		£000		£000
Assets
Non Current assets
Property, plant and equipment	14,245		14,824		14,402
Intangible assets	181		318		236
Investment in associates	857		931		846
Deferred income tax assets	787		1,163		858
	16,070		17,236		16,342
Current assets
Inventories	9,963		9,532		9,127
Trade and other receivables	7,372		8,056		7,767
Cash and cash equivalents	4,323		4,014		6,886
	21,658		21,602		23,780
Total assets	37,728		38,838		40,122
Liabilities
Current liabilities
Trade and other payables	(5,715)		(6,279)		(7,044)
Current income tax liabilities	(493)		(465)		(693)
Total current liabilities	(6,208)		(6,744)		(7,737)
Non current liabilities
Retirement benefit obligations	(2,889)		(4,457)		(3,295)
Deferred income tax liabilities	(1,372)		(1,616)		(1,437)
Total non current liabilities	(4,261)		(6,073)		(4,732)
Total liabilities	(10,469)		(12,817)		(12,469)
Net assets	27,259		26,021		27,653
Shareholders' equity
Issued share capital	1,096		1,096		1,096
Share premium account	2,348		2,348		2,348
Treasury shares	(89)		(91)		(89)
Retained earnings	22,679		21,466		23,082
Other reserves	1,225		1,202		1,216
	27,259		26,021		27,653

Churchill China plc

Consolidated Statement of Changes in Equity

as at 30 June 2012

	Retained earnings £000		Share capital £000		Share premium £000		Treasury shares £000		Other reserves £000		Total £000
Balance at 1 January 2011	22,014		1,096		2,348		(91)		1,202		26,569
Comprehensive income
Profit for the period	512		-		-		-		-		512
Other comprehensive income
Depreciation transfer - gross	6		-		-		-		(6)		-
Depreciation transfer - tax	(14)		-		-		-		14		-
Actuarial losses - net	(47)		-		-		-		-		(47)
Currency translation	-		-		-		-		(8)		(8)
Total comprehensive income	457		-		-		-		-		457
Transactions with owners
Dividends	(1,005)		-		-		-		-		(1,005)
Total transactions with owners	(1,005)		-		-		-		-		(1,005)
Balance at 30 June 2011	21,466		1,096		2,348		(91)		1,202		26,021
Comprehensive income
Profit for the period	1,584		-		-		-		-		1,584
Other comprehensive income
Depreciation transfer -  gross	6		-		-		-		(6)		-
Depreciation transfer - tax	(13)		-		-		-		13		-
Actuarial gains - net	620		-		-		-		-		620
Currency translation	-		-		-		-		7		7
Total comprehensive income	2,197		-		-		-		14		2,211
Transactions with owners
Dividends	(525)		-		-		-		-		(525)
Treasury shares	(56)		-		-		2		-		(54)
Total transactions with owners	(581)		-		-		2		-		(579)
Balance at 31 December 2011	23,082		1,096		2,348		(89)		1,216		27,653
Comprehensive income
Profit for the period	643		-		-		-		-		643
Other comprehensive income
Depreciation transfer - gross	6		-		-		-		(6)		-
Depreciation transfer - tax	(14)		-		-		-		14		-
Actuarial losses - net	(33)		-		-		-		-		(33)
Total comprehensive income	602		-		-		-		-		610
Transactions with owners
Dividends	(1,005)		-		-		-		-		(1,005)
Share based payment	-		-		-		-		1		1
Total transactions with owners	(1,005)		-		-		-		1		(1,004)
Balance at 30 June 2012	22,679		1,096		2,348		(89)		1,225		27,259

Churchill China plc

Consolidated Cash Flow Statement

for the six months ended 30 June 2012

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Twelve months to
	30 June 2012		30 June 2011		31 December 2011
	£000		£000		£000
Cash flow from operating activities
Cash (outflow)/ inflow from operations	(514)		1,646		5,922
Interest received	24		15		27
Income tax paid	(426)		(219)		(557)
Net cash (used by) / generated from operating activities	(916)		1,442		5,392
Investing activities
Purchases of property, plant and equipment	(674)		(843)		(1,383)
Proceeds on disposal of property, plant and equipment	44		43		117
Purchases of intangible assets	(12)		(65)		(99)
Net cash used in investing activities	(642)		(865)		(1,365)
Financing activities
Issue of ordinary shares	-		-		122
Purchase of treasury shares	-		-		(176)
Dividends paid	(1,005)		(1,005)		(1,530)
Net cash used in financing activities	(1,005)		(1,005)		(1,584)
Net (decrease) / increase in cash and cash equivalents	(2,563)		(428)		2,443
Cash and cash equivalents at the beginning of the period	6,886		4,442		4,442
Exchange gains on cash and cash equivalents	-		-		1
Cash and cash equivalents at the end of the period	4,323		4,014		6,886

