REG - Churchill China PLC - Interim Results <Origin Href="QuoteRef">CHCH.L</Origin> <Origin Href="QuoteRef">INPP.L</Origin> <Origin Href="QuoteRef">JLG.L</Origin>

Churchill ChinaAnnouncement

27/08/2015 07:04

RNS Number : 2274X
Churchill China PLC
27 August 2015
For immediate release
27 August 2015
CHURCHILL CHINA plc
("Churchill China" or the "Company" or the "Group")
INTERIM RESULTS
For the six months ended 30 June 2015
Churchill China plc (AIM: CHH), the manufacturer and global distributor of performance ceramic and related products to hospitality and retail markets, is pleased to announce its interim results for the six months ended 30 June 2015.
Key Highlights:
 Group revenue up 3% to 21.4m (2014: 20.9m)
- Hospitality revenue growth 6% 
 Operating profit up 12% to 1.6m (2014: 1.4m)
 Profit before tax up 12% to 1.6m (2014: 1.4m)
 Basic earnings per share up 14% to 11.4p (2014: 10.0p)
 Interim dividend up 10% to 5.6p (2014: 5.1p)
 Cash and deposit balances of 8.7m (June 2014: 8.5m)
Alan McWalter, Chairman of Churchill China, commented:
Churchill has continued to perform well and I am pleased to report a good performance in the first six months of the year. We have delivered further growth against strong comparative figures and the Hospitality business has again achieved a record performance.
We are confident that the continued growth of our markets and the strength of our position within them will enable us to meet our expectations for the full year.
For further information, please contact:
Churchill China plc
Tel: 01782 577566
David O'Connor / David Taylor 



Buchanan
Tel: 020 7466 5000
Mark Court / Sophie Cowles / Jane Glover



N+1 Singer
Tel: 020 7496 3000
Richard Lindley / James White



Our interim results will be available today on the Company's website: www.churchill1795.com. Copies of the Interim Report will be sent to shareholders in due course.
CHAIRMAN'S STATEMENT
Introduction
Churchill has continued to perform well and I am pleased to report a good performance in the first six months of the year. We have delivered further growth against strong comparative figures and the Hospitality business has again achieved a record performance. This progress has been achieved from our target markets and from new product ranges, in line with the strategy we have developed. We have also continued to invest in the long term future of our business through market development and new manufacturing capacity. 
Financial Review
Total revenues increased by 3% to 21.4m (2014: 20.9m).
Gross margins have remained comparable to the first half of 2014 with the adverse effect of the strengthening of sterling against the euro being offset by increased operating efficiencies. On a constant currency basis revenue would have been 0.5m higher had exchange rates remained at 2014 levels. Operating profit was impacted by 0.3m on the same basis. We have retained tight control of overheads.
Operating profit increased by 12% to 1.6m (2014: 1.4m). Operating margins improved to 7.2% (2014: 6.6%). 
Earnings before interest, tax, depreciation and amortisation increased by 4% to 2.3m (2014: 2.2m).
Profit before tax rose by 12% to 1.6m (2014: 1.4m), largely arising from the improved operating performance.
Earnings per share improved by 14% to 11.4p (2014: 10.0p).
Operating cash inflow was lower than in previous years, largely as a result of increased working capital requirements. Following the strong demand experienced in the second half of 2014, we rebuilt inventory levels to support our service promise. Operating cash generation was 0.4m (2014: 2.7m). At the end of the period, net cash and deposit balances were 8.7m(June 2014: 8.5m).
We continue to invest in our core business. Capital investment was 0.6m (2014: 1.1m) with this further expenditure mainly focussed on our manufacturing unit in Stoke on Trent. This spend delivers additional capacity to produce added value products and will be followed by further investment in the UK over the remainder of 2015 and 2016.
Dividend 
The Board is declaring a 0.5p increase in the interim dividend to 5.6p per share (2014: 5.1p). This increase reflects our policy of linking dividends to increased profitability whilst maintaining appropriate levels of dividend cover. The interim dividend will be paid on 1 October 2015 to shareholders on the register on 11 September 2015. 
Markets
Hospitality
Total sales to our Hospitality customers increased by 1.0m (6%). Contribution to Group operating profits rose by 6% to 2.9m from 2.7m.
We continue to make steady progress in the UK where we enjoy a leading position in a growing market. We have delivered a good performance against strong comparative figures that included a significant benefit from an installation contract in the first half of last year. This performance reflects the progress achieved in a number of market segments.
We have invested significantly in sales and market development which has allowed us to achieve further growth in export markets. In the first half of the year, Europe produced a strong performance with sales 9% ahead of 2014, despite the considerable headwind from the weaker euro. Underlying sales growth in constant currency terms in Europe was over 20%. Other export markets also benefitted from additional focus and resource and recorded double digit revenue growth overall. These markets remain at an early stage of development for us, but we are pleased with the progress we have made and the opportunities we have generated. 
Much of our success in export markets can be attributed to a strong programme of new product development. The hand crafted Stonecast range has performed particularly well in the first half year as we have added additional colours to the existing product range.
Retail
Results from our Retail business again reflected the prioritisation of resources towards Hospitality. Revenue declined by 0.5m to 3.6m, in line with our expectations. The effect on profitability of this reduction was again largely mitigated by cost reductions. Contribution to Group profit fell marginally to 0.2m (2014: 0.2m). 
Our Retail operation is performing in line with our strategic objectives and has been repositioned in its markets. We remain clear that it provides a valuable contribution to the Group's overall future performance.
Operations
Manufacturing and logistics operations have continued to deliver well against high expectations. The strong trading at the end of 2014 and consequent impact on inventory levels has necessitated higher output levels across our operations to maintain the high service levels required by the Hospitality market. At the same time we have continued to introduce new products and have commissioned two major capital projects increasing our UK capacity in key areas. We have reached the half year well positioned to meet the expected seasonal increase in demand in the second half year. 
People
We continue to invest in the development of our workforce at all levels. Increased skills and wider flexibility amongst our staff remain important components of our strategy.
As announced in July 2015, we are pleased to welcome James Roper to the Board as Sales and Marketing Director. James' appointment reflects the increased focus we have given to market and product development in recent years and we expect that his knowledge and experience will bring further balance to the Board.
Prospects
Our business continued to perform well in the first half of 2015. Despite the forecast impact of stronger sterling and other external factors, we have delivered an increase in profitability, built upon the growth and resilience of our Hospitality business. 
We are pleased with the platform that the work carried out in the first six months of the year gives us for future development in the short and medium term. We continue to meet a number of milestones in relation to the evolution and implementation of our strategy. These include further sales and market development, new product introductions and investment in our manufacturing operations 
We are confident that the continued growth of our markets and the strength of our position within them will enable us to meet our expectations for the full year.
Alan McWalter
Chairman
27 August 2015


