Good morning! I'll have to write this report fairly quickly this morning, as I'm heading into London for a broker/analyst lunch with Churchill China (CHH) - an interesting company that has been on my watch list for some time, but which has not fallen to an acceptable price for me to buy any (it's not been far off a couple of times).

Churchill China (LON:CHH)

Share price: 460p
No. shares: 10.93m
Market Cap: £50.3m

This is one of two Listed makers of ceramic crockery, the other being Portmeirion (LON:PMP). The main difference between the two seems to be that Churchill focus on supplying the hospitality sector, whereas Portmeirion seems more about decorative & special occasion crockery.

I compare the two companies from time to time, because I like the fundamentals & prospects at both, but always come back with the same conclusion - that Portmeirion is a higher quality business (making a significantly higher operating profit margin), yet the shares are consistently cheaper on a PER basis. Both have sound Balance Sheets & pay a reasonable dividend.

That has worked out well, as the chart below shows the share price performance of Churchill China (the dank blue line), with the comparison line (beige) being the share price of Portmeirion - which has done considerably better. So I picked the right one, in terms of performance over the last two years anyway.


Interim results - for Churchill China are published today, covering the six months to 30 Jun 2014. There is an H2 weighting to the trading year, so one has to be careful not to extrapolate % gains in profitability in H1 to the full year.

Operating profit - rose 31.9% in H1, although the figures are quite small - £1,046k last year H1, to £1,380k this year H1. The operating margin was medium at 6.6% (I prefer 10%+ operating margins), although the full year figure should be higher (it was 7.8% last full year), so will be getting close to 10% for the full year in 2014 I reckon.

Earnings Per Share (EPS) - diluted EPS rose from 7.6p to 9.8p in H1. Full year diluted EPS was 24.9p last year, so that suggests to me the company is probably heading for maybe 28-32p EPS for the full year in 2014? Broker consensus is 27.2p EPS…

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