1. Segmental analysis

For the six months ended 30 June 2012

	Hospitality		Retail		Unallocated		Total
	£000		£000		£000		£000
6 months to 30 June 2012
Revenue	13,936		5,242		-		19,178
Contribution to group overheads excluding depreciation	2,097		629		(1,135)		1,591
Depreciation	(520)		(148)		(187)		(855)
Operating profit	1,577		481		(1,322)		736
Share of results of associated company							11
Finance income							95
Finance costs							(1)
							841
Profit before income tax
Income tax expense							(198)
Profit for the period							643
6 months to 30 June 2011
Revenue	12,910		6,272		-		19,182
Contribution to group overheads excluding depreciation	2,330		328		(1,071)		1,587
Depreciation	(490)		(160)		(273)		(923)
Operating profit	1,840		168		(1,344)		664
Share of results of associated company							44
Finance income							21
Finance costs							(40)
Profit before income tax							689
Income tax expense							(177)
Profit for the period							512
12 months to 31 December 2011
Revenue	29,166		13,130		-		42,296
Contribution to group overheads excluding depreciation	5,765		1,311		(2,404)		4,672
Depreciation	(1,055)		(303)		(601)		(1,959)
Operating profit	4,710		1,008		(3,005)		2,713
Share of results of associated company							(41)
Finance income							52
Finance costs							(30)
Profit before income tax							2,694
Income tax expense							(598)
Profit for the period							2,096

2. Finance income and costs

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Twelve months to
	30 June 2012		30 June 2011		31 December 2011
	£000		£000		£000
Finance income
Interest on pension scheme	70		-		-
Other interest receivable	25		21		52
Finance income	95		21		52
Finance costs
Interest of pension scheme	-		(40)		(5)
Other interest	(1)		-		(25)
Finance costs	(1)		(40)		(30)

The interest income / (cost) arising from pension schemes is a non cash item.

3. Income tax expense

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Twelve months to
	30 June 2012		30 June 2011		31 December 2011
	£000		£000		£000
Current taxation	225		183		743
Deferred taxation	(27)		(6)		(145)
Income tax expense	198		177		598

4. Earnings per ordinary share

Basic earnings per ordinary share is based on the profit on ordinary activities after taxation of £643,000 (2011: £512,000) and on 10,924,976 (2011: 10,925,976) ordinary shares, being the weighted average number of ordinary shares in issue during the period.

Diluted basic earnings per ordinary share is based on the profit on ordinary activities after taxation of £643,000 and on 11,029,722 (2011:10,960,993) ordinary shares, being the weighted average number of ordinary shares in issue during the year of 10,924,976 (2011: 10,925,976) increased by 104,746 (2011: 35,017) 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.

5. Reconciliation of operating profit to net cash inflow from continuing activities

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Twelve months to
	30 June 2012		30 June 2011		31 December 2011
	£000		£000		£000
Cash flow from operating activities
Operating profit	736		664		2,713
Adjustments for
Depreciation	855		923		1,959
Profit on disposal of property, plant and equipment	(2)		(2)		(42)
Charge for share based payment	1		-		-
Decrease in retirement benefit obligations	(336)		(248)		(495)
Changes in working capital
Inventory	(836)		(1,335)		(930)
Trade and other receivables	397		1,896		2,199
Trade and other payables	(1,329)		(252)		518
Cash (outflow)/inflow from operations	(514)		1,646		5,922

6. Basis of preparation and accounting policies

The interim financial information for the period to 30 June 2012 has not been audited or reviewed and does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Company's statutory accounts for the year ended 31 December 2011, prepared in accordance with accounting standards adopted for use in the European Union (International Financial Reporting Standards - IFRS), have been delivered to the Registrar of Companies; the report of the auditors on these accounts was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

The interim financial statements have been prepared in accordance with IFRS as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS, under the historical cost convention as modified by the revaluation of land and buildings, available for sale financial assets, and 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 interim financial statements as were applied in the group's last audited financial statements.

 

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