Interim Results

RNS Number : 9950M

Churchill China PLC

25 August 2011

 



For immediate release

25 AUGUST 2011

CHURCHILL CHINA plc

(LSE : CHH)

INTERIM RESULTS

For the six months ended 30 June 2011

Churchill China plc, ("Churchill" or the "Company") the manufacturer and global distributor of ceramic tableware and household products to hospitality and retail markets, is pleased to announce its interim results for the six months ended 30 June 2011.

Key Points:

Ø Group revenue for the six months to 30 June 2011 was £19.2m (2010: £20.2m). 

Ø Profit before tax up 10% at  £0.7m (2010: £0.6m)

Ø Basic earnings per share up 12% to 4.7p (2010: 4.2p)

Ø Operating cash generation was £1.6m (2010: £0.6m)

Ø Cash  balances of £4.0m (June 2010: £5.7m)

Ø Interim dividend of  4.8p (2010: 4.8p)

Ø Strong performance in UK Hospitality

Ø Repositioning of Retail business continues

On prospects Jonathan Sparey, Chairman said: "Our performance is robust and we are on track to deliver the Board's revenue and profit objectives for the full year."

For further information, please contact:

Churchill China plc	Today on: 020 7466 5000
Andrew Roper/David Taylor	thereafter on: 01782 577566
Buchanan Communications	Tel No: 020 7466 5000
Tim Anderson/Lisa Baderoon
Brewin Dolphin Investment Banking	Tel No: 0845 213 4729
Mark Brady

CHAIRMAN'S STATEMENT

Introduction

I am pleased to report an improvement in Group profitability for the first half of the year.  This performance reflected the continued strength of our Hospitality business where profitability was ahead of the first half of 2010 on sales which were slightly lower than the comparable period.  We experienced sustained demand across all of our market segments in the UK. Our Retail business generated a small increase in operating profit as we continue to reposition our activity to more attractive market segments. Group profit before tax increased by 10% to £0.7m reflecting the improving performance. 

Financial Review

Group revenue for the six months to 30 June 2011 was £19.2m, down 5% against the first half of last year (2010: £20.2m) reflecting a reduction in supermarket revenues from our Retail business. 

Group operating profit increased to £0.7m (2010: £0.6m). Our manufacturing operations benefited from a more stable level of output and increased efficiencies. Additional investment in sales and marketing activity in our Hospitality business was largely offset by savings within Retail operations as we refocused our operations. 

Pre-tax profit increased by 10% to £0.7m (2010: £0.6m) largely due to this improved operating performance. Interest charges and our share of profit from our associate were stable compared to last year.

Earnings per share increased by 12% to 4.7p (2010: 4.2p).

Operating cash generation was strong at £1.6m (2010: £0.6m), despite an expansion in inventory levels to service increased Hospitality business in the second half of the year. This was achieved from tight control of receivables. Overall cash balances reduced to £4.0m (June 2010: £5.7m) given slightly higher levels of capital expenditure and payment of the final dividend for 2010 of £1.0m (2010: £1.0m).

Dividend

The Board is recommending a maintained interim dividend of 4.8p per share (2010: 4.8p per share) which will be paid on 6 October 2011 to shareholders on the register on 9 September 2011.

Hospitality

Sales to our Hospitality customers were 1% lower at £12.9m (2010: £13.1m) and matched the strong performance in the first half of 2010. This performance reflects the underlying strength of the business as it was delivered despite the absence of significant new installation projects. 

Sales in the UK, where we are market leader, were up by over 5% but this encouraging performance was limited by export revenues which were 12% down on the comparable period of last year. Our Hospitality business created an operating profit of £1.8m (2010: £1.8m).

Our hotel, restaurant, contract catering and pub customers are all operating in an environment of considerable economic uncertainty.    Several new product ranges have been launched and extended in the last few months, targeting specific dining out trends including "Asian", "Just Desserts", "Rustics" and "Deli" and these propositions have been well received.  Our penetration of accounts in the exclusive five star market continues to grow, supported by the extension of the "Ambience" product range in both white and sophisticated patterns. 

This new product development and innovation is underpinned by a sustained investment programme and an increase in dedicated sales and marketing resources to our target markets.  Although this investment activity has a short term impact on profitability, it is an integral part of our strategy and will drive future growth in shareholder returns.

Retail

Sales to our Retail customers at £6.3m (2010: £7.1m) declined by 11% as we continued to withdraw from unattractive, low margin business. These adjustments to sales mix, coupled with a reduction in cost levels, resulted in a small improvement in operating profit despite the lower revenues. 

Our Retail strategy is to concentrate on the sale of branded and licensed ranges at margins that are sustainable and we continue to focus our sales effort on the middle market where we are performing well.  Our new product launches have been very well received at recent trade fairs by key department stores and independent sector customers. We are taking advantage of opportunities in a rapidly evolving market place embracing tourism and leisure related outlets, farm shops, garden centres and web based retailers as well as more conventional outlets.

