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LONDON (Alliance News) - Churchill China PLC Thursday reported strong growth in pretax profit in 2014 as its focus on sales of its tableware to the hospitality trade paid off.
The maker of ceramic, glass and wood tableware and cutlery reported a pretax profit of GBP4.3 million, up from GBP3.4 million in 2013, as revenue rose to GBP44.5 million from GBP43.2 million, its operating margin rose to 9.5% from 7.8% and it booked a lower notional interest charge on pension fund liabilities. Its operating profit rose by a quarter to GBP4.2 million from GBP3.4 million.
It raised its final dividend to 11.0 pence, from 9.7p in 2013, giving a total for the year of 16.1p, up from 14.6p. It had reinstated a progressive dividend policy in 2013, and accelerated it in 2014 given the increase in profitability.
Sales to the hospitality sector rose by 10% to an all-time high of GBP36.0 million, and the contribution to operating profit rose to GBP6.6 million from GBP5.1 million. It said it had made steady progress in the UK hospitality market, even though it didn't benefit from the same level of re-furbishment business in the second half compared with the first half.
Its focus in the hospitality business remains exports, which grew 16% in 2014.
"We have once again achieved good results in Europe, giving a return on several years of investment into that market. Our competitive position in Europe has also been improved given the continuance of Anti Dumping Duties on Chinese ceramics. It is also pleasing to note that the changes made in our approach to North America and to other markets worldwide appear to be beginning to bear fruit in the form of growing revenues," it said.
"We believe our long term progress will increasingly be delivered by growth in export markets and we will continue to invest in sales, marketing and new product development to support this," it added.
Its decision to prioritise resources on the hospitality sector meant revenue in its retail business fell to GBP8.5 million, from GBP10.4 million in 2013. Contribution to profit fell to GBP0.9 million from GBP1.2 million.
"Whilst the retail market has remained highly competitive for some time, our business provides a clear financial contribution and many other less tangible benefits. Our operational capacity can be optimised across both our businesses and the transfer of ideas, technology and people between the two businesses continues to be of significant benefit to the group," it said.
The company spend GBP1.6 million in capital expenditure on manufacturing projects during the year, but still ended the year with cash and deposit balances of GBP10.5 million, up from GBP8.2 million at the end of 2013. It said it expects to start more development projects in 2015.
"We are confident that we have the right long term strategies to continue the development of our business and the resource to implement these plans. The current year has started well, and Churchill is well positioned to take advantage of its strong market position," it said.
Its one note of caution was a warning that the recent strength of sterling against the euro would make its progress in Europe a bit tougher.
Churchill China shares were up 1.4% at 588.20 pence Thursday morning.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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