INTERIM RESULTS

RNS Number : 6914M

Churchill China PLC

29 August 2013

 



For immediate release

29 August 2013

CHURCHILL CHINA plc

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

INTERIM RESULTS

For the six months ended 30 June 2013

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 2013.

Key Highlights:

·     Group revenue for the six months to 30 June 2013 was £19.7m (2012: £19.2m)

·     Operating profit up 42% to £1.1m (2012: £0.7m)

·     Profit before tax up 56% to £1.1m (2012: £0.7m)

·     Basic earnings per share up 58% to 7.6p (2012: 4.8p)

·     Cash  and deposit balances of £4.8m (30 June 2012: £4.3m)

·     Interim dividend increased to 4.9p (2012: 4.8p)

Alan McWalter, Chairman of Churchill China, commented: "We have started the year with a very encouraging first six months and current trading levels remain good for the Group as a whole."

For further information, please contact:

Churchill China plc	Tel: [phone]
Andrew Roper / David Taylor
Buchanan	Tel: [phone]
Mark Court / Fiona Henson / Sophie Cowles
N+1 Singer
Richard Lindley	Tel: [phone]

CHAIRMAN'S STATEMENT

Introduction

I am pleased to report a healthy increase in Group profitability for the first half of 2013. Our Hospitality business has performed well across all sectors although our progress in Retail has been more restrained. Group revenues rose from £19.2m to £19.7m. Group operating profit increased by £0.4m to £1.1m.

Financial Review

Revenues grew steadily building on the solid performance achieved last year and the Group both improved gross margins and managed costs well. Group operating profit increased by 42% to £1.1m (2012: £0.7m) with operating profit margins rising from 3.8% to 5.3%. The Group benefitted from a better mix of sales, increased manufacturing volumes and a more favourable sterling / euro exchange rate.  Earnings before interest, tax, depreciation and amortisation increased by £0.2m to £1.8m.

Pre-tax profits increased by 56% to £1.1m (2012 restated: £0.7m) and earnings per share improved by a similar amount to 7.6p (2012 restated: 4.8p). 2012 comparative figures have been restated to reflect the introduction of the revised IAS 19 accounting standard and its effect on the notional interest on our defined benefit pension scheme. Further details are provided in note 6.

Overall cash and deposit balances remained strong at £4.8m (June 2012: £4.3m). Operating cash generation in the first half of the year improved arising from increased profits and a lower than normal seasonal increase in working capital. The annual contribution to our pension fund was accelerated in the first half, but will remain unchanged for the year as a whole. Capital expenditure was slightly ahead of last year as we continued our progressive investment programme.

Dividend

The Board is pleased to recommend an increased interim dividend of 4.9p (2012: 4.8p). The Board continues to balance the desire to increase dividends with the maintenance of a reasonable level of dividend cover. Given the relative importance of the second half of the year to overall Group profitability we would expect to weight any further increases in the total dividend for the year towards the final dividend payment. The interim dividend will be paid on 3 October 2013 to shareholders on the register on 6 September 2013.

Hospitality

Total revenue in our Hospitality business increased by 8% to £15.0m (2012: £13.9m) continuing the historic trend of steady growth in this division. Churchill has consolidated its position as UK market leader with creditable sales growth of 8% in a period when new installations and the regional dining out market in general can best be described as patchy.

We have always stressed that return on investment in overseas hospitality markets is by its very nature a slow burn as exporting presents a raft of extra challenges including currency fluctuation, trade barriers, differing product requirements and indigenous competition. It is pleasing to note that our long term investments in new products, market development and people are yielding tangible benefits as our exports rose by 8%, broadening our customer base.

Our Hospitality product offering spans all market sectors, has excellent technical performance and is backed up by unrivalled service levels.

Contribution to Group central costs rose to £2.0m (£1.6m).

Retail

Revenues in our Retail business were affected by increased costs on imported ranges and declined by £0.6m to £4.7m.  The adverse effect of the EU Anti dumping duty on Chinese ceramics has been partially mitigated by the transfer of Churchill's sources of supply to other countries. UK consumers, as one would expect, are taking time to adjust to new higher price points resulting from the increase in duty. We are, nevertheless, delighted with the success of our Caravan Trail, Hidden World and Little Rhymes ranges which have proved very popular with excellent sell through in our independent retail customers. Contribution to Group central costs reduced to £0.3m (2012: £0.4m).