Prospects

Despite the heightened level of economic uncertainty in the UK and international markets, our performance is robust and we are on track to deliver the Board's revenue and profit objectives for the full year.  Within our Hospitality business profitability is always heavily weighted to the second half of the year and this year's performance will be boosted by the completion of an important contract.  We are working closely with key distributors to develop our market leading position in the UK whilst increasing investment in sales and marketing resources and new product development targeted at key export markets.

Our strategy for the Retail business is only partially implemented as we withdraw from low margin sales and improve the quality of our offerings to mid-market customers. The response from key customers to our new Autumn/Winter ranges has been very positive.

I am confident that Churchill will deliver enhanced profitability in 2011 in line with market expectations. 

Jonathan Sparey

Chairman

24 August 2011

Churchill China plc

Consolidated Income Statement

For the six months ended 30 June 2011

		Unaudited		Unaudited		Audited
		Six months to 30 June 2011 £000		Six months to 30 June 2010 £000		Twelve months to 31 December 2010 £000
	Note
Revenue		19,182		20,213			43,746
Operating profit	1	664		616			2,287
Share of results of associate company		44		68			162
Finance income	2	21		15			41
Finance cost	2	(40)		(75)			(176)
Profit before income tax		689		624			2,314
Income tax expense	3	(177)		(164)			(583)
Profit for the period		512		460			1,731
		Pence per share		Pence per share			Pence per share
Basic earnings per ordinary share	4	4.7		4.2			15.8
Diluted basic earnings per ordinary share	4	4.7		4.2			15.8

All the above figures relate to continuing operations

Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2011

		Unaudited		Unaudited		Audited
		Six months to 30 June 2011 £000		Six months to 30 June 2010 £000		Twelve months to 31 December 2010 £000
Other comprehensive (expense)/income
Actuarial (loss)/gain on retirement benefit obligations		(47)		-			1,894
Currency translation		(8)		9			7
Other comprehensive (expense)/income		(55)		9			1,901
Profit for the period		512		460			1,731
Total comprehensive income/ (expense) for the period		457		469			3,632
Attributable to:
Equity holders of the Company		457		469			3,632
All the above figures relate to continuing operations

Churchill China plc

Consolidated Balance Sheets

as at 30 June 2011

	Unaudited		Unaudited		Audited
	30 June		30 June		31 December
	2011		2010		2010
	£000		£000		£000
Assets
Non Current assets
Property, plant and equipment	14,824		14,298		15,030
Intangible assets	318		401		368
Investment in associates	931		793		887
Deferred income tax assets	1,163		2,116		1,266
	17,236		17,608		17,551
Current assets
Inventories	9,532		7,579		8,197
Trade and other receivables	8,056		8,847		9,963
Cash and cash equivalents	4,014		5,720		4,442
	21,602		22,146		22,602
Assets held for sale	-		662		-
	21,602		22,808		22,602
Total assets	38,838		40,416		40,153
Liabilities
Current liabilities
Trade and other payables	(6,279)		(6,561)		(6,735)
Current income tax liabilities	(465)		(579)		(501)
	(6,744)		(7,140)		(7,236)
Non current liabilities
Retirement benefit obligations	(4,457)		(7,537)		(4,670)
Deferred income tax liabilities	(1,616)		(1,692)		(1,678)
Total non current liabilities	(6,073)		(9,229)		(6,348)
Total liabilities	(12,817)		(16,369)		(13,584)
Net assets	26,021		24,047		26,569
Shareholders' equity
Issued share capital	1,096		1,096		1,096
Share premium account	2,348		2,348		2,348
Treasury shares	(91)		(109)		(91)
Retained earnings	21,466		19,450		22,014
Other reserves	1,202		1,262		1,202
	26,021		24,047		26,569

Churchill China plc

Consolidated Statement of Changes in Equity

As at 30 June 2011

	Retained earnings £000		Share capital £000		Share premium £000		Treasury shares £000		Other reserves £000		Total £000
Balance at 1 January 2010	19,992		1,095		2,332		(117)		1,234		24,536
Comprehensive income:
Profit for the period	460		-		-		-		-		460
Other comprehensive income:
Depreciation transfer - gross	6		-		-		-		(6)		-
Depreciation transfer - tax	(4)		-		-		-		4		-
Actuarial losses - net	-		-		-		-		-		-
Currency translation	-		-		-		-		9		9
Total comprehensive income	462		-		-		-		7		469
Transactions with owners:
Dividends	(1,004)		-		-		-		-		(1,004)
Share based payment	-		-		-		-		21		21
Issue of ordinary shares	-		1		16		-		-		17
Treasury shares	-		-		-		8		-		8
Total transactions with owners	(1,004)		1		16		8		21		(958)
Balance at 30 June 2010	19,450		1,096		2,348		(109)		1,262		24,047
Comprehensive income:
Profit for the period	1,271		-		-		-		-		1,271
Other comprehensive income:
Depreciation transfer-gross	6		-		-		-		(6)		-
Depreciation transfer - tax	(14)		-		-		-		14		-
Actuarial losses - net	1,894		-		-		-		-		1,894
Currency translation	-		-		-		-		(2)		(2)
Total comprehensive income	3,157		-		-		-		6		3,163
Transactions with owners:
Dividends	(525)		-		-		-		-		(525)
Share based payment	-		-		-		-		(66)		(66)
Treasury shares	(68)		-		-		18		-		(50)
Total transactions with owners	(593)		-		-		18		(66)		(641)
Balance at 31 December 2010	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 2010	21,466		1,096		2,348		(91)		1,202		26,021