Churchill China plc
Consolidated Income Statement
For the six months ended 30 June 2015









Unaudited

Unaudited

Audited


Six months to
30 June 2015
000

Six months to
30 June 2014
000

Twelve months to
31 December 2014
000

Note





Revenue

21,449

20,871

44,518







Operating profit
1
1,549

1,380

4,249







Share of results of associate company

75

68

116
Finance income
2
41

34

76
Finance costs
2
(84)

(75)

(124)







Profit before income tax

1,581

1,407

4,317







Income tax expense
3
(341)

(315)

(901)







Profit for the period

1,240

1,092

3,416









Pence per 
Share

Pence per 
share

Pence per 
share







Basic earnings per ordinary share
4
11.4

10.0

31.2







Diluted basic earnings per ordinary share
4
11.2

9.8

30.8
All the above figures relate to continuing operations


Churchill China plc
Consolidated Statement of Comprehensive Income 
for the six months ended 30 June 2015









Unaudited

Unaudited

Audited


Six months to
30 June 2015
000

Six months to
30 June 2014
000

Twelve months to
31 December 2014
000







Other comprehensive income/(expense)
Items that will not be reclassidied to profit and loss:
Actuarial gain on retirement benefit obligations

-

-

(1,850)
Items that will not be reclassified to profit and loss






Exchange differences

(3)

(8)

17







Other comprehensive expense

(3)

(8)

(1,833)







Profit for the period

1,240

1,092

3,416







Total comprehensive income for the period

1,237

1,084

1,583







Attributable to:






Equity holders of the Company

1,237

1,084

1,583







All the above figures relate to continuing operations


Churchill China plc
Consolidated Balance Sheet
as at 30 June 2015

Unaudited

Unaudited

Audited

30 June

30 June

31 December

2015

2014

2014

000

000

000






Assets





Non Current assets





Property, plant and equipment
14,026

14,013

14,258
Intangible assets
53

67

63
Investment in associate
1,171

1,048

1,096
Deferred income tax assets
1,002

804

1,117

16,252

15,932

16,534






Current assets 





Inventories 
8,942

8,625

8,274
Trade and other receivables 
8,457

8,312

8,255
Other financial assets
2,250

1,500

1,500
Cash and cash equivalents
6,421

6,996

8,961

26,070

25,433

26,990






Total assets
42,322

41,365

43,524






Liabilities 





Current liabilities





Trade and other payables
(7,516)