Operations and People

The continued improvement in the Group's performance owes much to the quality of our people. The management team have several projects both underway and planned to make further improvements to our UK manufacturing operations in terms of yield, quality, efficiency and reducing our impact on the environment.

Our employees have continued to support the local Douglas Macmillan Hospice and their 2013 fund raising is well on target. The effort is a huge credit to all our employees, their friends and relatives and has had a significant, positive, effect on our workforce.

Board appointment

We are delighted to announce that Brendan Hynes will be joining Churchill as a Non Executive Director in September. Brendan has extensive experience within listed companies, most recently at Nichols plc where he was Chief Executive Officer from 2007 to 2013. A more detailed announcement regarding Brendan's appointment will be made in due course.

Prospects

We anticipate that our Hospitality business will remain healthy both in the UK and in the majority of our export markets. We expect to continue to reap the benefit from our long term investment programme. Our Retail product range is strong but we expect sales to remain subdued for the remainder of the year.

We have started the year with a very encouraging first six months and current trading levels remain good for the Group as a whole. If current sales trends persist through the remainder of 2013, in particular through the important fourth quarter, we would expect to deliver a full year performance at the higher end of our initial expectations.

Alan McWalter

Chairman

28 August 2013

Churchill China plc

Consolidated Income Statement

For the six months ended 30 June 2013

		Unaudited		Unaudited		Audited
		Six months to 30 June 2013 £000		Six months to 30 June 2012* £000		Twelve months to 31 December 2012* £000
	Note
Revenue		19,724		19,178			41,435
Operating profit	1	1,046		736			2,830
Share of results of associate company		69		11			18
Finance income	2	62		25			76
Finance cost	2	(110)		(86)			(207)
Profit before income tax		1,067		686			2,717
Income tax expense	3	(231)		(161)			(571)
Profit for the period		836		525			2,146
		Pence per share		Pence per share			Pence per share
Basic earnings per ordinary share	4	7.6		4.8			19.6
Diluted basic earnings per ordinary share	4	7.6		4.8			19.5

All the above figures relate to continuing operations

*Restated - see Note 6

Churchill China plc

Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2013

		Unaudited		Unaudited		Audited
		Six months to 30 June 2013 £000		Six months to 30 June 2012* £000		Twelve months to 31 December 2012* £000
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss:
Remeasurements of post employment benefit obligations Items that may be reclassified subsequently to profit or loss:		-		85			(1,813)
Currency translation differences		14		-			(11)
Other comprehensive (expense)/income		14		85			(1,824)
Profit for the period		836		525			2,146
Total comprehensive income for the period		850		610			322
Attributable to:
Equity holders of the Company		850		610			322

All the above figures relate to continuing operations

*Restated - see Note 6

Churchill China plc

Consolidated Balance Sheet

as at 30 June 2013

	Unaudited		Unaudited		Audited
	30 June		30 June		31 December
	2013		2012		2012
	£000		£000		£000
Assets
Non Current assets
Property, plant and equipment	14,170		14,245		14,162
Intangible assets	7		181		73
Investment in associates	933		857		864
Deferred income tax assets	1,203		787		1,285
	16,313		16,070		16,384
Current assets
Inventories	10,384		9,963		9,877
Trade and other receivables	7,301		7,372		7,333
Other financial assets	500		-		500
Cash and cash equivalents	4,301		4,323		6,497
	22,486		21,658		24,207
Total assets	38,799		37,728		40,591
Liabilities
Current liabilities
Trade and other payables	(6,235)		(5,715)		(7,132)
Current income tax liabilities	(480)		(493)		(648)
Total current liabilities	(6,715)		(6,208)		(7,780)
Non current liabilities
Retirement benefit obligations	(4,482)		(2,889)		(5,054)
Deferred income tax liabilities	(1,276)		(1,372)		(1,296)
Total non current liabilities	(5,758)		(4,261)		(6,350)
Total liabilities	(12,473)		(10,469)		(14,130)
Net assets	26,326		27,259		26,461
Shareholders' equity
Issued share capital	1,096		1,096		1,096
Share premium account	2,348		2,348		2,348
Treasury shares	(41)		(89)		(89)
Retained earnings	21,660		22,679		21,871
Other reserves	1,263		1,225		1,235
	26,326		27,259		26,461