Churchill China plc

Consolidated Cash Flow Statement

for the six months ended 30 June 2011

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Twelve months to
	30 June 2011		30 June 2010		31 December 2010
	£000		£000		£000
Cash flow from operating activities
Cash inflow from operations	1,646		644		1,092
Interest received/ paid	15		15		21
Income tax paid	(219)		(96)		(564)
Net cash generated from operating activities	1,442		563		549
Investing activities
Purchases of property, plant and equipment	(843)		(770)		(1,507)
Proceeds on disposal of property, plant and equipment	43		64		129
Purchases of intangible assets	(65)		(40)		(58)
Net cash used in investing activities	(865)		(746)		(1,436)
Financing activities
Issue of ordinary shares	-		67		67
Purchase of treasury shares	-		(42)		(91)
Dividends paid	(1,005)		(1,004)		(1,529)
Net cash used in financing activities	(1,005)		(979)		(1,553)
Net decrease in cash and cash equivalents	(428)		(1,162)		(2,440)
Cash and cash equivalents at the beginning of the year	4,442		6,882		6,882
Cash and cash equivalents at the end of the year	4,014		5,720		4,442

1. Segmental analysis

For the six months ended 30 June 2011

	Hospitality		Retail		Unallocated		Total
	£000		£000		£000		£000
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		44
Finance income					21		21
Finance costs					(40)		(40)
Profit before income tax					(1,319)		689
Income tax expense							(177)
Profit for the period							512
6 months to 30 June 2010
Revenue	13,107		7,106		-		20,213
Contribution to group overheads excluding depreciation	2,216		225		(1,099)		1,342
Depreciation	(456)		(97)		(173)		(726)
Operating profit	1,760		128		(1,272)		616
Share of results of associated company					68		68
Finance income					15		15
Finance costs					(75)		(75)
Profit before income tax					(1,264)		624
Income tax expense							(164)
Profit for the period							460
12 months to 31 December 2010
Revenue	27,398		16,348		-		43,746
Contribution to group overheads excluding depreciation	4,914		1,060		(2,157)		3,817
Depreciation	(859)		(305)		(366)		(1,530)
Operating profit	4,055		755		(2,523)		2,287
Share of results of associated company					162		162
Finance income					41		41
Finance costs					(176)		(176)
Profit before income tax					(2,496)		2,314
Income tax expense							(583)
Profit for the period							1,731

2. Finance income and costs

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Twelve months to
	30 June 2011		30 June 2010		31 December 2010
	£000		£000		£000
Finance income
Other interest receivable	21		15		41
Finance income	21		15		41
Finance costs
Interest on pension scheme	(34)		(75)		(156)
Other interest	(6)		-		(20)
Finance costs	(40)		(75)		(176)

The interest 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 2011		30 June 2010				31 December 2010
	£000		£000				£000
Current taxation	183			101		490
Deferred taxation	(6)			63		93
Income tax expense	177			164		583

4. Earnings per ordinary share

Basic earnings per ordinary share is based on the profit on ordinary activities after taxation and on 10,925,976 (2010: 10,935,017) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

Diluted basic earnings per ordinary share is based on the profit on ordinary activities after taxation and on 10,960,993 (2010:10,965,940) ordinary shares, being the weighted average number of ordinary shares in issue during the year of 10,925,976 (2010: 10,935,017) increased by 35,017 (2010: 30,923) 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 2011		30 June 2010		31 December 2010
	£000		£000		£000
Cash flow from operating activities
Operating profit	664		616		2,287
Adjustments for:
Depreciation	923		726		1,530
Profit on disposal of property, plant and equipment	(2)		(3)		(12)
Charge for share based payment	-		21		(45)
Decrease in retirement benefit obligations	(248)		(248)		(495)
Changes in working capital:
Inventory	(1,335)		(436)		(1,055)
Trade and other receivables	1,896		197		(922)
Trade and other payables	(252)		(229)		(196)
Cash generated from operations	1,646		644		1,092

6. Basis of preparation and accounting policies

The interim financial information for the period to 30 June 2011 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 2010, 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 interim financial information has been prepared using the same accounting policies, presentation and methods of computation as were applied in the Group's last audited financial statements.

 

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