(8,180)

(8,676)
Current income tax liabilities
(490)

(676)

(698)






Total current liabilities
(8,006)

(8,856)

(9,374)






Non current liabilities





Retirement benefit obligations
(4,715)

(2,989)

(4,674)
Deferred income tax liabilities
(1,070)

(1,090)

(1,070)






Total non current liabilities
(5,785)

(4,079)

(5,744)






Total liabilities 
(13,791)

(12,935)

(15,118)






Net assets
28,531

28,430

28,406






Shareholders' equity





Issued share capital
1,101

1,096

1,096
Share premium account
2,348

2,348

2,348
Treasury shares
(10)

(134)

(224)
Retained earnings
23,740

23,732

23,654
Other reserves
1,352

1,388

1,532

28,531

28,430

28,406


Churchill China plc
Consolidated Statement of Changes in Equity
as at 30 June 2015

Retained
Earnings
000

Share
capital
000

Share
premium
000

Treasury
shares
000

Other reserves
000

Total
000












Balance at 1 January 2014
23,697

1,096

2,348

(41)

1,332

28,432












Comprehensive income











 Profit for the period
1,092

-

-

-

-

1,092
Other comprehensive income











 Depreciation transfer - gross
6

-

-

-

(6)

-
 Depreciation transfer - tax
(1)

-

-

-

1

-
 Currency translation
-

-

-

-

(8)

(8)
Total comprehensive income
1,097

-

-

-

(13)

1,084












Transactions with owners











 Dividends
(1,062)

-

-

-

-

(1,062)
 Share based payment 
-

-

-

-

69

(93)
 Treasury Shares
-

-

-

(93)

-

69
Total transactions with owners
(1,062)

-

-

(93)

69

(1,086)












Balance at 30 June 2014
23,732

1,096

2,348

(134)

1,388

28,430












Comprehensive income











 Profit for the period
2,324

-

-

-

-

2,324
Other comprehensive income











 Depreciation transfer - gross
6

-

-

-

(6)

-
 Depreciation transfer - tax
(1)

-

-

-

1

-
 Remeasurement of post employment











 benefit obligations - net
(1,850)

-

-

-

-

(1,850)
 Currency translation
-

-

-

-

25

25
Total comprehensive income
479

-

-

-

20

499












Transactions with owners











 Dividends
(557)

-

-

-

-

(557)
 Share based payment
-

-

-

-

124

124
 Treasury shares
-

-

-

(90)

-

(90)
Total transactions with owners
(557)

-

-

(90)

124

(523)












Balance at 31 December 2014
23,654

1,096

2,348

(224)

1,532

28,406












Comprehensive income











 Profit for the period
1,240

-

-

-

-

1,240
Other comprehensive income











 Depreciation transfer - gross
6

-

-

-

(6)

-
 Depreciation transfer - tax
(1)

-

-

-

1

-
 Currency translation
-

-

-

-

(3)

(3)
Total comprehensive income
1,245

-

-

-

(8)

1,237












Transactions with owners











 Dividends
(1,200)

-

-

-

-

(1,200)
 Proceeds of share issue
-

5

-

-

-

5
 Share based payment
250

-

-

-

(172)

78
 Treasury shares
(209)

-

-

214

-

5
Total transactions with owners
(1,159)

5

-

214

(172)

(1,112)












Balance at 30 June 2015
23,740

1,101

2,348

(10)

1,352

28,531
Churchill China plc
Consolidated Cash Flow Statement
for the six months ended 30 June 2015

Unaudited

Unaudited

Audited

Six months to

Six months to

Twelve months to

30 June 2015

30 June 2014

31 December 2014

000

000

000












Cash flow from operating activities





Cash generated from operations (note 5)
355

2,728

6,903
Interest received
41

34

76
Interest paid
-

-

(5)
Income tax paid
(434)

(254)

(688)






Net cash (used by) / generated from operating activities 
(38)

2,508

6,286






Investing activities





Purchases of property, plant and equipment
(584)

(1,076)