Churchill China plc

Consolidated Statement of Changes in Equity

as at 30 June 2013

	Retained Earnings* £000		Share capital £000		Share premium £000		Treasury shares £000		Other reserves £000		Total £000
Balance at 1 January 2012	23,082		1,096		2,348		(89)		1,216		27,653
Comprehensive income
Profit for the period	525		-		-		-		-		525
Other comprehensive income
Depreciation transfer - gross	6		-		-		-		(6)		-
Depreciation transfer - tax	(14)		-		-		-		14		-
Remeasurements of post employment benefit
obligation - net	85		-		-		-		-		85
Total comprehensive income	602		-		-		-		8		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
Comprehensive income
Profit for the period	1,621		-		-		-		-		1,621
Other comprehensive income
Depreciation transfer -  gross	6		-		-		-		(6)		-
Depreciation transfer - tax	(13)		-		-		-		13		-
Remeasurements of post employment benefit
obligation - net	(1,898)		-		-		-		-		(1,898)
Currency translation	-		-		-		-		(11)		(11)
Total comprehensive income	(284)		-		-		-		(4)		(288)
Transactions with owners
Dividends	(524)		-		-		-		-		(524)
Share based payment	-		-		-		-		14		14
Total transactions with owners	(524)		-		-		-		14		(510)
Balance at 31 December 2012	21,871		1,096		2,348		(89)		1,235		26,461
Comprehensive income
Profit for the period	836		-		-		-		-		836
Other comprehensive income
Depreciation transfer - gross	6		-		-		-		(6)		-
Depreciation transfer - tax	(1)		-		-		-		1		-
Currency translation	-		-		-		-		14		14
Total comprehensive income	841		-		-		-		9		850
Transactions with owners
Dividends	(1,027)		-		-		-		-		(1,027)
Treasury shares	(25)		-		-		48		-		23
Share based payment	-		-		-		-		19		19
Total transactions with owners	(1,052)		-		-		48		19		(985)
Balance at 30 June 2013	21,660		1,096		2,348		(41)		1,263		26,326

*Restated - see Note 6

Churchill China plc

Consolidated Cash Flow Statement

for the six months ended 30 June 2013

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Twelve months to
	30 June 2013		30 June 2012		31 December 2012
	£000		£000		£000
Cash flow from operating activities
Cash (outflow)/ inflow from operations	(203)		(514)		3,433
Interest received	53		24		36
Income tax paid	(337)		(426)		(728)
Net cash (used by) / generated from operating activities	(487)		(916)		2,741
Investing activities
Purchases of property, plant and equipment	(738)		(674)		(1,182)
Proceeds on disposal of property, plant and equipment	36		44		88
Purchases of intangible assets	(3)		(12)		(6)
Net cash used in investing activities	(705)		(642)		(1,100)
Financing activities
Issue of ordinary shares	75		-		-
Purchase of treasury shares	(52)		-		-
Dividends paid	(1,027)		(1,005)		(1,529)
Purchase of financial assests	-		-		(500)
Net cash used in financing activities	(1,004)		(1,005)		(2,029)
Net decrease in cash and cash equivalents	(2,196)		(2,563)		(388)
Cash and cash equivalents at the beginning of the year	6,497		6,886		6,886
Exchange losses on cash and cash equivalents	-		-		(1)
Cash and cash equivalents at the end of the year	4,301		4,323		6,497

