Good morning,

We have a few new updates worth discussing today, and I'm also interested to look at yesterday's backlog if there's a chance.

As a reminder, the backlog from yesterday includes Loungers (LON:LGRS), Headlam (LON:HEAD), Wey Education (LON:WEY) and Proactis Holdings (LON:PHD).

Churchill China (LON:CHH)

  • Share price: 1610p (+1.6%)
  • No. of shares: 11 million
  • Market cap: £177 million

Interim Results

Churchill China plc (AIM: CHH), the manufacturer of innovative performance ceramic products serving hospitality markets worldwide, is pleased to announce its interim results for the six months ended 30 June 2019.

I have read through this entire thing and can't find anything particularly controversial in it.

This reflects well on a company which has grown over the years and hasn't really put a foot wrong. It's the good companies which also tend to be the most "boring", on a superficial level, because they just keep on pumping out solid results!

Note the strong like-for-like growth rate of 25% in operating profit, before taking into account the effects of a small acquisition.

The increased stake in Furlong Mills bumps up Churchill's growth rate to 30%.

Note also the very clean accounting: H1 PBT before exceptional items is £4.2 million, while H1 PBT after exceptional items is £4.3 million! The company made an exceptional gain of £0.1 million during its acquisition.

Last year, there were no exceptional items in H1 at all.

Strategically, the company says it has exited activities where it did not have a competitive advantage over the past five years. Despite this, revenues have grown every year. The latest H1 period continues the trend with 10% growth on an underlying basis (my own calculations, excluding the acquisition).

One thing I would bring your attention to is the higher level of cash that left the business in H1, as Churchill expanded manufacturing capacity and bought the Dudson brand. The good news…

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