(2,238)
Proceeds on disposal of property, plant and equipment
28

41

57
Purchases of intangible assets
(5)

(20)

(42)






Net cash used in investing activities
(561)

(1,055)

(2,223)






Financing activities





Issue of ordinary shares
10

-

-
Purchase of treasury shares
-

(93)

(183)
Dividends paid
(1,200)

(1,062)

(1,619)
Sale of other financial assets
1,500

1,000

1,000
Purchase of other financial assets 
(2,250)

(1,500)

(1,500)






Net cash used in financing activities
(1,940)

(1,655)

(2,302)






Net decrease in cash and cash equivalents
(2,539)

(202)

1,761






Cash and cash equivalents at the beginning of the period
8,961

7,199

7,199






Exchange losses on cash and cash equivalents
-

(1)

 1






Cash and cash equivalents at the end of the period
6,422

6,996

8,961








1. Segmental analysis 
For the six months ended 30 June 2015

Hospitality

Retail

Unallocated

Total

000

000

000

000
6 months to 30 June 2015















Revenue
17,849

3,600

-

21,449
















Contribution to group overheads excluding depreciation
3,383

325

(1,360)

2,348
Depreciation
(563)

(116)

(120)

(799)
Operating profit
2,820

209

(1,480)

1,549








Share of results of associate company






75
Finance income






41
Finance costs






(84)








Profit before income tax






1,581








Income tax expense






(341)








Profit for the period






1,240








6 months to 30 June 2014















Revenue
16,793

4,078

-

20,871








Contribution to group overheads excluding depreciation
3,313

359

(1,423)

2,249
Depreciation
(652)

(113)

(104)

(869)








Operating profit
2,661

246

(1,527)

1,380








Share of results of associated company






68
Finance income






34
Finance costs






(75)








Profit before income tax






1,407








Income tax expense






(315)








Profit for the period






1,092








12 months to 31 December 2014















Revenue
35,999

8,519

-

44,518








Contribution to group overheads excluding depreciation
7,779

1,183

(3,086)

5,876
Depreciation
(1,190)

(224)

(213)

(1,627)








Operating profit
6,589

959

(3,299)

4,249








Share of results of associated company






116
Finance income






76
Finance costs






(124)








Profit before income tax






4,317








Income tax expense






(901)








Profit for the period






3,416
2. Finance income and costs

Unaudited

Unaudited

Audited

Six months to

Six months to

Twelve months to

30 June 2015

30 June 2014

31 December 2014

000

000

000
Finance income





Other interest receivable
41

34

76






Finance income
41

34

76






Finance costs





Interest on pension scheme
(84)

(75)

(119)
Other interest payable
-

-

(5)






Finance costs
(84)

(75)

(124)












The interest cost arising on 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 2015

30 June 2014

31 December 2014

000

000

000






Current taxation
226

366

822
Deferred taxation
115

(51)

79






Income tax expense
341

315

901
4. Earnings per ordinary share
Basic earnings per ordinary share is based on the profit after taxation of 1,240,000 (June 2014: 1,092,000, December 2014: 3,416,000) and on 10,914,230 (June 2014: 10,945,755, December 2014: 10,934,908) 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 after taxation of 1,240,000 (June 2014: 1,092,000, December 2014: 3,416,000) and on 11,021,343 (June 2014: 11,116,239, December 2014: 11,105,668) ordinary shares, being the weighted average number of ordinary shares in issue during the period of 10,914,230 (June 2014: 10,945,755, December 2014 10,934,908) increased by 107,113 (June 2014: 170,484, December 2014: 170,760) 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 flow from operating activities

Unaudited

Unaudited

Audited

Six months to

Six months to

Twelve months to

30 June 2015

30 June 2014

31 December 2014

000

000

000






Cash flow from operating activities











Operating profit
1,549

1,380

4,249
Adjustments for





 Depreciation
799

869

1,627
 Loss on disposal of property, plant and 
 equipment
5

9

10
 Charge for share based payment
78

69

193
 Decrease in retirement benefit obligations
(43)

-

(672)
Changes in working capital





 Inventory 
(669)

144

495
 Trade and other receivables
(205)

249

338
 Trade and other payables
(1,159)

8

663






Cash inflow from operating activities
355

2,728

6,903
6. Basis of preparation and accounting policies
The interim financial information for the period to 30 June 2015 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 2014, 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. 

This information is provided by RNS
The company news service from the London Stock Exchange
  END
IR LLFETTRIRFIE