Notes

1. Segmental analysis

For the six months ended 30 June 2013

	Hospitality		Retail		Unallocated		Total
	£000		£000		£000		£000
6 months to 30 June 2013
Revenue	15,030		4,694		-		19,724
Contribution to group overheads excluding depreciation	2,507		464		(1,161)		1,810
Depreciation	(502)		(150)		(112)		(764)
Operating profit	2,005		314		(1,273)		1,046
Share of results of associated company					69		69
Finance income					62		62
Finance costs					(110)		(110)
Profit before income tax					(1,252)		1,067
Income tax expense							(231)
Profit for the period							836
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		11
Finance income					25		25
Finance costs					(86)		(86)
Profit before income tax					(1,372)		686
Income tax expense							(161)
Profit for the period							525
12 months to 31 December 2012*
Revenue	29,407		12,028		-		41,435
Contribution to group overheads excluding depreciation	5,103		1,721		(2,402)		4,422
Depreciation	(942)		(301)		(349)		(1,592)
Operating profit	4,161		1,420		(2,751)		2,830
Share of results of associated company					18		18
Finance income					76		76
Finance costs					(207)		(207)
Profit before income tax					(2,864)		2,717
Income tax expense							(571)
Profit for the period							2,146

*Restated - see Note 6

2. Finance income and costs

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Twelve months to
	30 June 2013		30 June 2012*		31 December 2012*
	£000		£000		£000
Finance income
Interest on pension scheme	-		-		-
Other interest receivable	62		25		76
Finance income	62		25		76
Finance costs
Interest on pension scheme	(100)		(85)		(167)
Other interest	(10)		(1)		(40)
Finance costs	(110)		(86)		(207)

The interest cost arising on pension schemes is a non cash item.

*Restated - see Note 6

3. Income tax expense

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Twelve months to
	30 June 2013		30 June 2012*		31 December 2012*
	£000		£000		£000
Current taxation	169		225		688
Deferred taxation	62		(64)		(117)
Income tax expense	231		161		571

*Restated - see Note 6

4. Earnings per ordinary share

Basic earnings per ordinary share is based on the profit on ordinary activities after taxation of £836,000 (June 2012 restated: £525,000, December 2012 restated: £2,146,000) and on 10,933,540 (June 2012: 10,924,976, December 2012: 10,924,976) 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 of £836,000 (June 2012 restated: £525,000, December 2012 restated: £2,146,000) and on 11,069,628 (June 2012: 11,029,722, December 2012: 11,030,731) ordinary shares, being the weighted average number of ordinary shares in issue during the year of 10,933,540 (June 2012: 10,924,976, December 2012 10,924,976) increased by 136,088 (June 2012: 104,746, December 2012 105,755) 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.

*Restated - see Note 6

5. Reconciliation of operating profit to net cash flow from operations

	Unaudited		Unaudited		Audited
	Six months to		Six months to		Twelve months to
	30 June 2013		30 June 2012		31 December 2012
	£000		£000		£000
Cash flow from operating activities
Operating profit	1,046		736		2,830
Adjustments for
Depreciation	764		855		1,592
Profit on disposal of property, plant and equipment	(3)		(2)		(2)
Charge for share based payment	19		1		15
Decrease in retirement benefit obligations	(672)		(336)		(672)
Changes in working capital
Inventory	(506)		(836)		(751)
Trade and other receivables	51		397		417
Trade and other payables	(902)		(1,329)		4
Cash (outflow)/inflow from operations	(203)		(514)		3,433

6. Basis of preparation and accounting policies

The interim financial information for the period to 30 June 2013 has not been audited or reviewed and does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The Company's statutory accounts for the year ended 31 December 2012, 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 with the exception of the adoption of IAS 19 (revised).

IAS 19 (revised), amongst other changes, amends the expected long term rate of return on defined benefit plan asset classes from that applying to the individual asset class held to the same rate as that used to discount the scheme's liabilities. The impact of the adoption of this revised standard on the Consolidated Income Statement is a change of £155,000 in Interest on pension scheme in the six months to 30 June 2012, with £70,000 finance income being revised to a finance cost of £85,000 and in the year to 31 December 2012 a change of £370,000 in Interest on pension scheme, revising finance income of £203,000 to a finance cost of £167,000. The tax charge for the six months to 30 June 2012 has reduced by £37,000 and by £89,000 for the year to 31 December 2012 accordingly. The post tax impacts of these changes are matched by increases in other comprehensive income. Comparative financial information shown in this statement has been amended accordingly.

 

END

 

 

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